VARTA AG
9M 2023 Earnings Presentation
14 November 2023
Disclaimer
This presentation contains certain financial measures (including forward-looking measures) that are not calculated in accordance with IFRS and are therefore considered "non-IFRS financial measures". The management of VARTA believes that these non-IFRS financial measures used by VARTA, when considered in conjunction with (but not in lieu of) other measures that are computed in accordance with IFRS, enhance an understanding of VARTA' s results of operations, financial position or cash flows. A number of these non-IFRS financial measures are also commonly used by securities analysts, credit rating agencies and investors to evaluate and compare the periodic and future operating performance and value of other companies with which VARTA competes. These non-IFRS financial measures should not be considered in isolation as a measure of VARTA' s profitability or liquidity, and should be considered in addition to, rather than as a substitute for, net income and the other income or cash flow data prepared in accordance with IFRS. In particular, there are material limitations associated with the use of non-IFRS financial measures, including the limitations inherent in determination of each of the relevant adjustments. The non-IFRS financial measures used by VARTA may differ from, and not be comparable to, similarly-titled measures used by other companies. Certain numerical data, financial information and market data (including percentages) in this presentation have been rounded according to established commercial standards. Furthermore, in tables and charts, these rounded figures may not add up exactly to the totals contained in the respective tables and charts. This presentation contains forward-looking statements which are based on certain assumptions, expectations and opinions of the management of VARTA AG (the "Company") or cited from third-party sources. These statements are, therefore, subject to certain known or unknown risks and uncertainties. A variety of factors, many of which are beyond the Company's control, affect the Company's business activities, business strategy, results, performance and achievements. Should one or more of these factors or risks or uncertainties materialize, actual results, performance or achievements of the Company may vary materially from those expressed or implied as being expected, anticipated, intended, planned, believed, sought, estimated or projected in the relevant forward-looking statement. The Company does not guarantee that the assumptions underlying such forward-looking statements are free from errors nor does the Company accept any responsibility for the actual occurrence of the forecasted developments. The Company neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.
2
Executive Summary
Q3 2023 has been the strongest quarter of FY 2023 to date with regards to revenue and adjusted EBITDA.
- Q3 2023 results exceed Q3 2022: revenue Q3 2023: €215.1 m (Q3 2022: €193.9 m), adjusted EBITDA Q3 2023: €29.4 m (Q3 2022: -€2.5 m)
- This also applies when considering positive effects totaling EUR €12.5 m, which result from the reimbursement of ramp-up costs that incurred primarily in the first half of the year in in the area of large-formatlithium-ion cells.
- Broad product portfolio carries overall success in Q3 2023.
Seasonal increase in demand, successful restructuring measures, decrease of costs for raw materials and energy have positive impact.
- Personnel costs YTD reduced by €7.8 m; personnel costs in Q3 2023 lower than €60 m for the first time since Q1 2022.
- Material costs decreased by €23.1 m compared to 9M 2022.
- Other operating expenses reduced by €25.3 m (-19.8% y/y) through stringent cost reduction programs.
- Thereof, Energy costs virtually halved from €18.3 m in 9M 2022 to €9.6 m in 9M 2023.
- Level of inventories has declined by 18.6% from €262.5 m as at 30 September 2022 to €213.7 m as at 30 September 2023.
Confirmation of guidance for full financial year 2023:
- Revenue around €820 m.
- Adjusted EBITDA* between €40 m and €60 m.
*) Including adj. items from shared-based payments, expenses from M&A transactions, restructuring and integration costs and inventory step-up from purchase price allocation (PPA) | 3 |
**) Negative effects on the VARTA AG Group cannot be ruled out. For details refer to the outlook in this presentation and VARTA's 9M 2023 report |
VARTA Group - Significantly improved Q3
leads to adj. EBITDA of €22.6 m in 9M 2023
Revenue and adj. EBITDA, € m
Description
Revenues | ||
-2.9% | ||
570.7 | 554.1 | |
Q3 | 193.9 | 215.1 |
Q2 | 191.5 | 174.8 |
Q1 | ||
185.3 | 164.2 | |
9M 2022 | 9M 2023 |
Adj. EBITDA | • | ||||
adjusted EBITDA margin | • | ||||
-65.9% | |||||
66.4 11.2% | 22.6 | 4.1% | |||
• | |||||
38.1 | |||||
28.2 | 29.4 | ||||
-1.9 | -2.0-4.8 | ||||
9M 2022 | 9M 2023 | • | |||
Q1 | Q2 | Q3 |
Revenues down 2.9% y/y to €554.1 m.
At segment level, the revenue decline in 9M was driven by Micro Batteries and Lithium-IonCoinPower. Revenues in Consumer Batteries were in line with previous year's level while
Energy Storage Systems revenues grew
substantially (86.2% y/y growth).
Significant improvement on the cost side through strict cost containment measures: personnel expenses fell by 4.0% to €190.3 m; other operating expenses fell by 19.8% to
€102.2 m; higher material prices in 9M 2023,
and effects from product mix led to a higher cost of materials ratio (52.2% from 49.2%). Cost of materials ratio for Q3 alone declined (47.1% in Q3 2023 from 49.2% in Q3 2022).
Adjusted EBITDA of €22.6 m down from €64.3
m, mainly resulting from the volume decline in Lithium-Ion CoinPower in HY1 2023. Q3 2023 strongly improved at €29.4 m vs. -€1.9 m in Q3
2022.4
Strong margin improvement in Consumer
Batteries and further growth in Energy Storage (ESS)
Revenue and adj. EBITDA, € m
Description
Consumer
Batteries
The power of freedom:
From radio to toys to blood pressure monitor - we provide you the optimal power.
Energy Storage Systems (ESS)
Future-proof and flexible: The storage capacity can be expanded at any time, even after installation.
Revenues | |||
+0.5% | |||
231.1 | 232.2 | ||
Q3 | 84.5 | 89.7 | |
Q2 | 64.3 | 67.6 | |
Q1 | 82.2 | 74.9 | |
9M | 9M | ||
2022 | 2023 | ||
Revenues | |||
+86.2% | |||
121.9 | |||
Q3 | 65.5 | 40.4 | |
Q2 | 22.9 | 41.8 | |
Q1 | 27.9 | 14.7 | 39.7 |
9M | 9M | ||
2022 | 2023 |
Adj. EBITDA | • | |||||
adjusted EBITDA margin | ||||||
+55.0% | ||||||
14.3 | 6.2% | 22.1 | 9.5% | |||
11.6 | 14.6 | • | ||||
6.2 | ||||||
1.6 | 1.1 | 1.3 | ||||
9M | 9M | |||||
2022 | 2023 | |||||
Q1 | Q2 | Q3 |
Adj. EBITDA | • | |||||
adjusted EBITDA margin | ||||||
> +100% | ||||||
1.7 | 2.6% | 16.0 | 13.1% | |||
5.8 | 5.6 | 4.5 | • | |||
-0.22.9 -1.0 | ||||||
9M | 9M | |||||
2022 | 2023 | |||||
Q1 | Q2 | Q3 |
HY1 2023 Consumer Batteries revenues slightly up y/y. Partial price pass-onsand new customer acquisition outweighed slight volume decline and contributed to the improved sales momentum (Q3 2023: +6.1% y/y).
Falling costs for raw materials and typical
stronger net sales in HY2 significantly improved profitability for Consumer Batteries (9M 2023: 9.5%; +3.3 percentage points). VARTA expects to return to its 2020/21 margin levels in the medium term.
Revenues in Energy Storage Systems continue
to grow impressively at >86% y/y, driven by the structural shift towards home storage solutions and VARTA's highly competitive product and service offering.
In Q3 2023, the very high adj. EBITDA margin
has fallen slightly due to price reductions (sales price adjustments of around -7% in August 2023). Margin for 9M 2023 stands at
13.1%.5
Sustained high margins in Micro Batteries,
Q3 improvement in challenging year for CoinPower
Revenue and adj. EBITDA, € m
Description
Micro Batteries
Hearing aid batteries with an even higher energy density are the result of consistent research and ongoing development.
Lithium-Ion
CoinPower
Lithium-Ion Cells:
Main power for portable and cordless devices like true wireless headsets.
*) TWS = True Wireless Stereoheadsets
Revenues | |||
-14.2% | |||
123.7 | 106.1 | ||
Q3 | 40.7 | ||
36.1 | |||
Q2 | 39.8 | 35.8 | |
Q1 | 43.3 | 34.2 | |
9M | 9M | ||
2022 | 2023 | ||
Revenues | |||
-61.3% | |||
114.5 | |||
Q3 | 34.8 | ||
Q2 | 45.0 | 44.4 | |
Q1 | 34.6 | 25.2 | 2.7 |
16.5 | |||
9M | 9M | ||
2022 | 2023 |
Adj. EBITDA | • | ||||
adjusted EBITDA margin | |||||
+17.6% | |||||
13.5 | 10.9% | 15.9 | 14.9% | ||
7.4 | 6.1 | • | |||
5.7 | 3.9 | 5.9 | |||
0.5 | |||||
9M | 9M | ||||
2022 | 2023 | ||||
Q1 | Q2 | Q3 | |||
Adj. EBITDA | • | ||||
adjusted EBITDA margin
> -100%
35.6 31.1%
•
20.0 18.3 -2.7 | -2.5 |
-18.2-11.2
-31.9-71.9%
9M9M
20222023
Q1 Q2 Q3
Demand for Micro Batteries continued to be affected by subdued market sentiment, reflecting e.g. customer stock piling during the pandemic and the market shift to rechargeable hearing devices.
Adjusted EBITDA increased significantly in Q3 y/y due to lower raw material prices and the favorable product mix. The adjusted EBITDA margin rose to the attractive level of 14.9% YTD (9M 2022: 10.9%).
In Lithium-Ion CoinPower, the strong decline
in demand for TWS* had a significant impact on revenues. Q3 2023 significantly improved: Revenue in Q3 (€ 25.2 m) > HY1 (€ 19.2m).
Y/y decline in sales volumes, in particular from the major customer, and costs from underutilization resulted in highly negative adjusted EBITDA. The 2022 bottom-linewas positively impacted by gov. grants payments of €29.2 m from a funding program that was
finalized as expected in 2022. | 6 |
Reimbursement of ramp-up costs in Li-Ion
Large Cells drives top- and bottom-line growth
Revenue and adj. EBITDA, € m | Description | |
Revenues | Adj. EBITDA | • | The segment Other consists of the business | ||||||||||
Other | adjusted EBITDA margin | divisions Lithium-Ion Battery Packs and | |||||||||||
+37.9% | -55.5% | Lithium-Ion Large Cells (V4Drive and | |||||||||||
Includes the businesses of | 49.6 | 1.3 | 0.6 | RoundPower). | |||||||||
3.7% | 1.2% | 9M 2023 net revenues up 37.9% y/y, due to | |||||||||||
"Lithium-Ion Battery | 36.0 | • | |||||||||||
Packs" and "Lithium-Ion | Q3 | 23.7 | 7.0 | effects from reimbursement of ramp-up costs | |||||||||
0.3 | |||||||||||||
Large Cells" (V4Drive and | 11.0 | -0.7 | 2.4 | -0.4 | |||||||||
RoundPower). | Q2 | 14.5 | 13.2 | -6.7 | in Q3 of €12.5 m. Lower adj. EBITDA margin in | ||||||||
Potential special effects | Q1 | 10.6 | 12.7 | 2023 (9M 2023: 1.2%) attributable to subdued | |||||||||
of the Group may fall into | 9M | 9M | |||||||||||
this segment. | 9M | 9M | 2022 | 2023 | Battery-Pack business revenues. | ||||||||
2022 | 2023 | ||||||||||||
Q1 | Q2 | Q3 | |||||||||||
VARTA Group | 9.0% | Adj. EBITDA | • | ~42% of Group revenues attributable to | |||||||||
9M 2023 | Consumer Batteries. | ||||||||||||
8.0% | 22.6 | • | Energy Storage Systems has become the | ||||||||||
Consumer Batteries | Revenues | 41.9% | 22.1 | second largest segment accounting for 22% | |||||||||
9M 2023 | of company revenues. | ||||||||||||
19.1% | ~ €55 m | ||||||||||||
Energy Storage Systems | 16.0 | ||||||||||||
€554.1 m | |||||||||||||
• | Significant bottom-line contribution from | ||||||||||||
15.9 | |||||||||||||
Micro Batteries | |||||||||||||
0.6 | Consumer, Micro Batteries and Energy Storage | ||||||||||||
CoinPower | |||||||||||||
22.0% | -31.9 | Systems. Substantial improvement of Lithium- | |||||||||||
Others | |||||||||||||
Ion CoinPower in Q3, but still a highly negative | |||||||||||||
adj. EBITDA for 9M 2023. | 7 |
Consistent focus on balance sheet
resilience and net working capital management
Balance sheet positions, € m
Description
Assets | |
-9.0% | |
1,258.5 | 1,145.8 |
749.2 | 722.9 |
509.2 | 422.9 |
FY | 9M |
2022 | 2023 |
Non-current assets | Current assets |
Net Working Capital | ||
NWC ratio* | ||
-11.7% | ||
214.0 | 162.7 | 189.1 |
9M | FY | 9M |
2022 | 2022 | 2023 |
27.6% | 17.2% | 22.0% |
Inventories | Operative payables | |
Trade receivables | Customer bonuses |
Equity & Liabilities | ||
Equity-Ratio | ||
-9.0% | ||
1,258.5 | 1,145.8 | |
239.5 | ||
175.3 | ||
1,019.0 | 970.5 | |
19.0% | 15.3% | |
FY | 9M | |
2022 | 2023 | |
Equity | Total Liabilities |
• Total assets declined by 9.0% vs. end- 2022, |
reflecting lower non-current and current |
assets. |
• The net working capital increased from €162.7 |
m end-2022 to €189.1 m as at 30 September |
2023. It was well below the €214.0 m as at 30 |
September 2022, though. |
• The letter was mainly due to the substantial |
decline in inventories which fell from €262.5 |
m (30 September 2022) to €213.7 m as (30 |
September 2023). |
Inventories | ||
-18.6% | ||
262.5 | 223.3 | 213.7 |
9M | FY | 9M |
2022 | 2022 | 2023 |
Trade receivables** | ||
+3.8% | ||
107.3 | 114.3 | 111.3 |
9M | FY | 9M |
2022 | 2022 | 2023 |
Current trade payables*** | ||
-16.7% | ||
108.1 | 119.2 | 90.1 |
9M | FY | 9M |
2022 | 2022 | 2023 |
• As a result, the NWC ratio* fell from 27.6% on |
30 September 2022 to 17.2% in FY 2022 and |
amounted to 22.0% on 30 September 2023. |
• Equity fell from € 239.5 m as at 31 December |
2022 to € 175.3 m as at 30 September 2023. |
The equity ratio amounted to 15.3 % as at the |
reporting date (31 December 2022: 19.0 %). The main effects are the capital increase of € 50.7
m carried out Q1 2023 and the negative |
*) The net working capital ratio is calculated in relation to the revenue of the last three months extrapolated to one year **) Trade receivables including contract assets
***) Current trade payables including advanced payments received and contract liabilities
consolidated result of -€115.8 m. | 8 |
Further improvement of Free Cash Flow
remains a top priority
Cash flow statement, € m
Description
2023 | |||
108.7 | |||
-8.3 | |||
-18.7 | |||
-55.7 | -0.2 | 39.8 | |
(CAPEX**) | 14.0 | ||
-74.4 |
Cash & cash | Cash flow from | Cash flow from | Cash flow from | Cash & cash | |
equivalents | Exchange rate | equivalents | |||
operating | investing | financing | |||
1 January | fluctuations | 30 September | |||
activities | activities | activities | |||
2023 | 2023 | ||||
2023
9M 2023
-82.7
Free Cash Flow (FCF)
• The Free Cash Flow substantially improved vs. |
the previous year but has remained negative. |
• The cash flow from operating activities |
improved to -€8.3 m in 9M 2023. Thus, it rose |
by €50.1 m. The improvement was driven by the |
ongoing restructuring programme and the |
consistent cash flow management. |
• The cash flow from investing activities has |
improved from -€127.1 m in the same period of |
the previous year to -€74.4 m, largely |
2022
73.1
-58.4
-35.7
142.5
-91.4
(CAPEX**)
-127.1
2.2
32.4
2022
9M 2022
-156.7
reflecting the lower CAPEX**. |
• Cash flow from financing activities decreased |
in the reporting period from €142.5 m in 2022 |
to €14.0 m. Main drivers: capital increase |
(+€50.7 m), higher interest expenses (-€15.5 m), |
both in 2023, and base effects from |
promissory note (€250.0 m) and dividend |
Cash & cash | Cash flow from | Cash flow from | Cash flow from |
equivalents | |||
operating | investing | financing | |
1 January | |||
activities | activities | activities | |
2022 | |||
Cash & cash | |
Exchange rate | equivalents |
fluctuations | 30 September |
2022 |
Free Cash Flow (FCF)
payment (-€100.2 m) in 2022. |
• As at 30 September 2023, cash and cash |
equivalents totalled €39.8 m (2022: €32.4 m). |
*) 2022 financial figures adjusted according to IAS 8 (further details can be found in the annual report 2022) **) CAPEX denotes investments in intangible assets and property, plant and equipment
9 |
Moving forward to restore operational
excellence - base for the successful turnaround
Action plan
Implementation of sales
initiatives across segments to
increase top line and bring
VARTA back to the growth
path
Execution on cost reduction
through clearly defined
restructuring concept to boost
EBITDA and return to an
adequate profitability level
Leveraging operational
excellence, installed
capacities, strong brand and position in growing markets to increase top- and bottom-line
Outlook FY 2023 & FY2024*
FY sales revenue
at ~ €820 m
[ confirmed ]
FY adj. EBITDA**
at €40 m to €60 m
[ confirmed ]
as amended on 26 July 2023 and confirmed on 10 November 2023
- €900 m
sales revenue
20 24
Clear management focus
Management laying the foundation for the successful turnaround
*) The outlook is subject to the further developments of the very high inflationary pressure and the associated central-bank increases in interest rates as well as the development in the wars in Ukraine and Israel/Gaza and their impact on the global economy. The further macroeconomic and geopolitical
development therefore results in an exceptionally high level of uncertainty. Furthermore, the outlook is dependent on impact of the intended restructuring measures. Adj. EBITDA accounts, among other factors, for potential costs associated with restructuring and adjusts them accordingly.10 **) Including adj. items from shared-based payments, expenses from M&A transactions, restructuring and integration costs and inventory step-up from purchase price allocation (PPA)
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VARTA AG published this content on 14 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 November 2023 06:04:07 UTC.