David Herro Comments on Applus Services

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Sydnee Gatewood
Apr 13, 2021
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Applus Services (

XMAD:APPS, Financial), another industrial name, was a top detractor from the Fund's first-quarter returns. The Spanish-headquartered company provides testing, inspection and certification services through four divisions: energy & industry, laboratories, automotive, and IDIADA (design, testing, engineering and homologation services for the global automotive industry). Applus' business has been hurt by Covid-19-related restrictions in Europe and by low commodity prices in the oil and gas industry. In addition, the company is navigating the renewal of several key contracts within its automotive and IDIADA businesses. This operational uncertainty was another weight on the company's share price in the first quarter. Long aware of these upcoming contract renewals, we have regularly spoken with Applus management over the past year to discuss possible risks. We continue to believe the company's incumbency and industry leadership position make it very likely these contracts will be renewed on favorable terms. In addition, the company's recent difficulties should turn around as Europe emerges from lockdowns and revenues recover to pre-Covid-19 levels. We continue to view Applus as a high-quality business with an attractive risk-return profile.



From

David Herro (Trades, Portfolio)'s Oakmark Intl Small Cap (Trades, Portfolio) Fund's first-quarter 2021 commentary.



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I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg