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August 12th, 2022 | 10:10 CEST

Almonty Industries, K+S, E.ON - These companies benefit from the energy transition

  • Mining
  • Tungsten
  • renewableenergies
  • Energy
Photo credits: pixabay.com

The situation on the energy markets remains tense. The German Minister of Economics received a rejection from Qatar. Alternatives are urgently needed, such as solar and wind power. Almonty Industries is well positioned to source materials for these energies. The world's leading supplier of tungsten can become a decisive player in the market for the hunt for raw materials. Rising prices are benefiting the Company in this regard. The changed prices, in turn, play into the hands of fertilizer producer K+S. Higher average prices in both customer segments compensated for increased costs. In Western Europe, prices fell due to demand, which led to increased sales in Eastern and Northern Europe. Energy network operator E.ON warned of "valuation risks for investments" when publishing last year's results in March and surprised with the current results.

time to read: 4 minutes | Author: Juliane Zielonka
ISIN: ALMONTY INDUSTRIES INC. | CA0203981034 , K+S AG NA O.N. | DE000KSAG888 , E.ON SE NA O.N. | DE000ENAG999

Table of contents:


    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG

    Full interview

     

    Almonty Industries: On its way to becoming the strongest tungsten supplier alongside China and Russia

    The energy transition in Europe is only possible in the long run with sufficient sources of rare earths and minerals. Economics Minister Robert Habeck is currently in a quandary. On the one hand, supplies of Russian gas are being reduced, while on the other hand, the switch to renewable energies such as wind power and solar are proceeding sluggishly. In addition to supplies from coal-fired power plants and secure commitments from other gas suppliers, valuable raw materials are needed to make the switch.

    That is why Habeck is tasking his party colleague Franziska Brantner to secure supplies of non-energy raw materials. "Germany's dependence on Russian energy is very difficult and painful for us. Many decision-makers are now regretting their earlier approach to the country," the state secretary in Germany's Ministry of Economics and Climate Protection explains to Estonia TV. The new drivers are wind power, solar, and electric mobility. Tungsten sulfide compounds are emerging as promising materials for improving power generation in the solar cell industry. Tungsten is advantageous because it occurs naturally in biological ecosystems. It is more environmentally friendly and has fewer potential waste hazards. The future of solar energy could be in the hands of one of the densest heavy metals in the world.

    Exploration, mining and processing of tungsten is what Almonty Industries specializes in. Almonty Industries is a turnaround investor and operator specializing in acquiring distressed and underperforming operations and assets in tungsten markets. What Ms Brantner and investors should know: Almonty Industries will produce 30% of total tungsten volume outside China and 7-10% of global supply. The Canadian company's mining projects include three mines in South Korea. The largest mine, in Sangdong, is expected to come on stream in the second half of 2023.

    China produced over 80% of the world's tungsten output in 2021, while Russia and Vietnam combined for another 10%. When South Korea's Sangdong mine, owned by Almonty Industries, reaches full capacity from the middle of this decade, it will account for about 30% of non-Chinese supply and 7-10% of global supply. With the increasing demand for tungsten and the limited supply, tungsten prices will continue to rise.

    K+S: Increase in revenues and earnings

    Whether Kassel-based salt and fertilizer producer K+S can continue to operate its German sites without interruption hangs in the balance on Russian gas supplies. "Should there be a gas shortage, this would lead to impairments in the energy supply to the German sites and thus to restrictions in production," K+S management explains.

    For the first time, the Company's Q4 forecast envisages a 25% reduction in the availability of natural gas at all German sites. Likewise, K+S controllers are playing out production with increased gas costs and calculating a total burden in the low three-digit million euro range.

    So far in the second quarter, K+S has increased revenues to EUR 1.5 billion. At EUR 706 million, EBITDA operating earnings were up significantly year-on-year. In the first half of the year, revenues were EUR 2.7 billion, and EBITDA was EUR 1.2 billion.

    The second quarter of the fiscal year brought a significant increase in sales of EUR 1.2 billion for the Agriculture customer segment (Q2/2021: EUR 474 million). This was mainly due to higher prices. Despite logistics constraints, volumes were kept more or less stable compared to the previous year. In Western Europe, price-related demand declined, counteracted by volume increases in Eastern and Northern Europe.

    The second quarter was characterized in particular by the early procurement of de-icing salt in Northern and Eastern Europe and significantly higher sales of products for the chemical industry. This also positively impacted sales, which at EUR 266 million were significantly higher than in the same quarter of the previous year (Q2/2021: EUR 191 million).

    E.ON - On track despite turbulent times

    Despite the challenging environment, the business performance of energy network operator E.ON in the first half of 2022 was as expected. Adjusted Group EBITDA came in at just under EUR 4.1 billion, around EUR 700 million below the prior-year figure, which was strongly influenced, above all, by positive special effects relating to residual power volumes.

    EBITDA was primarily offset by strong network business of around EUR 2.7 billion. However, this was negatively impacted by milder weather and higher costs for network losses in Sweden and Central and Eastern Europe. However, these charges were partially offset by operational improvements in the German network.

    E.ON continues to expect adjusted EBITDA in the range of EUR 7.6 billion to EUR 7.8 billion and adjusted net income of EUR 2.3 billion to EUR 2.2 billion - equivalent to adjusted earnings per share of 88 to 96 cents.

    E.ON CEO Leonhard Birnbaum said: "The current energy crisis makes it clear once and for all that Europe needs to transform its energy system. To be independent of Russian gas. To ensure security of supply."

    E.ON has reduced the value of its stake in the Nord Stream 1 gas pipeline by around EUR 700 million. The reason for this is "increased uncertainties" following Russia's invasion of Ukraine. Now Economics Minister Habeck urgently needs to come up with something to keep Germany's energy supply stable.


    The battle for the most efficient energy supply has begun. E.ON CFO Marc Spieker emphasizes: "Our investment planning is right on target, and our earnings will grow organically as a result, as promised. We confirm investments of around EUR 5.3 billion in 2022. In the non-core business, rising energy prices have a positive impact. Therefore, we are raising our forecast for the non-core business by EUR 200 million to EUR 0.8-1.0 billion." K+S is adjusting to a reduced energy supply and continues to forecast a substantial increase in EBITDA to EUR 2.3-2.6 billion. Almonty Industries, meanwhile, is on track to produce 30% of total tungsten volume outside China and 7-10% of global supply. With its three tungsten mines in South Korea, the Company can become a key player for Europe.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Juliane Zielonka

    Born in Bielefeld, she studied German, English and psychology. The emergence of the Internet in the early '90s led her from university to training in graphic design and marketing communications. After years of agency work in corporate branding, she switched to publishing and learned her editorial craft at Hubert Burda Media.

    About the author



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