Debt profile & cash position – 2Q 25 snapshot
All‑cash operations in the quarter pushed Allos’ net‑cash balance to R$ 1.2 bn, up from R 0.9 bn at the end of 1Q 25. The company generated R 1.1 bn of free cash flow after deducting cap‑ex (R 0.3 bn) and working‑capital adjustments, which more than covered the R 0.6 bn of interest‑bearing debt that remains on the balance sheet. The net‑debt / cash ratio therefore fell to 0.5×, a clear improvement from the 0.7× level recorded at the end of 1Q 25 and well below the 1.0× “covenant‑break” threshold that the credit facilities reference.
The debt mix is still dominated by a R 0.4 bn revolving credit facility (R 0.2 bn used) and a R 0.2 bn term loan maturing in 2027. Both are fully amortising and carry a weighted‑average interest rate of ~5.8 % p.a., comfortably covered by the current operating margin (EBITDA ≈ R 0.8 bn). The company’s leverage‑reduction plan, announced in late 2024, targets a ≤ 0.4× net‑debt/EBITDA by the end of 2026 – the 0.5× ratio after 2Q 25 is already on a clear downward trajectory.
Trading implications
- Fundamentals: The improved cash conversion and declining leverage signal a healthier balance sheet, reducing the risk of a credit‑rating downgrade and freeing up runway for strategic expansion (e.g., the 45 % ownership stake in the new lifestyle platform).
- Technical view: The stock has broken above the R 12.00 / R 12.30 resistance band on the daily chart, holding the 2‑week moving average as support. Volume‑weighted momentum is still bullish, with the MACD histogram turning positive.
- Action: With the balance sheet tightening and upside technical bias, the setup leans toward a moderate‑risk long position. Consider buying on pull‑backs to the R 12.00 support level, targeting the next resistance around R 13.20 (≈ +10 % from current levels). A stop‑loss just below R 11.60 (the recent low) would keep downside exposure limited while the company’s cash‑flow tailwinds remain intact.