Renold enter the new financial year with good momentum (LON:RNO)

renold plc

Renold plc (LON:RNO) Chief Executive Officer Robert Purcell caught up with DirectorsTalk for an exclusive interview to discuss the acquisition of Industrias YUK S.A., what it’ll bring to the company, synergies and what investors can expect in the coming months from the business.

Q1: First off, congratulations on the acquisition of Industrias YUK S.A. Can you just tell us what the company does?

A1: YUK engineers, manufacturers and resales industrial chains, primarily in Spain and Portugal, but also North Africa and to some degree across Europe. It’s based in Valencia in Spain and it’s where it has its manufacturing, warehousing and offices.

The key part of their industrial chain range is what we would call conveyor chains, chains that are used for moving or conveying things though they do also sell transmission chains, which are primarily about power transmission.

They have a team of about 80 people, turned over about €18.5/18.6 million last 12 months within an EBITDA of about €3.1 million, also in the last 12 month period.

Q2: So, what attracted the Board to YUK and what will it bring to the company?

A2: It’ll bring a great deal to company. YUK is a high quality outfit, three quarters of our sales are industrial chains, similar to YUK’s, and we are keen to grow our chain business. Whilst we sell transmission chain and conveyor chain around the world, we are underrepresented in Europe, in both our sales and manufacturing capability in conveyor chain, YUK improves this position considerably. Renold also has a low market share in industrial chain in Iberia, which this acquisition again changes for the better.

YUK has a strong team and we know that they will be of help to us to grow our business and they’re all staying with Reynold post the acquisition, and that’s obviously very important to us. YUK brings a range of conveyor chains that we can sell throughout the our sales network across Europe and we’ll be able to offer YUK’s existing customers our premium transmission and solution chains so helping us grow the original business and the new YUK business.

Clearly, the financials of the deal, they work well for us with the acquisition being earnings and operating margin enhancing from day one whilst it’s expected to leave our net debt to EBITDA ratio under 1.5 times.

This is a high quality business that brings multiple synergies and benefits to us which is exactly what we’ve laid out in our strategy.

Q3: Now, you mentioned the synergies there, can you just tell us about those, what exists between the two companies?

A3: On manufacturing synergies, which I haven’t really mentioned, YUK has a good conveyor chain manufacturing facility in Valencia, which we will be keeping, as we don’t today have a facility in Europe that can manufacture these types of products.

However, YUK also buys in finished chain products from elsewhere, which we will work to bring in house using our global manufacturing footprint and this will generate synergies as we steadily move production in house to our own existing plants.

Q4: What can investors expect next from Renold over the next few months?

A4: Well, I’ve been pleased with the group’s robust performance through the pandemic, which reflected the benefits of the strategic development completed over prior years. Our employees around the world have responded excellently to the challenges we faced and I thank them for all their hard work.

Throughout the last year, the business has been on an improving trend and our order books have continued to grow in the early part of the new financial year, we are however cognizant there remain considerable COVID related challenges in some parts of the world. Supply chain issues are still prevalent and inflation obviously is high and growing, however, we’ve entered the new financial year with good momentum and a belief in the excellent fundamentals of the business upon which we’re building and we also believe that the YUK acquisition will further help strengthen our business.

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