Tuesday 31 January 2017 by FIIG Research Company updates

Company updates – BlueScope, Emeco, Enviva, Navient and more

Company updates galore as BlueScope, Emeco and Sunland reported for the second quarter, we add Enviva and Talen Energy Supply to our USD DirectBonds list, Navient is downgraded by S&P, NCIG is placed on CreditWatch and Tesco announced they agreed to merge with Booker Group plc 

BlueScope Steel Ltd

BlueScope guided to $600m in underlying EBIT for 1H17, compared with prior guidance of $510m. Net debt/EBITDA for 1H17 is expected to be just 0.4x, compared with 0.8x at June FY16.

The improvement was mainly due to:

  • Stronger steel prices and spreads
  • The impact of stronger than expected iron ore prices on export iron sands
  • Productivity improvements, including further cost reductions in the Australian steel products, North Star BlueScope Steel and New Zealand and pacific steel segments

The ASX release can be found here.External link - opens in a new window

Emeco Group

Emeco released its second quarter operational update. Highlights were:

  • Group utilisation averaged 85% in Q217, up from 75% in Q216 – while operating utilisation averaged 53%, up from 42% in Q216
  • Unaudited revenue for Q217 was $46.5m.
  • H217 represents Emeco's first half of positive EBIT since H213
  • Significant uplift in EBITDA margins in Q217 to 38%, up from 19% Q216
  • Quarter end cash balance of $34m, $7m in operating cashflow generated in Q217
  • Early signs of market recovery, with increased number of equipment deployed in January and a number of successful project wins during the Q217
  • The integration plan for the merger of Orionstone and Andy’s are ‘well advanced’ and should be completed in H217

The ASX release can be found here.External link - opens in a new window

Enviva added to our DirectBond list

Enviva Partners LP (Enviva) is a limited partnership involved in the production of utility grade wood pellets. The company aggregates and processes wood fibre into wood pellets, which are used by major power generators in co fired and biomass power plants.

Enviva is currently the world’s largest supplier of industrial wood pellets as measured by production capacity, with its existing output accounting for around 13% of global industrial wood pellet supply according to management reports.

On 27 January 2017, the Enviva senior unsecured bond, maturing in 2021, was added to our DirectBond list. The bond is US dollar denominated with a yield to worst of 5.52%*. The bond is available to wholesale investors only, with minimum investments of USD10,000 and denominations of USD1,000 thereafter.

For more information please see the Enviva 2021 bond factsheet.External link - opens in a new window

Navient Corp.

Navient has been downgraded by S&P to BB- from BB, with the outlook negative. The consumer financial protection board is suing Navient over its servicing of student loans. If the lawsuit is successful, S&P believe “restitution, disgorgement, or penalties could be substantial”.

S&P stated:

“We believe the possible magnitude of the complaint filed on Jan. 18, 2017 by the Consumer Financial Protection Board (CFBP) against Navient Corp. and certain of its subsidiaries (Navient) increases the risk profile of the company. The outcome of this litigation is uncertain in our view, but if the lawsuit succeeds we believe it could result in a substantial financial impact to the company. In a statement, the company has said that the CFPB's allegations are unfounded and that the timing reflects political motivations.  We expect that the company will vigorously defend itself against the allegations.”

The full S&P press release can be viewed by registering on the S&P website.External link - opens in a new window


Newcastle Coal Infrastructure Group (NCIG) has issued notices to all its shippers, giving them an option to provide cash to or letter of credit for an USD85m reserve. As a result, S&P placed NCIG’s rating for both the senior secured and junior debt on CreditWatch with positive implications.

More information can be found here.External link - opens in a new window

Sunland Group

Sunland announced earnings guidance for the first half of the 2017 financial year of approximately $3.0m net profit after tax. The group is on track to achieve full year earnings guidance of $35m, in accordance with the company announcement made on 24 November 2016.

Results are in line with our forecasts.

The ASX release can be found here.External link - opens in a new window

Talen Energy Supply added to our DirectBond list

Talen Energy Supply (Talen) is a North American independent energy and power generation company, headquartered in Allentown, Pennsylvania. As an independent power producer (IPP), Talen produces and sells electricity, capacity and energy related services from its fleet of power plants totalling over 16,000 MW of generating capacity, as at December 2016. 

The Talen senior unsecured bond, maturing in 2025, is US dollar denominated and available to wholesale investors only, in minimum parcels of USD10,000 and denominations of USD1,000 thereafter.

For more information please see the Talen 2025 bond factsheet.External link - opens in a new window

Tesco Plc

Tesco Plc, the UK’s largest food retailer, and Booker Group plc, the UK’s largest food wholesaler, announced that they had agreed to merge – pending approvals from regulators and Tesco’s and Booker’s shareholders. The proposed share and cash merger values Booker’s equity at approximately £3.7bn.

Moody’s said that the deal was credit positive, noting:

  • solid strategic rationale, pro forma improvements in leverage and interest coverage metrics, and enhanced post deal underlying free cashflow generation outweigh the negative credit implications of reintroducing dividends
  • Despite the proposed transaction’s positive effect on leverage and interest coverage metrics, credit quality is still weak for its Ba1 rating category.


*Note: Prices are indicative only and accurate as of 31 January 2017. Please contact your local dealer for more information on the Enviva and Talen DirectBonds.