Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Industrie De Nora SpA (HAM:M3D, Financial) reported a 3.8% year-on-year revenue increase in Q2 2024, or 6.1% at constant exchange rates, indicating a recovery across all business units.
- The company delivered 588 megawatts of green hydrogen technologies in the first half of 2024, driving a 10.6% year-on-year revenue growth in the energy transition business.
- Water technologies and energy transition businesses reported significant growth in Q2, with increases of 4.9% and 24.2%, respectively.
- The backlog improved by 3% compared to December 2023, reflecting strong order intake and future growth potential.
- Industrie De Nora SpA (HAM:M3D) expanded its global manufacturing footprint, including a new innovation center in the US and a groundbreaking for an Italian giga factory, supporting future growth and backlog execution.
Negative Points
- Delays in final investment decisions (FIDs) for green hydrogen projects due to regulatory and funding uncertainties are impacting the energy transition business.
- The electronics division remains in a soft phase, affecting overall revenue growth.
- The company experienced a slowdown in production scheduling due to supply chain issues, impacting Q3 2024 revenues.
- The EBITDA margin is expected to be affected by costs related to the Italian giga factory and production setup optimization.
- The energy transition business faces challenges due to high interest rates and recurring inflation, causing delays in project development.
Q & A Highlights
Q: If you win no new contracts on green hydrogen and just execute your current backlog, would you expect flat revenues in energy transition in 2025 versus this year? What are the key roadblocks for new projects to materialize into backlog?
A: Yes, if no new orders are received, 2025 revenues will be comparable to 2024. The key roadblocks include pending clarifications from the Inflation Reduction Act in the U.S., financing issues, and grid connections. Different regions have varying drivers, with some areas like Japan and Australia having incentives in place, but projects require long gestation times. Projects with good offtake agreements tend to progress faster.
Q: Can you quantify the startup costs for the giga factory included in the 17% EBITDA margin guidance for 2024?
A: The startup costs for the giga factory are expected to amount to approximately EUR5 million to EUR6 million in 2024. These costs are related to the ramp-up of production and are not capital expenditures.
Q: What is your current exposure to the PFAS business within Water Technology, and what are your expectations for growth?
A: The PFAS market is just starting, with regulatory support helping its growth. In the U.S., the EPA has identified areas above the limit, leading to a process of qualifying and piloting technologies. We have identified 52 opportunities and have five pilots ongoing. Revenue from PFAS is expected to start in 2025, with potential growth into tens of millions, but it's too early to provide precise figures.
Q: How should we think about the timing of the EUR300 million CapEx plan considering the slower-than-expected demand in energy transition?
A: Some CapEx projects, like those in China and Japan, are already fully utilized by other segments. The giga factory in Italy is on schedule due to European Commission program requirements and preorders for Dragonfly electrolyzers. We need to be ready in advance for future demand, so the CapEx plan remains largely on track.
Q: Are there any structural shifts in demand for new installations in the chlor-alkali segment from a geographical standpoint?
A: We see substantial growth in Asia, particularly China, due to ongoing investments and maintenance needs. In the U.S., there are significant conversion projects due to asbestos bans, with De Nora involved in major projects like Occidental Chemical. Europe is experiencing maintenance-driven demand due to lower utilization rates in the chemical industry.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
