In today’s briefing:
- Whitehaven Coal Suspension of Buyback: A Negative Despite Rising Coal Price/ Potential Acquisition
- Frontera Energy – ESG Report – Lucror Analytics
- LyondellBasell Industries N.V.: Can The Acquisition Of Stiphout Be A Game Changer? – Major Drivers
- Chevron Corporation: Is The Strategic Acquisition Of PDC Energy A Major Enhancement Of The US Portfolio? – Key Drivers
- Rayonier Advanced Materials, Inc. – Mature Business Growing New Shoots
- Vulcan Materials Company: Solidifying Its Base with Surging Gross Margins! – Major Drivers
Whitehaven Coal Suspension of Buyback: A Negative Despite Rising Coal Price/ Potential Acquisition
- The pivot in capital allocation plans of Whitehaven Coal (WHC AU) by suspending its buyback program (up to 25% of outstanding shares) is a big negative for us.
- We think the increase in capex spending in a frothy pricing environment and focus on M&A for spending the 2.6 bn of cash is a coin toss on capital allocation.
- We prefer names that keep their capital allocation plans consistent, e.g., Indo Tambangraya Megah (ITMG IJ), and would take money off the table here.
Frontera Energy – ESG Report – Lucror Analytics
Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Frontera Energy’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.
LyondellBasell Industries N.V.: Can The Acquisition Of Stiphout Be A Game Changer? – Major Drivers
- LyondellBasell Industries delivered mixed results for the previous quarter, with revenues below the analyst consensus.
- O&P Americas EBITDA climbed by $138 million to $679 million during the second quarter.
- Their team anticipates that fluctuating feedstock costs and the emergence of new capacity will cause margins to contract in the third quarter.
Chevron Corporation: Is The Strategic Acquisition Of PDC Energy A Major Enhancement Of The US Portfolio? – Key Drivers
- Chevron Corporation delivered an all-around beat in the previous quarter.
- While the company faced challenges, with adjusted earnings down $5.6 billion compared to the same quarter the previous year, it also achieved notable successes.
- Lower refining margins impacted adjusted downstream earnings, and there was a decrease in upstream earnings primarily due to lower realizations.
Rayonier Advanced Materials, Inc. – Mature Business Growing New Shoots
We are initiating coverage of Rayonier Advanced Materials, Inc. (RYAM), a leading supplier of wood- derived products and specialty materials, such as specialty cellulosics, paperboard, and high-yield pulp, to the industrial and consumer markets.
The company is currently focused on deleveraging the balance sheet and investing in the growth of higher-value biomaterial products, while improving operations and profitability of cash generative, but slower-growing, legacy operations.
FCF generation in a weak operating environment. With 2Q23 seeing downward pressure on commodity prices, as they retreat from the post-pandemic spike, and volumes, affected by customer destocking, management raised its free cash flow (FCF) generation goal to $55-70 million from $40-65 million in 2023 in order to accelerate debt paydown, toward the 2.5x net debt to EBITDA target level.
Vulcan Materials Company: Solidifying Its Base with Surging Gross Margins! – Major Drivers
- Vulcan Materials Company delivered a positive result and managed an all-around beat in the quarter.
- Vulcan has increased its gross margin and strictly managed SAG costs to increase its adjusted EBITDA margin by 350 basis points year-to-date.
- With excellent price growth and restrained cost increases over the previous year, cash gross profit per ton increased.
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