New construction stopped and short-time work
Battery manufacturer Varta pulls out the red pencil
11/15/2022, 4:16 p.m
Delivery problems, high costs and a lack of demand: the battery company Varta is struggling with this triad of problems. Annual sales will probably drop by around ten percent. In addition, the construction of a battery factory is put on hold. The employees are also feeling the effects of the situation.
The battery manufacturer Varta, which is struggling with high costs and order delays, has announced a savings program with short-time work and an investment freeze. Due to falling demand for button cells for headphones, around 500 employees at the Nördlingen site went on short-time work for 80 percent of their working hours from December to April, the company announced. Up to 200 temporary employees are to go. The planned new factory for battery cells for electric cars will be stopped due to a lack of purchase commitments from car manufacturers. Prices should also be increased.
Varta wants to reduce costs by at least 40 million euros in the coming year, explained the new Varta boss Markus Hackstein. With massively increasing costs of energy and raw materials and at the same time increasingly gloomy economic prospects, Varta, like many companies, is facing major challenges. So far, they have caused charges of 220 million euros. “However, we will master these challenges,” said Hackstein, who surprisingly replaced Herbert Schein as CEO at the end of September.
After several profit warnings, Varta named a new earnings target for 2022 with an operating profit of 55 to 60 million euros – almost minus 80 percent compared to the previous year. A net loss of 20 million euros was incurred at the end of September. The owners of the badly battered shares of the MDax group from Ellwangen cannot expect a dividend, explained Varta. After several profit warnings, the title collapsed by more than 70 percent within a year. The sell-off continued on Tuesday while the release of the final quarterly figures was delayed for hours due to technical issues. It was a pure IT problem and not a cyber attack, explained CFO Armin Hessenberger.
Sales drop by around ten percent
Annual sales in 2022 are now expected to fall to EUR 805 million to EUR 820 million from EUR 903 million in 2021. For the coming financial year, the company forecast a slight recovery to EUR 850 million to EUR 880 million in sales and an operating result of EUR 90 million to EUR 110 million.
It is unclear how the future project battery cells for cars will continue after the emergency brake for the new factory building in Nördlingen. Varta would have had to invest 500 million euros for a production capacity of one to two gigawatt hours. A pilot plant went into operation at the end of 2021, and a series order from a car manufacturer for high-performance cells is to be processed. According to media reports, this is the sports car manufacturer Porsche, but Varta has not confirmed it. According to Hackstein, there are no other supply contracts with car companies. Large investments would have to be made for other products beyond the currently built standard cell of format 21,700. “We only have limited financial resources to develop this further,” said the Varta boss. Projects for future lithium-ion round cells have not been abandoned.
But the company is looking for financiers – be it investors through investments in the separate company founded specifically for the product V4Drive or partnerships with customers. In addition to the car industry, manufacturers of cordless tools are also candidates. Hackstein’s predecessor, Schein, manages the new subsidiary. At the end of September, the manufacturer of button cells, household batteries and energy storage had already overturned its profit forecast for this year. At that time it was said that two large orders were delayed. The company supplies Apple with batteries for the “Airpods” headphones, among others. Demand for this product has fallen, while demand for household batteries and storage is good, Varta explained. After nine months, sales of EUR 571 million are eight percent below the previous year, adjusted Ebitda has fallen by almost two thirds to EUR 66 (182.5) million.