- Business development better than expected in COVID-19 environment
- High crisis-resilience and momentum in Clean Energy & Mobility segment with hydrogen and methanol fuel cells
– Consolidated sales at €39,213k (9M/2019: €43,784k, -10.4%) better than expected
– Underlying EBITDA at €2,226k (9M/2019: €2,198k), underlying EBIT at €-433k (9M/2019: €-233k)
– Clean Energy & Mobility segment achieves strong sales growth of 84.6% to €14,806k (9M/2019: €8,022k) due to a significant rise in demand for fuel cells for professional applications
– COVID-19 impact on sales in Oil & Gas (-19.6%), Industry (-29.0%) and Defense & Security (-69.7%) segments
– Order backlog increases by 26.4% to €13,009k (9M/2019: €10,289k) – business expected to pick up considerably in Q4
– Strategy and product portfolio being refined further along the hydrogen technology value chain – company benefiting early on from the German government’s hydrogen strategy
Brunnthal/Munich–SFC Energy AG (ISIN: DE0007568578), a leading supplier of hydrogen and direct methanol fuel cells for stationary and mobile hybrid power supply solutions, is today publishing its interim statement on the third quarter of 2020, including explanations on business development and significant events for the period from January 1 to September 30, 2020.
Management Board Report
Dr. Peter Podesser, CEO of SFC Energy AG: “In spite of the restrictions that were imposed in response to the COVID-19 pandemic, which resulted in a 10.4% downturn in sales, the company’s stability over the nine-month period has surpassed expectations, with business development much better than we had forecasted back in March.
Development was heterogeneous overall. Whereas the whole nine-month period was characterized by high level of crisis-resilience and momentum in the Clean Energy & Mobility segment (with growth of 84.6%) despite the corona crisis, business development in the Industry (-29.0%), Defense & Security (-69.7%) and Oil & Gas (-19.6%) segments was severely impacted by the COVID-19 pandemic. Containment measures taken in response to the coronavirus crisis resulted in temporary shutdowns to some of our customers’ production plants and to parts of our distribution network. The restrictions on travel and gatherings made our sales activities considerably more difficult in some areas. This all led to significant delays and postponement of investment decisions from our customers. Shutdown measures, especially the tough lockdown situations had the biggest impact on the awarding of orders in the defense business.
This was offset by strong momentum in the civil fuel cell business, which compensated to a large extent for declines in sales in the other segments. EFOY Pro fuel cells in industrial applications like the wind industry and surveillance & security technology in Europe, Asia and Canada and hydrogen fuel cells in the telecommunications sector in Germany both made substantial contributions to sales growth also in the third quarter of 2020. EFOY Jupiter hydrogen fuel cells are already being used as emission-free back-up power generators in cell towers of the digital public radio network BOSNet in Germany. In addition we continued to execute on our “Fit for the future” program – i.e. intensifying and expediting R&D projects and the digital transformation of our Sales & Marketing process, expanding our partner network for accelerated future growth with Toyota Tsusho, Jenoptik (Vincorion) and e-propulsion as well as solidifying the Supply Chain in these times.
More than 20 nations and the EU have now selected hydrogen as the “element of choice” to pave the way for a successful finalization of the energy transition and help them to achieve their all-important long-term climate targets. At the end of the energy chain, fuel cells ensure that (potentially green) hydrogen is converted emission-free and efficiently back into electrical energy sustainably and made available to decentralized users. We are one of the first companies in the world that is already in a position to supply industrially manufactured products, and we are benefiting from this global development while it is still in its very early days. From next year, we also foresee significant opportunities to benefit from public funding both for R&D and market activation programs. Our company has focused its hydrogen efforts at an early stage on product availability and product quality. Access to established markets worldwide from our EFOY business and new markets such as telecommunications and critical infrastructure – including the BOSNet-program – are helping us to achieve above-average growth here in the medium and long term.”
In the months from January to September 2020, the SFC Group reported a decline in sales of 10.4% year on year to €39,213k in the wake of the COVID-19 pandemic (9M/2019: €43,784k). Group sales were also down 9.5% on the previous year at €11,503k in the third quarter of 2020 (Q3/2019: €12,707k). Pandemic-related delays in individual target markets, production shutdowns by some of SFC Energy’s customers and tough restrictions on sales activities significantly impacted business development in the Oil & Gas, Industry and Defense & Security segments. The strong sales performance in the Clean Energy & Mobility segment improved further on the high momentum of the previous year with growth of 84.6% and largely mitigated the decline in sales in the other segments. This pleasing performance also culminated in a 26.4% increase in the order backlog to €13,009k. The figure in the prior-year period was €10,289k.
Performance by segment
Clean Energy & Mobility
Throughout the entire nine-month period in 2020, the Clean Energy & Mobility segment experienced considerable momentum and high demand for fuel cells, especially for industrial applications in Europe, North America and Asia. The strong business performance that has been ongoing since the start of the year continued with sales growth of 84.6% generated year-on-year (9M/2020: €14,806k; 9M/2019: €8,022k). The third quarter showed another substantial improvement on the high organic sales growth reported in the first half of 2020, with sales growth of 116.5% to €5,379k (Q3/2019: €2,484k). The supply of hydrogen fuel cells made a particularly strong contribution to sales growth in the third quarter of 2020. This segment was thus characterized by a high degree of stability during the Corona crisis. The momentum of the business continues in the current fourth quarter.
Oil & Gas
In an environment where demand is heavily impacted by COVID-19, the Oil & Gas segment saw its sales decrease by 19.6% to €13,321k in the first nine months of the current financial year, after €16,571k in the previous year. Although sales were down by 36.2% in the third quarter (Q3/2019: €2,974k, Q3/2020: €4,664k) order activity in summer and in the fourth quarter was significantly stronger than anticipated at mid-year. The segment benefited from a high order backlog at the start of the year. This declined significantly over the course of the current financial year, mainly due to restrained investment activity. During the second half of the third and in the current fourth quarter, however, a stable increase in demand can be observed alongside the usual year-end business.
In the current financial year, for the first time, the fuel cell sales of €1,319k generated by Simark in the non-oil-and-gas sector were allocated to the Clean Energy & Mobility segment, and not to the Oil & Gas segment. Excluding this effect, sales in the Oil & Gas segment decreased only by 11.7% in the first nine months.
A pleasing development in this regard was the increase in fuel cells as a percentage of the Oil & Gas segment’s total sales. This business area has been expanded considerably. Sales in the EFOY applications business accounted for 17.2% of Group company Simark’s sales (9M/2019: 12.0%).
Similar to the situation in the second quarter, lower call-off orders and postponed customer investment decisions as a result of the pandemic were responsible for the weaker sales performance in the Industry segment. The pattern in the development of customer investment behavior was heterogeneous. While long-term projects tended to be less affected, customers refrained from making short-term investment plans. The measures taken to contain the pandemic, such as restrictions on travel and gatherings, made both sales activities and on-site application installations at customer premises perceptibly more difficult. Efficiency enhancement measures that were put in place or rolled out had a positive impact on margins. While sales fell by 29.0% to €9,193k in the first nine months of 2020 (9M/2019: €12,943k), the gross margin remained much the same as in the previous year at 29.9% (9M/2019: 29.2%). Sales for the quarter came to €2,660k (Q3/2019: €3,954k, -32.6%). A significant increase is expected in the current fourth quarter.
Defense & Security
Particularly restrictive lockdown measures in international core markets like Israel and India, combined with shutdowns in some areas and significant delays in orders awarded by government agencies in the wake of the COVID-19 pandemic, resulted in a considerable drop in sales in the Defense & Security segment. With almost all countries in SFC Energy’s core markets having imposed widespread restrictions on public life during March to contain the spread of coronavirus, these restrictions are either still in place or have been reintroduced. Travel restrictions have also severely hampered sales activities since March, with technical customer discussions and face-to-face meetings with customers not being able to take place. At €1,894k, sales in the first nine months of the year were a considerable 69.7% lower than in the prior-year period (9M/2019: €6,247k). Sales totaled €490k in the third quarter of 2020 (Q3/2019: €1,615k), which also equated to a drop of 69.7% compared with the previous year’s figure. However, sales appear to be picking up slightly in the current quarter.
The Group’s gross margin resulting from its sales performance (gross profit as a percentage of sales revenues) remained stable year-on-year over the reporting period at 33.2% (9M/2019: 33.1%). The main factor that contributed to this was the significantly higher sales contribution of the Clean Energy & Mobility segment, which achieved a gross margin of 42.6% in the current financial year. The Group’s gross margin was higher than in the previous year at 36.9% in the third quarter of 2020 (Q3/2019: 32.3%). The utilization of government support in the form of wage subsidies in Canada and the Netherlands totaling €828k, the COVID-19-induced reduction of travel and marketing costs, and cost optimization measures taken had a positive impact on the development of operating expenses over the nine-month period and offset the decline in gross profit. Declining sales performance in connection with the changed sales contributions of the segments (changes to product mix) saw gross profit deteriorate by 10.3% to €13,016k in the first nine months of 2020 (9M/2019: €14,511k).
Gross profit by segment
Group EBITDA decreased to €-785k in the first nine months of 2020, compared with €195k in the prior-year period. Underlying EBITDA adjusted for non-recurring effects came to €2,226k in the period under review, up 1.3% the previous year (9M/2019: €2,198k). The underlying EBITDA margin, on the other hand, was slightly higher than in the previous year at 5.7% (9M/2019: 5.0%).
Group EBIT declined to €-3,445k in the first nine months of the current financial year (9M/2019: €-2,237k). Taking into account non-recurring effects, underlying EBIT amounted to €-433k in the reporting period (9M/2019: €-233k).
For the first nine months of 2020, the consolidated loss for the period was €3,896k, after a loss of €2,975k in the same period of the previous year. This put IFRS earnings per share (diluted and basic) at €-0.30 (9M/2019: €-0.27).
The equity ratio went up to 56.3% as of the end of the third quarter of 2020, mainly as a result of the reduction of current liabilities (December 31, 2019: 55.3%). Available cash and cash equivalents amounted to €12,515k as of September 30, 2020 (December 31, 2019: €20,906k). In this context, special attention must be paid to increased R&D-investments to complete the next generation of EFOY fuel cells, as well as the development of the new generation of hydrogen fuel cells and partly the stockpiling of essential components to prevent potential supply bottlenecks in the wake of the COVID-19 pandemic. There was a cash capital increase with a net cash inflow of €750k in the first nine months of 2020. The SFC Energy Group had 285 permanent employees as of September 30, 2020 (December 31, 2019: 282).
Long-term growth strategy on track
On March 19, 2020, the Management Board of SFC Energy AG withdrew its guidance for the 2020 financial year in an ad-hoc disclosure, due to the uncertainty and lack of visibility as a consequence of the pandemic and the negative development of the oil price. Both effects are impacting the sales and earnings of the SFC Group in the current year, however it was not yet possible to quantify the effect this will have. Due to continuing uncertainty regarding the extent and duration of the restrictions and the resulting impossibility of forming a reliable estimate as to the possible further consequences of the pandemic, the conditions required to form a realistic and reliable assessment of the SFC Group’s continued business performance have still not been met. Nor is it possible to determine at present when this will be the case.
In spite of a significant upturn in business in the current fourth quarter compared to the previous quarters, Management Board expects sales revenues and profitability to be lower than in the previous year.
Despite the continuing uncertainties resulting from the current challenging environment, SFC Energy adheres to its mid- and long-term target of generating sustainable and profitable growth. “We are utilizing our core expertise in hydrogen and direct methanol fuel cell solutions to supply fast-growing markets with pioneering technology. We are thereby delivering an important contribution to sustainably shaping global trends such as decarbonization, energy generation from renewable sources and the ongoing digitalization. Hydrogen as an energy source is now regarded the world over as a key resource for meeting long-term climate targets and a tool to successfully complete the energy turnaround. SFC Energy has already established itself in this segment with its range of reliable high-tech products. We are convinced that the continued consistent implementation of our hydrogen strategy – which also includes drawing on the attractive conditions offered by national and international hydrogen funding schemes for research and development and market ramp-up – along with further deepening and expanding our partnerships as with Toyota Tsusho are turning into even stronger drivers for further growth than previously considered in our mid-term plan. For this reason, we are expecting stronger impetus in the long term as well for our growth strategy, which is proving to be comparatively robust even in a challenging environment,” said Dr. Peter Podesser.
Key figures 9M/2020
* as of September 30, 2020
The financial figures for the third quarters of 2020 and 2019 and for the first nine months of 2020 and 2019 are unaudited and are not reviewed by an auditor.
Detailed financial information
SFC Energy AG’s interim report for the third quarter is available for download at http://www.sfc.com/de/investoren/finanzberichte#header.
SFC Energy AG will hold a conference call in English for interested investors and members of the media at 9:00 a.m. today, November 16, 2020.
To register, please send an e-mail to [email protected].
About SFC Energy AG
SFC Energy AG is a leading provider of hydrogen and direct methanol fuel cells for stationary and mobile hybrid power solutions. With more than 45,000 fuel cells sold worldwide, SFC Energy is a sustainably profitable fuel cell producer. The Company has award-winning products and serves a range of applications in Clean Energy & Mobility, Defense & Security, Oil & Gas and Industry markets. The Company is headquartered in Brunnthal/Munich, Germany, operates production facilities in the Netherlands, Romania, and Canada. SFC Energy AG is listed on the Deutsche Boerse Prime Standard (GSIN: 756857, ISIN: DE0007568578).