Autos / Industrials / Utilities: Week in Review

Earnings: earnings season is getting to the tail end now. Once again, no blow ups emerged this week.

• Evonik - No spread impact. Leverage higher as expected after headwinds last year. Forecasting lower EBITDA than expected, offset by lower capex.
• Thales - No spread impact. Leverage up on M&A and pension transfer. Results were better than expected, particularly FCF.
• Traton - Small positive for spreads. Nice revenue and operating income beat, strong FCF and better than expected forecast.
• Schaeffler - Neutral for spreads. Forecast for 2024 was a little softer. the Vitesco merger set to drive the credit story from here.
• Pirelli - Neutral for spreads. Results and forecasts land close to home.
• Continental – Neutral for spreads. Good numbers, but no real room for upside with tight valuations.

Newsflow: mostly M&A related.

• Engie – looking to sell $1 billion in US renewable assets to reduce debt and fund investments. Eyes on valuations achieved, this will be a significant medium term funding strategy.
• Albemarle – high equity volatility due to cash raising. Cash will go to investments, so no immediate credit impact.
• Iberdrola – Offering ~€2.3bn for the 18.4% of Avangrid it doesn’t already own. Small leverage impact but does demonstrate M&A appetite post recent asset disposal. We could see supply in a tight credit that is vulnerable to a re-rating.
• Mondi - In-principle merger agreement With DS Smith reached. MNDILN spreads have widened ~25bp since the initial offer. SMDSLN 5-15 tighter on the latest news.

Primary: rather quiet with only Transurban and Orano in the market. NIPs remain generally low, although we are seeing some premium for issues > 10y.

Secondary:

Industrials - generally tighter, in a +2/-8 range. Packaging was the volatile subsector with SMSDLN 9 to 18 tighter on the MNDILN news. Meanwhile BERY and VRLAFP finish wider. ENFP lagged after last week’s acquisition. Despite the risk on mood, Miners are unchanged. Airports performed well with HTHROW and ADRIT long end 5+ tighter.

Utils - unchanged overall in a +1/-6 range. ENGIFP outperformed, recouping primary driven weakness last week. IBESM widened 2-4 on M&A.

Autos - broadly unchanged, in a +6/-6 range with SCHAEFF wider post earnings.