SFC Energy AG - Corporate News

SFC Energy AG publishes nine-month figures - Subdued third quarter / hydrogen program with first series orders ahead of schedule

- Consolidated sales at EUR43,784k (9M/2018: EUR44,269k)
- EBITDA underlying at EUR2,198k (9M/2018: EUR2,015k), EBIT underlying at minus EUR233k (9M/2018: EUR1,181k)
- Continuing weak demand in the Oil & Gas segment in Canada
- Sustained positive sales performance in the Clean Energy & Mobility and Industry segments
- Conclusion of the first framework contract for hydrogen fuel cells
- New guidance for 2019 as communicated on November 13, 2019: Revenue between
EUR58 and 62 million, EBITDA underlying in the range of EUR0.5 to 2.5 million and
EBIT underlying of minus EUR0.5 to 1.5 million
- Medium-term outlook remains unchanged

Brunnthal/Munich, November 15, 2019 - SFC Energy AG (ISIN: DE0007568578), a leading international supplier of fuel cells as well as stationary and mobile hybrid power generation, publishes its figures for the first nine months of 2019 today.

Management Board Report

Dr. Peter Podesser, CEO of SFC Energy AG: "We look back on a subdued third quarter, which, besides the usual seasonality, was also characterized by a development in the Oil & Gas segment that fell well short of expectations. In Canada, a lack of transport capacity for oil and gas still contributes to a considerable investment reluctance. In addition, as disclosed on November 13, 2019, we had to conclude that an expected order in the defense segment in Germany will no longer be awarded in the current financial year and therefore not be revenue-relevant. On the basis of current discussions with customers, the Management Board expects the award of the project in the 2020 financial year.

Nevertheless, we succeeded to further internationalize our Defense & Security segment in the period under review. A growing number of international defense organizations resulted in a significant diversification of the customer base. The moderate decline in sales continues to be based on the high comparative figure from the same period of the previous year, which included a large-volume order from the German Bundeswehr.

The fact that fuel cells as efficient and reliable source of energy are gaining recognition with numerous user industries is also demonstrated by developments in our Clean Energy & Mobility segment. At segment level, the highest sales growth results from high demand in the markets for security technology and wind energy. Customer orders mainly came from Europe and Asia.

We also recognized solid growth in the Industry segment. The positive performance in this segment is due in particular to an increased demand for our solutions for the laser industry, which more than offsets weaker customer demand in the semiconductor industry.

Even though we are of course not satisfied with our operating performance in the third quarter of 2019 due to the decline in the Oil & Gas segment and the business prospects in the national defense business for 2019 had to be adjusted, we have nevertheless achieved key milestones on our way to securing sustainable growth. We are also optimistic about the increasing diversification of our business through products and initial orders for hydrogen fuel cells. Thus, together with our cooperation partner adKor, we have concluded a first framework agreement for hydrogen fuel cells for a German government digital radio program. The first products will already be produced in the current fourth quarter. The agreement runs until end of 2021 and covers a range of at least 200 up to 650 systems with an order volume of approximately EUR1.8 to 5.3 million.

Sales growth

The Group generated sales revenue of EUR43,784k in the period from January to September 2019, compared with EUR44,269k in the previous year. The Clean Energy & Mobility segment (+15.6% compared with 9M/2018) and the Industry segment (+5.9% compared with 9M/2018) continued their dynamic development in the reporting period. The overall 1.1% decline in sales is mainly due to weak demand in the Oil & Gas segment (-11.0%) and lower sales in the Defense & Security segment (-3.7%) compared with the previous year as a result of a major order invoiced to German Bundeswehr in the same period of the previous year.
 

Performance by segment

Oil & Gas

After a subdued first half of 2019, the overall development in the Oil & Gas segment fell well short of expectations in the third quarter. This was due to the tangible reluctance of customers in western Canada to invest as a result of a lack of pipeline capacity, along with uncertainties regarding current approval procedures. For this reason, the third quarter recorded a year-on-year decline of 27.7% and was thus also the quarter with the lowest sales to date this year. In the nine-month period, sales fell by 11.0% year-on-year to EUR16,571k (9M/2018: EUR18,625k). On the other hand, the segment saw continuous growth in the high-margin EFOY-applications business. Sales from this segment amounted to 12.6% of total product sales (previous year: 10.6%). The further expansion of US business remains one of the segment's strategic focal points in order to reduce dependence on the Canadian oil and gas business in the long term.

In order to adjust to the market environment, the Canadian subsidiary Simark already implemented a cost reduction program in September and reduced the number of employees by 10%.

Industry

The Industry segment is on track. The positive sales development in the first half of 2019 was continued in the third quarter. Sales revenue increased by 5.9% to EUR12,943k in the period from January to September 2019, compared with EUR12,220k in the same period of the previous year. This growth was primarily due to stronger demand among new and existing customers, along with the modular product platform developed by PBF for customers in the laser industry. Increased sales in the laser platform area compensated for lower sales among customers in the semiconductor area. The focus will continue to be on improving margins on the purchasing and sales side while simultaneously scaling sales based on the High Power Standard Platform technology.

Defense & Security

The Defense & Security segment generated sales of EUR6,247k in the first nine months of 2019, compared with EUR6,485k in the same period of the previous year. This moderate decline of 3.7% must still be seen in connection with the significant contribution of the major order from the German Bundeswehr in the first quarter of 2018 (total sales volume of EUR3.6 million) and is to be regarded as positive overall. The intensified internationalization strategy of the Defense business continues to bear fruit. In the reporting period, the international share of total sales revenue in the Defense & Security segment increased to 67.6%, compared with a national share of 32.4%. This means that international business has moved upward by around 80.6% year-on-year. Services accounted for EUR782k of total sales in this segment. These services relate to market development work for fuel cells in vehicles but have comparatively lower margins.

Clean Energy & Mobility

The Clean Energy & Mobility segment showed strong sales growth in the reporting period with an increase of 15.6% to EUR8,022k compared with EUR6,939k in the previous year. This positive development was driven by high demand from the markets for security technology and wind energy. The industry sub-segment posted an increase of 22.0%, and even the consumer sub-segment generated an increase of 3.9%.

Earnings performance

In the nine-month period, gross profit and gross margin at Group level were EUR14,511k and 33.1% respectively (9M/2018: EUR14,664k and 33.1%). While gross profit declined in the Oil & Gas and Defense & Security segments, it increased in the Industry and Clean Energy & Mobility segments. In the Clean Energy & Mobility segment, the gross margin rose from 38.4% to 43.0%.

Gross profit by segment

EBITDA for the Group amounted to EUR195k in the reporting period compared with EUR937k in the previous year. EBITDA underlying for non-recurring effects improved to EUR2,198k in the first nine months of 2019 after EUR2,015k in the previous year.

The Group's EBIT in the reporting period amounted to minus EUR2,237k (9M/2018: EUR103k). Taking into account non-recurring effects of EUR2,004k (9M/2018: EUR1,078k), EBIT underlying amounted to minus EUR233k in the nine-month period (9M/2018: EUR1,181k).

The consolidated net result after tax amounted to minus EUR2,975k in the reporting period after minus EUR792k in the same period of the previous year. This resulted in earnings per share in accordance with IFRS (basic and diluted) of minus EUR0.27 (9M/2018: minus EUR0.08).

With effect from the 2019 financial year, the Group applies the new IFRS 16 accounting standard for the recognition and measurement of leases. The application of IFRS 16 had the following effects on profit or loss that are already included in the figures presented:
 

Balance sheet

The equity ratio increased to 55.0% as a result of the capital increase carried out in the reporting period (December 31, 2018: 43.3%).

As of September 30, 2019, the SFC Energy Group had a total of 286 permanent employees (December 31, 2018: 279).

Available cash and cash equivalents amounted to EUR23,042k as of September 30, 2019 (December 31, 2018: EUR7,520k).

Growth strategy on track

The growth strategy announced in the summer and the associated future use of funds from the capital increase are progressing according to plan. "Our hydrogen program is way ahead of the original schedule with respect to the mobile radio project. The development of the next EFOY generation is also on track for a launch in 2020. We are also involved in advanced negotiations for our first M&A transactions and partnerships, to substantially expand the SFC Energy-footprint in Asia in particular. In the third quarter, we entered into further targeted sales partnerships in the US and selected various strategic M&A targets in order to gain access to new regions and markets, expand our technology expertise and develop the existing business model for new services. Here, too, we are in the midst of serious examinations and negotiations," said Dr. Peter Podesser.

Guidance for 2019

The Management Board adjusted its Guidance for 2019 on November 13, 2019. The adjustment had to be made for two reasons: Firstly, persistent structural problems in the Canadian oil and gas industry led to a significant deviation in sales in the reporting period compared with the previous year. The reason for this is the overall restrained investment activity in Western Canada caused by a lack of pipeline capacity in combination with uncertainties regarding current approval procedures. On the other hand, according to the Management Board's current knowledge, an expected order in the defense segment in Germany, which was expected for the fourth quarter of 2019, will no longer be awarded to SFC Energy in the current financial year and therefore not be revenue-relevant.

Against this background, the Management Board currently expects sales revenues of between EUR58 and 62 million, an EBITDA underlying in the range of EUR0.5 to 2.5 million and an EBIT underlying of minus EUR0.5 to 1.5 million for the full year 2019 (original forecast for 2019: consolidated revenues of EUR67 to 74 million, EBITDA underlying between EUR4.5 and 7 million and EBIT underlying of EUR3.5 to 6 million). This forecast was prepared without taking into account the effects of the adoption of IFRS 16.

When calculating sales revenue and earnings of the Canadian subsidiary Simark, the Management Board assumes an exchange rate of 1.50 between the Canadian dollar and the euro.

The medium-term outlook remains completely unaffected. The Management Board reaffirms its medium-term planning, with sales of over EUR100 million and an EBITDA margin underlying clearly above 10% in the next three to four years. Future fluctuations in demand, particularly in the Oil & Gas segment and the national defense business, are expected to be offset by considerable growth in the hydrogen fuel cell business.

Key figures 9M/2019

* As of September 30, 2019

Detailed financial information

The interim report of SFC Energy AG as of September 30, 2019, is available for download at https://www.sfc.com/en/investors/finance/.

SFC Energy AG will hold a conference call in English for interested investors and press representatives today, November 15, 2019, at 9:00 am. To register, please send an e-mail to [email protected].

About SFC Energy AG

SFC Energy AG is a leading provider of direct methanol and hydrogen fuel cells for stationary and mobile hybrid power solutions. With more than 40,000 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).

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