The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Alexandre GTrard - CIC Market Solutions - Analyst
: Yes, good afternoon, JTr(me and good afternoon to the team. Just one question on my side to start maybe with Scalian. I'd love to have an update
on the levels of value creation at Scalian. So I see that you have reinvested EUR44 million for the finance of the acquisition of MANNARINO. Do we
have to understand that Scalian is not in a state at the moment to be able to self-finance its development?
So just a very general question regarding the way you see the development of that company going forward. And maybe also the update on its
balance sheet, do you feel that the company, which is rather leveraged at the moment, might reach its governance or not? Thank you.
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OCTOBER 25, 2024 / 1:00PM, MWDP.PA - Q3 2024 Wendel SE Trading Statement Call
Jerome Michiels - Wendel SE - Executive Vice President - Third Party Asset Management Business, Director of Wendel Growth
Thank you, Alexandre. So on your first question about the levers of value creation, there are many. Some are, I would say internal in terms of what
we call the value creation plan. We have this playbook for every company that we acquire where we deploy our operating partners and try and
identify with the management some levers for value creation. We have that at Scalian.
So there is a series of initiatives going on from salesforce to staffing to utilization rate to performance in terms of cash generation, et cetera. So we
have those levers that management is working currently on.
M&A is a key driver for value creation. The acquisition of MANNARINO was very attractive, is very attractive in terms of valuation, in terms of growth
profile and in terms of profitability. MANNARINO is a company that is active in engineering in North America for air transport.
And they are really one of the leaders in their field. It's a company that is growing by 30% and with 30% plus EBITDA margin. So this is enhancing
the growth profile of Scalian and this is to generate synergies as we will try to deploy the expertise and offering of MANNARINO throughout the
group.
And this is very much the type of acquisition that we are looking for at Scalian, because it makes a lot of sense from an operational and strategic
perspective, first and second, from a financial point of view. In terms of why did we invest? We started off as you know, when we closed the
acquisition in July 2023 with a leverage of 5.5 times or something like that, or slightly above, I think, at closing.
And the investment thesis is very much to use financing both from existing lenders and equity when required, when the size of the transaction
requires equity to commit equity from our side as well.
MANNARINO is a fairly large transaction. I mean, if you look at what Scalian has done historically, this is quite a large transaction actually in terms
of total consideration and EBITDA, et cetera. So this one required some equity. This is the first one that required equity since we invested in Scalian.
There has been a few others that took place that did not require equity, but this one was funded through a combination of new debt from existing
lenders and new equity from shareholders, including Wendel, obviously, and management.
You asked about an update on the balance sheet. We reported on June 30 on the net debt of Scalian, which included the new drawing for the
acquisition of MANNARINO. So it was slightly up versus the entry when we invested in July 2023.
As you might have seen for the first nine months, we are looking at a slightly negative performance. So there is some headwind in markets that
Scalian is active on. You've seen the peers, I'm sure, reporting on that. The guidance and the messages that that come from the other players in
the industry are not different than the one I've just given.
So this puts a lot of some pressure, I would say, on the revenue growth. And we are obviously very focused, the management team of Scalian is
very focused on preserving their financial flexibility and preserving the balance sheet. But no issue there, as you have asked nothing in particular
to be mentioned.
Question: GrTgoire Hermann - Berenberg - Analyst
: Good afternoon, everyone. Maybe just a few questions on Stahl, please. I think Q3 was slightly disappointing, and you mentioned tensions on the
auto segments and the luxury exposure as well. Can you give us a bit of insights for the rest of the year if you're seeing a continued similar performance
and maybe just on the acquisition that has been announced during the quarter WEILBURGER, is there anything you can say about the valuation
of the acquisition? And if there is -- we should expect more to come by the end of 2024 and 2025. Thank you.
Jerome Michiels - Wendel SE - Executive Vice President - Third Party Asset Management Business, Director of Wendel Growth
Thank you. Yes, the performance has been slightly negative in Q3. You have that at the back of the press release. The organic growth is minus 3.1%
for start at just for the third quarter. And it's the reason for that is, as you rightly pointed out, the softening of the auto market as well as luxury.
And we have all seen the disappointing earnings for Q3 of the large luxury companies.
So Stahl is obviously exposed to those sectors, but not to the -- I mean, not with the same magnitude minus 3.1% is, slightly negative compared
to very negative figures from auto and luxury.
The outlook is, we don't give any guidance, as you know, for our companies, but I think at this point in time, management thinks it's -- it has been
a softer August compared to previous year. They are obviously very focused and attentive because in this market environment volatility is higher
and the messages that come from auto and luxury are not reassuring.
So they will have to live in this environment. But as you know, Stahl is very good at defending margins and managing prices, both on the purchasing
side and on the sell side. So they will continue to do so in the next quarter.
Regarding the acquisition of WEILBURGER, we are not disclosing -- I can't disclose the evaluation, but what I can say is that obviously it's very positive
from a strategic point of view. It makes sense from a financial point of view as well. Will we continue to do acquisitions? Yes, possibly. Given the
very healthy capital structure at Stahl, we are at a low level in terms of leverage, so there is room actually to make more M&A.
And as you know, M&A has been a big part of the success story of Stahl over the years with ISP and before that, Clariant and BASF. So, yes, I think
we'll be open to that, certainly, if opportunities come.
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