Bolloré 2021 annual results feedback from institutional investors meeting
Lots of interesting options open with a pragmatic management team
A lot of work on the ESG ratings for the last 2 years.
IER USA: the orders are there but due to the lack of components, 8 MEUR in sales were lost.
Batteries: high additional costs for raw materials and in particular lithium, which has risen sharply when customers thought it would drop. We are in the process of raising prices for customers. Order books are full. There is an impact due to transport cost, cost of resins.
Sale of charging stations in Singapore to Total Energies took place 10 days ago. This completes our exit of this activity. This sale was made through a tender offer.
Port concessions : non-renewal of Douala in 2019 represented a loss of 39 MEUR in sales.
Transport and logistics: increase in the rate of containment. Health, luxury, cosmetics are doing well. Increase in inter and intra flows.
Took full control of Bolloré logistics Dubai: local legislation now allows this.
Bolloré Africa Logistics: MPS in Ghana, whose terminal 3 (where we invested 1.2 billion USD) has a record rate, works super well, ramping up. Same for the terminals in Abidjan, in Benin, Freetown, Congo….
Oil and gas projects are resuming. Mining project also but more slowly.
Rail: operational excellence saved the operational result despite lower sales. Very good cost management too. Great job by management team.
Bolloré energy: good activity in distribution.
Vivendi: C+: top international margin, Havas: very good year, entity was the most impacted by covid.
Other trades: going well everywhere. Gameloft was EBITA positive thanks to better positioning on the platforms.
Electric batteries: 2022 aim is to have a 100 MEUR negative EBITA.
Brittany/ Bluebus: Batteries: sales to Daimler and Bluebus (RATP), Actia, Gaussin sell Bolloré batteries.
Plastic films: focuses on food films and also for electric vehicles. Raw material increases: historically we have never seen it.
Q&A
Q: maritime prices in 2022, is the context still favorable? Has the profitability of transport been impacted by depreciations ? Is the Africa transport commission part included or excluded from the sale of BAL? Does the agreement with MSC include a dimension concerning the transport commission and an agreement on volumes? For the energy storage activity, the price of raw materials will continue to increase, will there be additional saving plans?
A: for the shipping price in January, February and March 2022 there is no longer any downward pressure. There is a significant shortage of containers. In the air too, shortage too. In addition, they have to make detours with longer journeys and therefore an increase in costs.
In the first months of the year, volume and margin structure are correct. No high, insignificant restructuring costs.
2021: demand was very strong, recruitment problem. Increase in staff to process requests. Finding agents is difficult. Don't know when prices will drop.
MSC: the transport commission (Bolloré Logistics includes all international, includes all countries except Africa).
BAL= African port terminals, + East Timor + Haiti + railway perimeter (Sitarail, Camrail) + the African transport commission.
Operational dimension with MSC, we are very close with them, Maersk… No operational dimension planned in freight forwarding with MSC.
Batteries: sees no decrease in Raw Materials. The objective is that as long as we do not raise the selling prices to customers, we will not necessarily sell more buses. We are going to sell a few fewer buses.
R&D Batteries: we are continuing R&D for the next generation of batteries; the aim is to address the automotive market. Private vehicles will allow us to be fine. Reduced investments. We have 18 to 36 months of R&D to re-address the private vehicle market.
The objective is to be able to design batteries with a manufacturer.
If we manage to improve the result by around 10 MEUR (you have to understand to reduce losses by 10 MEUR, results will remain negative) that will be great.
Q: Regarding exclusive negotiations with MSC. What use for the cash? Logistics, M&A, what are the valuation levels for freight forwarding?
A: The MSC teams visited the teams in Africa. This morning the consolidated accounts of BAL have been validated and will be submitted to MSC.
The objective is to have a binding offer by March 31. 3 stages/suspensive conditions:
1. Consultation of employee representative bodies. Should be finished by mid-April. Half of the entities concerned have already said ok.
2. Green light from competition authorities. MSC will start notifications.
3. Agreement of the counterparties= agreement of the licensing authorities. Work is just beginning but the first feedbacks are positive.
The lights are green for employees and states. MSC is appreciated by the states.
For the use of cash, growing in freight forwarding. Some ship-owners invest a lot. The critical size will be very important. We will not avoid to grow as the market is concentrating.
The subject is valuation.
2022: the results should not collapse.
Transaction multiples are between 15 to 20 times EBITDA.
We have made an offer for a European company (50 to 100,000 TU) for which we are waiting for a return.
How do we grow?
Either by paying it by cash or by using the good value of freight forwarding.
Q: Can MSC exit the transaction? Exhibitions Russia and Ukraine? What future for UMG's 18%? 2nd generation of batteries what capex and by what horizon can we have the product?
A: Anyone can exit a trade. MSC is as motivated as ever. BAL's figures are top notch (even higher than what we originally provided to MSC).
Exposure to Russia and Ukraine: Vivendi through Gameloft has 600 people at Kharkiv. On the Bolloré part: nothing significiant. Havas is present in Russia. Bolloré has no establishment in Ukraine. Business volume impacted by 60 MEUR but the most important element is CAP (productive sales) by 9 MEUR.
For the 18% of UMG, we are happy with the management, they manage very well. Positive earnings trend, dividend yield is good. We are very happy with our 18% in UMG.
Electric batteries: 145 MEUR in capex over the next few years. We will be more precise during the general assembly.
Q: critical size of freight forwarding by selling it?
A: no plans to sell it. And if we sold it we would be bored as we would only have cash.
Q: Dassault? serious or not serious?
A: No it's not serious. They are family friends. We don't want to and we don't have the means.
Private opinion
Bolloré management are very pragmatic, as their previous decisions have already shown. Once BAL (Bolloré Africa Logistics) is sold the company will be able to move on to other subjects (freight forwarding, galaxy simplification or other acquisitions). The numbers are good in all the BU’s with the exception of the batteries. I think that they are giving it a last shot and the strategy appears to be the right one. They could possibly spac it or spin it off. At the Compagnie de l’Odet level, Sébastien Bolloré was named deputy CEO and the dividend was increased by 20% (3,6 euros per share). Ok it is only 3,6 euros but it means more cash is being distributed back to the different Bolloré companies which own Odet and it keeps reinforcing their balance sheet. It is also a very good news that Vincent Bolloré isn’t retiring now but delaying it to this summer. There are too many interesting things to take of.
Management is focused on creating shareholder value, have lots of options open and respect minority shareholders (especially those of the Bolloré Galaxy) who have been long time partners of Vincent Bolloré.
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Disclaimer: The above article constitutes the authors’ personal views and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. The authors may from time to time hold positions in the aforementioned stocks consistent with the views and opinions expressed in this article. Disclosure – we hold a position in Bolloré Galaxy entities at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).