26. July 2021 | 11:04 CET
Varta, Deutsche Rohstoff AG, Nordex: Multipliers in the commodity sector!
Commodity companies are currently sitting in the front row. But not all of them can profit! Only if a company has invested in recent years can it now deliver. Mining operations worldwide are currently working at the limits of their capacity, and supplying customers is also causing increasing problems. That is because supply chains have been badly hit by a lack of transport capacity, skyrocketing freight rates and pandemic-related outages. It is particularly noticeable in industry: Procurement prices for raw materials and precursors are going through the roof. We take a look at the books of some of the companies involved.
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ISIN: VARTA AG O.N. | DE000A0TGJ55 , DT.ROHSTOFF AG NA O.N. | DE000A0XYG76 , NORDEX SE O.N. | DE000A0D6554
"[...] 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
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
VARTA - When will the first battery for the E-generation arrive?
Lithium and cobalt are considered key elements in electromobility. The two metals are in lithium-ion batteries, regarded as powerhouses among rechargeable batteries due to their high energy density. They already power almost all cell phones, smartphones and laptops, and increasingly also e-bikes and electric cars. Thanks to enormous investments in research and development, Varta is one of the leading players in the field of battery technology - and the electromobility market is only just beginning to boom.
According to its statements, Varta stands for the future of energy and storage solutions. The battery portfolio ranges from microbatteries, household batteries and energy storage systems to customized battery solutions for various applications. Since 2021, the Company has been working intensively on the first high-performance rechargeable battery for electric drives. Some contracts with major OEMs are said to exist already, but there are no clear commitments yet.
On August 13, the figures for the first half of the year are on the agenda. The battery manufacturer may have to make further improvements, as it did in the first quarter because the current research expenditures are a real challenge. From a chart perspective, the share price fluctuates with volatility between EUR 127 and EUR 145. A movement below or above this corridor should be groundbreaking. For stocks, it is best to set a safety stop at EUR 125.50.
Deutsche Rohstoff AG - Full repayment of the bond and good prospects
Deutsche Rohstoff AG (DRAG) remains in good waters and continues to be one of the scarcity beneficiaries. Last week, the Company repaid its second corporate bond 2016/21 with a remaining volume of EUR 16.7 million on schedule. In 2019 and 2020, EUR 50 million have already been repaid or exchanged for the new 2019/24 bond.
Currently, the excellent results of the first half of the year and the strong cash flow are leading to a rapid reduction in the Group's debt. That is because free liquidity has gradually increased in parallel with rising crude oil volumes over the last three quarters. There even remains significant scope for further investments. The debt of the Deutsche Rohstoff Group now amounts to EUR 101 million. Outstanding are the convertible bond 2018/23 and the bond 2019/24 with a volume of EUR 10.7 and 87.1 million, respectively. In addition, there are smaller bank liabilities of around EUR 3.4 million. A total of EUR 27 million has now been repaid in just 7 months. A credit line from Cub Creek Energy remains in place for USD 23 million and is expected to be used again during the year to finance the completion of the Knight well site. The equity ratio was 29.1% at the half-year and increases to 31.9% after the bond repayment. This is what good capital management feels like today.
The preliminary figures for the half-year are also convincing. Thus, a consolidated net income of EUR 17.5 million (the previous year minus EUR 13.4 million) was achieved, sales amounted to EUR 38.3 million (last year EUR 26.1 million) and EBITDA to EUR 39.9 million (previous year EUR 15.8 million). The forecasts for 2021 are now raised slightly (change in %): consolidated sales EUR 68 to 73 million (+19%) and EBITDA EUR 57 to 62 million (+36%). This forecast calculation assumes that oil prices decrease linearly from USD 70 to USD 60, creating a comfortable expectation corridor.
In our opinion, DRAG's planning is very solid and, with its tungsten activities in South Korea, it is also one of the perfect commodity plays in Germany. Since our first recommendation, the share price has doubled. The DRAG share price has corrected slightly from the top at EUR 18 to EUR 15.8, which is a sound basis for medium-term follow-up purchases.
Nordex - Now, even short-sellers are at work
We have often reported skeptically about the Nordex stock here. High raw material costs and ever-new approval requirements are putting a sustained strain on the wind turbine manufacturer's margins. As suspected, the most recent capital increase to replace a major shareholder loan has not improved confidence in the stock. Now the first reportable short quotas are appearing.
Anyone who sells shares short - this is known as short-selling - must comply with certain transparency requirements. These are regulated in the EU Short Selling Regulation, which provides for a two-tier transparency system. If the net short position exceeds 0.5% of the issued share capital, it must be reported via a publication in the Federal Gazette. In the case of Nordex, this relates to Citadel Europe LLP with a current position of minus 0.90% and Arrowstreet Capital with minus 0.62%.
In operational terms, Nordex is now extending the cooperation with rotor blade manufacturer TPI Composites, which has been in place since 2013. As part of this cooperation, the operation of rotor blade production in Matamoros (Mexico) will be transferred to TPI for three years. In this way, the northern Germans and TPI intend to increase their efficiency and performance of production at the Mexican site. TPI will take over 1,500 employees of Nordex's rotor blade production.
The news from Mexico sounds like a cost-cutting measure to us. Hopefully, it is also a noticeable building block for the Group's future figures. Since April, Nordex stock has suffered a loss of 45%. Currently, we would therefore wait and see which Group will win in the price tussle for Nordex.
The companies described here are affected in different ways by the commodity boom. In the case of Varta and Nordex, it affects the cost side, while Deutsche Rohstoff AG is a clear winner of this boom.