The Clean Technology Vue has generated a total return of +17.92% in the last twelve months (1 Mar 2017 to 28 Feb 2018). The key contributors to this performance were Faurecia (EPA:EO +92.44%), Lanxess (ETR:LXS +24.17%) and Solvay (EBR:SOLB +20.56%).
Three High Performing Cleantech Stocks
Faurecia SA (EPA:EO)
Faurecia’s emissions control business (which makes the company relevant for inclusion in the Clean Tech Vue) generates ~39% of group revenues. The company has been a key beneficiary of the recovery in the European automotive market and has been tracking well in turning around its North American operations. Faurecia is also actively pursuing growing it’s business in Asia, with growth likely to come in at high single digits.
The company reported earnings for second-half of 2017 in February and beat consensus earnings estimates (operating profit of €584 mn Vs. expected €539 mn). One of the key drivers was better than expected results from the European market – underpinned by strong demand from major European automakers including Peugeot, Fiat Chrysler, Volvo and Volkswagen. Faurecia has signed 4 new JVs with Chinese OEMs (original equipment manufacturers) which is likely to add ~€200 mn in revenue in 2018, based on company guidance. This should further boost Faurecia’s efforts to boost market share in China.
Lanxess AG (ETR:LXS)
Lanxess is relevant for Clean Tech via its high performance plastics business As automakers move toward creating lighter and more energy efficient vehicles as well as hybrids, they will be looking to replace metal components with lighter high performance plastics. Lanxess is well positioned to capitalise on that demand. Lanxess is currently half way through a strategy that involves transitioning the business away from cyclical commoditised products to specialty chemicals with a more stable earnings profile. The turnaround has been underway, but it will take time for the results to bear fruit. There could be near term hiccups in terms of softer than guided sales, but the company should likely be able to expand margins from low double digits to high teens over the next three years.
Lanxess’ 4Q 2017 / FY 2017 results were fairly in line with consensus expectations. The company reported EBITDA pre of €1,290 mn for FY 2017, in line with guidance. It also announced an increase of +14% in dividends – paying out €0.80 per share. 4Q faced some challenges with its Saltigo business (ag chemicals) and a one-time impact on earnings from US tax reform. Looking ahead, near term upside for Lanxess is likely to come from synergies from its Chemtura acquisition and better cost management. Most of the opportunity for revenue growth is later. Near term challenges come from a weaker agricultural chemicals market.
Solvay SA (EBR:SOLB)
Solvay reported earnings for 4Q FY2017 in February and results were fairly in line with consensus estimates. Reported EBITDA was €494 mn; but removing non-recurring items, it was €482 mn, which was close to consensus estimates of €485 mn. Top line growth for 4Q struggled, primarily due to FX headwinds. Nonetheless, for FY 2017 Solvay achieved significantly higher free cash flow of €782 mn, driven by EBITDA growth and better cost management. The company also announced a higher dividend of €3.60 per share (+4.3% over previous year).
Looking ahead, company management guided it expects to achieve organic growth of +5-7% for EBITDA. It also expects to generate a higher free cash flow relative to FY 2017. There are growth opportunities to capitalise on, in our view, and valuation is currently reasonable.
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*As of 28/02/2018. Returns are expressed in AUD. Past Performance is not a reliable indicator of previous performance. See how our performance is calculated.