Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SFC Energy AG (SSMFF, Financial) reported a 24.2% increase in revenues for the first half of 2024.
- The company expanded its EBITDA adjusted margin to 17.7%, a 4.8 percentage point increase compared to H1 2023.
- Order intake increased to EUR79 million in the first half of the year, up from EUR68.8 million.
- The company has successfully ramped up MEA production in the U.K. and opened a new facility in the U.S.
- SFC Energy AG (SSMFF) reported a significant improvement in operating cash flow, up 70% compared to the first half of 2023.
Negative Points
- The company experienced slower growth in Q2 due to capacity limitations in ramping up membrane production.
- The U.S. market showed a decrease in performance, with numbers below last year's figures.
- The company faced higher costs for membrane production in the first half of the year.
- There are concerns about potential quality issues as the company transfers production processes to new facilities.
- The company has not raised its full-year guidance despite strong H1 performance, indicating caution about the second half of the year.
Q & A Highlights
Q: Daniel, This is Karsten. So my first question is regarding your ramp-up MEA production. You said you have already achieved a 2-shift production, and you see a catch up in Q3 and Q4. So could you tell us when do you want to achieve 100% production when in Q4? Early Q4? Late Q4? And will Q3 be better than Q2 in terms of shipments and production of MEA?
A: Good morning, Karsten, this is Peter. Yes, this has been the single factor here for us being or seeing Q2 that as the weakest quarter this year, and with this said, yes, Q3 as well as Q4 is expected to be, I'd say, significantly higher, not only in shipments, but also with this than in revenue. And if we look at the ramp up, as I said, we are already in a 2-shift production and with August, we have now reached, let's say, a capacity that is up to almost 100%. So end of August, we expect to be up at 100%. And so with September, October and November time frame, we have significant capacity to catch up, means, we are at this point in time, at a double capacity than what we got from our previous supplier here on a yearly basis last year. So it is a 100% add up in capacity that we have now already within our Q3 compared to what we got last year as an input. So we are on track timing-wise as well as capacity wise. Is there a residual risk? I think everybody who ramps up a factory knows there are different factors that can impact this for the time being, what I think gives me and also our technical team here around our CTO, a lot of comfort is as mentioned before, we have, I think, eliminated or almost eliminated one major risk factor means new team members, new people operating there. We have more than 90% of the team doing this for call it, really decades. So they basically moved their workspace from one factory, a couple of hundred meters to the next one. We are almost next door neighbor here to Johnson Matthey. So that gives us really a lot of confidence.
Q: You mentioned in the call and also in the news that quality could be an issue, but given that you obviously have succeeded so far according to plan, why do you see quality problems could arise in coming months? Or is that just a precautionary wording?
A: No, I think it's more precautionary, but still, if you transfer such a process from one factory to another one, there are ambient factors from temperature to humidity, individual timing of process steps. Basically, we have copied what we purchased and so to speak, inherited. And still, you are -- still you need to calibrate it than to the actual ambient situation in the new factory. I think this has taken place. We are measuring this on a daily basis to make sure we are where we want to be. And so far, I think we are fully within the boundary parameters here.
Q: If I see your result for H1, the EBITDA result and look at the upper end of your guidance for the full year, you have already reached 56% of that guidance. So you have confirmed it, but you seem to be a bit cautious to raise it. So perhaps you could elaborate on that.
A: Karsten, this is Daniel. I'm happy to elaborate on that. So it's not necessarily being cautious. It's really looking at our second half year. Please remember, that's pretty much what I said in the first quarter applies and head count is adding in the course of the year. So that's really happening. You will not have this entirely up and running in the first half of the year. Secondly, business development activities, including capacity expansion also further ramps up in the second half of the year, and then there may be certain projects that we're working on, especially member IT, ERP that almost -- there are links to tend to become more intensive in the second half of the year. So basically, if you look at our cost basis in the relative cost basis, and you also see that in the last year's (inaudible) business, it tends to get a little bit higher than what we see in the first half year. Let's see. Obviously, we still have the variables product mix. We still have the variable in the regional mix that all could have an impact on the margin. So I will not say that we're necessarily cautious. At the end of the day, it's really in line with our planning and the expectation, especially on the operating cost, which, as I mentioned, are mostly driven by headcount.
Q: One last question to Romania. Have you reached already your capacity there? Is it up and running well? What is the output there? Perhaps, Peter, you could elaborate on your Romanian site?
A: Happy to do so. I think looking back to the last couple of weeks, I did -- we did a tour here through also the new sites, particularly also impressed here by Cluj. We just moved last month here, mid of July to this new building more than doubling, I'd say, the space there. The Clean Power management part of the operation was already up and running by end of the month, again, and Clean Energy, the fuel cell production is ramping up as we speak. Official opening, we planned for mid of September, and then we have a step-by-step plan here starting, let's say, from 3,000 units here for the remaining part of the year up to 17,500 units capacity next year and then comparing this with, let's say, the current 12,000 units capacity here in Brunnthal, you can see the significance of this operation. Midterm, 30,000 units includes as well as 17,500 units here in Brunnthal is the planning and then also adding India. So the production for fuel cells is not yet fully operational includes, but was also not planned as said, we just moved in July the power and -- the Clean Power management production is already up and running, but again, on track and on schedule.
Q: Could I just repeat the figures. It is 30,000 units in Romania next year and 17,500 in Brunnthal. Did I get that right?
A: Now, we are looking at a step-by-step ramp up. So the first step here in Cluj is now for the remaining part of the year, approximately 3,000 units. And then next year, up to 17,500 with, let's say, a final capacity in the current setup here, what we have of 30,000 for Cluj, but that's more a 2026 target line. And then Brunnthal this year now about 12,000 units output. And now with the shift of some of the systems assembly with, let's say, the energy solutions
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
