Customer projects were delayed, the company also announced on Saturday in Ellwangen. The negative factors have already had an impact in recent months, as can be seen from the provisional figures for the first half of the year that were also presented.
The Varta management around CEO Herbert Scheint now expects sales this year to be between 880 and 920 million euros, instead of the previous 0.95 to 1 billion. Adjusted operating earnings before interest, taxes, depreciation and amortization (Ebitda) should be between 200 and 225 million euros. So far, 260 to 280 million have been sought.
At the start of the year, the company had to contend with weak demand for the otherwise fast-growing lithium-ion button cells. Because, among other things, the customers were missing parts to complete wireless headphones, for example, things also got stuck in the once booming main business of the Ellwangen-based company. The demand for household batteries, which was still good at the time, and the growth in energy storage could not offset this.
The pressure on the business seems to have lasted recently. This means that the company can only pass on higher costs to customers with a delay. In the first half of the year, sales fell by a good five percent to EUR 376.8 million, based on preliminary figures. The adjusted operating result even collapsed by almost 40 percent to 68.9 million euros. The company thus fell short of its own targets. The final results are scheduled to be released on August 11th.
Lowering of the forecast prolongs the suffering of Varta shareholders
The ongoing pressure on the operating business weighed heavily on the once celebrated Varta shares on Monday. After the battery manufacturer had lowered its annual targets due to a gloomier economic outlook and high raw material, energy and transport costs, the papers stopped their recent recovery and continued their month-long downward trend.
Varta’s shares fell by 13.5 percent to EUR 68.50 in early XETRA trading, almost reaching the interim low of mid-May. Most recently, there was still a minus of 5.78 percent to 74.62 euros. This meant last place in the index of medium-sized stocks MDAX. This recently increased by 0.7 percent.
Varta announced that customer projects were delayed. At the start of the year, the company had to contend with weak demand for the otherwise fast-growing lithium-ion button cells. Because, among other things, the customers were missing parts to complete wireless headphones, for example, things also got stuck in the once booming main business of the Ellwangen-based company. The demand for household batteries, which was still good at the time, and the growth in energy storage could not offset this.
According to Jürgen Molnar, capital market strategist at the trading house RoboMarkets, Varta also has problems with the products sold, passing on the rising costs to customers – and that in an environment where sales are already weakening. The shares have already lost an above-average 36 percent in value this year and, according to the expert, a trend reversal does not appear to be in sight in the current environment.
Analyst Christian Sandherr from Hauck Aufhäuser Investment Banking was also skeptical. Market conditions continued to deteriorate. The overall economic environment is becoming more and more demanding and amidst the intensifying competition, Varta’s pricing power is apparently also crumbling.
The expert Robert-Jan van der Horst from the analysis company Warburg Research noted lower growth and lower profitability at Varta and referred to the planned high investments in V4Drive cells. In this respect, the expert concluded that the battery manufacturer needed additional external financing. Van der Horst downgraded the shares by two notches from “buy” to “sell” and thus expects a price loss over the next twelve months.
Analyst Jose Asumendi from the US bank JPMorgan was somewhat more confident. The reason for the lowering of the profit outlook is probably higher raw material costs, but this does not represent a long-term, structural headwind.
Asumendi stuck to his fundamentally positive view of the Varta papers, as did the analyst Philipp Konig from the US investment bank Goldman Sachs. He spoke to investors, according to whom the old outlook for the operating result included very ambitious growth in the second half of the year have. Therefore, investor expectations are likely to have been below the original targets even before the outlook was lowered. Konig still sees the news as a burden on the shares.
The slide earlier in the week pushed the shares back below the 21-day moving average line for the short-term trend, which they broke just late last week. The much-noticed 200-day line as an indicator of long-term development was already undershot at the beginning of November last year.
After the IPO in October 2017, the Varta shares had developed very well with an issue price of EUR 17.50 and reached their record high of more than EUR 181 at the beginning of 2021. One of the reasons for the price strength was the good order situation – also thanks to the supposed major customer Apple. After some ups and downs and an interim high in August 2021 at around 166 euros, it then went down continuously.
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