EM LATAM CREDIT: Mexico's Nemak (TNEMAK; Ba2/BB+neg/BBB-neg) 4Q 2024 Earnings
Fourth Quarter 2024 Earnings Results
Neutral for spreads
• Mexican auto parts manufacturer Nemak announced decent results with lower volumes made up by margin improvement and leverage reduction, but 2025 management guidance was weak. 2031 bonds are virtually unchanged vs three months ago, last quoted T+370bps and ranging from T+346-411bps.
• Despite 4Q volume falling 7% y/y, revenues increased 6% and EBITDA up a better than expected 21% while the company also generated enough free cash flow to reduce debt from USD1.56bn to USD1.53bn and net debt/EBITDA came in at 2.4x, down from 2.7x last year. Capex fell 28% for the year as the company dialed back on its investments in electric vehicle parts.
• Management forecasted 2025 EBITDA USD580-600mn, down from USD633mn and capex USD285-295mn, down from USD389mn in 2024. The rating agencies want to see net debt/EBITDA below 2x over the longer run but with management guiding down EBITDA and business conditions still very challenging further progress on leverage seems unlikely but at least 2024 might be sufficient for now.
Link to earnings release: https://investorcloud.s3.amazonaws.com/nemak/InformacionFinanciera/ReportesTrimestrales/2024-4T24-en-.pdf
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CANADA: CAD Assets Look Through Further Climb In Y/Y Cost Pressures
- The industrial product and raw materials price report didn’t have a discernible impact on Canadian asset prices although it nevertheless shows a further acceleration in cost pressures in Y/Y terms.
- BoC-dated OIS has ~21bp of cuts priced for next Wednesday’s BoC decision.
- Not linked to the data, USDCAD has since stepped higher to session highs of 1.4370 on the back of a leg higher in the BBDXY index. It remains within particularly wide recent ranges (key support at 1.4261 from Jan 20 low vs resistance at 1.4516 from Jan 21 high).
- Details: IPPI was admittedly softer than expected at 0.2% M/M (cons 0.6) after 0.6% M/M in Nov and 1.2% in Oct, although IPPI ex-petroleum has seen a more consistent recent trend with 0.4% M/M in Dec after 0.5% in Nov and 1.0% in Oct.
- That leaves IPPI ex-petroleum inflation at 5.1% Y/Y (fastest since Nov 2022) whilst raw materials inflation stands at 9.1% Y/Y or 12.1% Y/Y ex-petroleum (fastest since May 2022).
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MNI: CANADA DEC INDUSTRIAL PRICES +0.2% MOM; EX-ENERGY +0.4%
- MNI: CANADA DEC INDUSTRIAL PRICES +0.2% MOM; EX-ENERGY +0.4%
- CANADA DEC RAW MATERIALS PRICES +1.3% MOM; EX-ENERGY +1.6%
