Why Read?

• Understand KME’s working capital (WC) cash flow – sensitivity to copper prices; what the current copper forward curve implies for likely WC development pre-mitigation; key levers to manage WC and the magnitude of their potential impacts; KME’s historic WC cash flow during other periods of sharply rising copper prices (e.g. FY 06 and FY 10 – FY 11) and similarities / differences in tools available vs today; extent to which historic unleveraged FCF has been driven by WC release that may not be sustainable going forward; how tolling arrangements work, their accounting treatment and extent to which they have benefitted KME’s WC cash flow thus far
• Understand options for KME to improve its liquidity and capital structure – analysis of potential disposals (Special division, Trefimetaux and 50% stake in KMD JV), Intek’s ability to support KME (including a review in turn of Intek’s core ultimate shareholders) and property monetisation

What’s New?

• Detailed WC analysis
• Analysis of strategic options – potential disposals (Special division, Trefimetaux and 50% stake in KMD JV), Intek’s ability to support KME and property monetisation
• Tactical strategy for SSNs holders in any hypothetical restructuring
• Financial projections (including liquidity), DCF valuation and key sensitivities 

Questions Answered

• Why is it likely not straight forward for KME to access the remaining headroom on its total €450m factoring facilities?
• How much impact have KME’s increased tolling operations since copper prices started rising sharply after Q3 20 had on its WC cash flow?
• How sensitive is KME’s WC cash flow to the copper forward curve pre-mitigation and how sensitive is it to increasing the share of toll basis copper volume processed?
• Are KME’s bank lenders under its Borrowing Base Facility (BBF) likely to extend maturity beyond Feb-22 given their likely economics, taking into account their regulatory capital, leverage ratio, LCR and NSFR requirements?
• What is our DCF valuation of KME and how is it different to Intek’s valuation of KME?
• What recovery would we expect on KME’s SSNs and how do we view the Group’s pension deficit in this context?
• Can investors engineer a restructuring of KME to gain control?
• What are KME’s Special division, Trefimetaux and 49% stake in KMD JV worth and what challenges might there be to a sale of the Special division?
• How does KME’s group structure look, following legal separation in Q2 20 of its Osnabruck plant’s Copper division and Special division activity as well as M&A / disposals in FY 19, and with what impact for SSNs?
• How dependent has KME’s historic unleveraged FCF been on WC release over many years that may not be sustainable going forward at higher copper prices?
• To what extent is KME’s Adj EBITDA likely to grow given the structural trends in favour of electric vehicles, renewable energy and digitalisation?
• How much extra copper is likely to be needed each year as electric vehicle sales and charging points increase and how much of the semi-finished part of this increased demand could KME capture, production-capacity permitting?
• Why did KME’s Q4 20 and Q1 21 revenue and our estimated volume of copper tonnes produced decline so much YOY and is there a benign explanation?
• How has KME’s market share in European copper rolled products evolved through time?
• Where have all the MKM synergies (FY 19 – FY 21E) and cost savings initiatives over FY 14 – FY 17 gone?
• Have KME’s bank lenders been reducing their credit exposure to KME?
• Is KME likely to benefit from a state-guaranteed loan?
• What liquidity, monetisable assets and ability to raise debt to support KME does Intek have?