ACX
🏭 Acerinox has diversified into higher value-added products, reducing its reliance on commodity steel and Chinese competition.
🇺🇸 The company’s US operations are a major source of profitability, benefiting from protectionist measures.
📈 The stock has risen 40% since Trump’s election, but still presents a significant upside potential.
🇪🇺 The company is addressing challenges in its European operations, potentially boosting overall performance.
@Academiadeinversion:
“Acerinox, which has already risen 40% since Trump was elected, which people also forget. During the pandemic years, it undergoes a spectacular positive transformation. They diversify into a business area such as, well, this is a stainless steel company that historically had factories in the United States, Spain, South Africa, and Malaysia, but for the last 15-20 years, China has eaten their lunch because they were in the most commodity product, and China, as in so many other sectors, has built brutal overcapacity and has flooded all international markets with very cheap stainless steel products. Then the pandemic arrives, all supply chains are closed, and two or three years pass in which Acerinox and all these types of companies fly in terms of results, repair their balance sheet, and Acerinox also takes the opportunity to diversify towards higher value-added products where the Chinese are not. They do this in 2020-2021; they buy VDM, which is a company of higher added value, also of special alloys. It is a spectacular purchase. It also helps them that, for some time now, the asset they have in the United States has been performing spectacularly. So that always helps them to maintain a very solid balance sheet and to continue diversifying towards the special alloys business more and more. We find ourselves today in a situation where Acerinox is a company in which most of its profitability is obtained in the United States. Let’s say 70-80% comes from the United States, from the traditional business but from the plant that comes from the United States, and the other 20% comes from special alloys. This year they buy another special alloys company in the United States as well, and on top of that, Trump comes out and everything is protected much more, industry, and we are going to a more protectionist world, which causes that massive arrival of cheap Chinese products to be increasingly difficult, increasingly expensive, and that regionalism that can play Acerinox allows it to enjoy really excellent margins and profitability. So this company, which has always been seen as a cyclical company that depends, that is completely tied hand and foot to Chinese products, is now a completely diversified company, increasingly with greater exposure to higher value-added products in which there are almost no players as large as Acerinox, and which also has a unique asset in the United States. If you add to that that you are listed in Europe and you are cyclical, they have penalized you a lot, and this company was trading at the floor levels it has historically had when it was not this type of company, which was basically trading at book value. Suddenly, Trump comes out, people look at it again a bit for the wrong reasons, but of course, they start to realize that the EBITDA they manage to make in the middle point has risen 50% from this diversification, while the valuation is at historical lows. So there we have built a large position. I also have to say that we have a very good relationship with the management team, which is historical, and something that comforts me is that the real problem they have, which is Spain, well, they have realized that they have to change the production model of the Algeciras plant a bit, which is the main one they have here, and they are trying to put a series of profitability requirements on their plants that can give a great boost to the accounts because we have had 2-3 years of tremendously negative results from the European plant. So, with just a little improvement in the situation in Europe and if they manage to grow the alloys issue as they have been doing in the last 4 or 5 years, this company is another one that we see really spectacular potential in. I think it is in the top five main positions of Cartesio as well.”
Watch the exact part of the YouTube video where Jorge talks about Acerinox here:
View the video on YouTube.
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