PRELIMINARY ASSESSMENT POINT : DISRUPTION OF OXYGEN SUPPLIES
Key event
As several countries around the world, Morocco is in turn under pressure on its health system, given the rise of COVID-19 contamination cases during this summer period. With a view to "vigilance", the competent authorities recently decided to direct all of the local production of oxygen to the various hospitals within the Kingdom. This exceptional situation would spread over an estimated period of two weeks.
Since oxygen is an essential input in the production process of several industries, it seems important to assess the impact of this decision on the listed companies concerned.
Impact on SNEP
Assuming that this "exceptional" situation would cover a period of two weeks, the financial impact on SNEP during 2021 would be limited. According to our own estimates, this is a shortfall in terms of revenue of less than 3%. This scenario is justified by two main points :
- SNEP enjoys non-cyclical activity throughout the year. Therefore, a possible shutdown of production over two weeks would represent 4.2% of revenue ;
- Thanks to its storage capacity, SNEP would be able to cope with a supply disruption over a period of two weeks. However, we expect the pace of the company's delivery to slow down, pending confirmation of this exceptional period to end.
Our opinion
In the event that the interruption of oxygen supplies were limited to only two weeks, SNEP’s earnings loss would be easily recoverable in the few coming months. In fact, the stability of COVID-19 new cases and the acceleration of the vaccination rate to 54%(1) of the target population in Morocco support this scenario.
We remain confident about SNEP's ability to cross the MAD 100 Mn mark in profits during 2021. As a reminder, the operator suffered from a similar situation in November 2020 without feeling a visible impact on its annual results.
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