May 22nd, 2023 | 09:30 CEST
Varta, Altech Advanced Materials, Volkswagen - The battle for the battery of the future
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"[...] Silumina Anodes® is a ceramic-coated graphite/silicon anode composite material that we plan to produce in Schwarze Pumpe, Saxony. Here, we aim to supply manufacturers of batteries for e-cars with an application-ready drop-in technology that is low-cost, high-performance and safe. [...]" Uwe Ahrens, Direktor, Altech Advanced Materials AG
Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.
Varta - Disappointing Q1 figures
For several years, Varta was the flagship battery company from Germany. In the field of button cells, it was the global leader, and Apple also relied on "Made in Germany" for its AirPods. With V4Drive, the German company aimed to create the next bestseller, but as it stands now, the division that was supposed to benefit from the growing electromobility has yet to take off. Profit warnings followed in 2022 due to customer reticence, and costs rose. Now the Company is facing another turnaround.
In mid-May, the results for the 1st quarter were published. Due to weak consumer demand, especially in the Lithium-Ion Coin Power (LCP) and Microbattery (MB) segments, this declined. Higher restructuring and financing costs further worsened profitability. Sales fell by 11% to EUR 164 million, with LCP sales down 92% and MB sales down 21%. Significant growth was recorded in the Energy Storage Systems segment. Adjusted EBITDA was a loss of EUR 2 million.
Whether the new CFO Marc Hundsdorf can turn things around remains to be seen. A total of 800 full-time positions are to be cut. Nevertheless, rising purchase prices, sustainability pressures, higher financing costs and increased competition from Asia are weighing on the return to profitability. After the quarterly figures, the share marked a new low for the year at EUR 18.485. On Friday, the share exited Xetra trading at EUR 18.98. The analysts at Warburg recently issued a sell recommendation with a price target of EUR 15.50.
Altech Advanced Materials - CERENERGY prototypes under construction
Altech Advanced Materials has two hot irons in the fire to profit from the rapidly growing battery and energy storage markets. Together with the Fraunhofer Institute, they have developed the CERENERGY battery, a solid-state sodium-aluminium oxide battery. It is expected to revolutionize the energy storage market, as the battery is safer, longer lasting and more weatherproof than current lithium-ion energy storage systems and significantly cheaper to manufacture. On May 11, the Company announced that it had started production of 2 prototypes of the 60 KWh CERENERGY battery. After completion, a test under extreme conditions is planned, and industrial customers will then be able to try out the energy storage units.
The second pillar is the development of a method for the cost-effective coating of the anode material of a battery with high-purity aluminium oxide in the nanometre range, which increases both the performance by about 10% and the service life by 30%. Both graphite and silicon coating are possible. Especially the latter has a lot of potential because silicon has a higher energy storage capacity than graphite, and therefore many manufacturers try to use silicon in their batteries. The results of the profitability study assume annual sales of EUR 153 million at costs of EUR 101 million with a production capacity of 10,000 tons of silicon, which is to be marketed under the name "Silumina Anodes".
The construction of the first test facility next to the planned production plant is already underway. By the end of the year, about 120 kg of Silumina Anodes should be available for testing purposes and certification of the product by battery and car manufacturers. As the material does not cause any changes to the battery, the customer base in the lithium-ion battery environment is practically unlimited. These prospects have boosted the share enormously since the beginning of the year, and it went from EUR 3.74 to EUR 12.80 at the peak. Since that day, the share has been in a sideways phase from EUR 10.10 to EUR 12.80 and is currently trading at EUR 10.20. More information can be found at researchanalyst.com. https://researchanalyst.com/en/updates/stock-news-altech-advanced-materials-new-opportunities-after-the-fireworks
Volkswagen - Yield to increase
For a long time, the Volkswagen Group was No. 1 in the Chinese car market. After the 1st quarter, the Wolfsburg-based company had to cede this position to BYD. Even though Volkswagen committed itself to electric mobility at an early stage, the transformation from a manufacturer of combustion vehicles to electric vehicles has been challenging. While BYD saw a 68% increase in sales in the first three months compared to the previous year, VW experienced a 14% decline. Due to recurring software issues in electric vehicles, the management of that division was replaced. The new CEO of VW, Blume, is now planning a performance program to optimize profitability.
According to Spiegel, a second battery factory will probably not be built in Germany. The reason is that electricity prices in Germany are too high. Industry is currently paying 13 cents per kilowatt hour; costs would have to fall by about 50% to be competitive. This means that the plant in Salzgitter will likely remain the only one in Germany. A 2nd plant is being built in Spain, and there are efforts to build a 3rd plant in Eastern Europe. Speaking of Eastern Europe, the group has sold its plant in Russia to the financial investor Art-Finance LLC and the Russian Avilon. There, 225,000 vehicles could be produced per year.
It is not yet clear how the return on investment is to be raised from the current 3% to 6.5%. The Company wants to save billions in order to remain competitive. By comparison, Tesla has a double-digit return on sales. There will be no job cuts in Wolfsburg because of a job guarantee until 2029. After testing the support zone at EUR 115, the share has moved up again and is currently trading at EUR 120.20. In May, there were 5 buy recommendations for the share with price targets between EUR 160 and EUR 235. Only Jeffries recommends selling with a price target of EUR 115.
The energy transition and especially electromobility pose significant challenges for well-established companies, especially considering that electricity costs in Germany are much higher compared to international standards. This can be seen in the case of Varta, whose margins have recently melted away. Combined with an evident reluctance to buy on the part of customers, this is a dangerous mix. Altech Advanced Materials, on the other hand, is benefiting from growth and has occupied two exciting business areas. It is worth keeping a close eye on whether they will achieve a breakthrough. Volkswagen has to master a transformation. The Company cannot turn around quickly like BYD or Tesla. It will take time.
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