Demand in the fast charging market for electric cars was lower than the company previously thought. The expectation of the operating profit margin is negative. The orders of existing customers have been counted.
Electric vehicles Kempower, which manufactures fast charging devices, said early Thursday evening that it is calculating its guidelines for the year 2024.
The company lowers its turnover expectation for the year to 220–260 million euros, assuming that exchange rates do not have a significant impact. The previous guideline was 360–410 million euros in turnover.
Kempower expects the operative operating profit margin for the year to be negative. However, it expects profitability to improve to a zero level in the last quarter of the year. Previously, the company expected a positive margin of 5–10 percent.
The company’s announcement was published at 18:15, i.e. just a quarter of an hour before the end of trading. The company’s share price on the Helsinki stock exchange fell by 5.25 percent on Thursday.
On Friday, when the stock market opened, the stock continued its steep decline, and traded up to almost 40 percent below zero.
After the stock market closed at 18:30, the company’s share was 28.6 percent below Thursday’s closing price.
Kempower was still one of the so-called price rockets of the Helsinki Stock Exchange at the end of last year. The company’s share price began to rise in the second half of 2022 and continued to rise until October 2023.
The peak of Kempower’s stock was seen in the middle of last October. At the closing price on October 12, the company’s share price was almost 53 euros. The company’s market value reached three billion euros.
That was the start of a rapid decline. By the end of October, the company’s share price had fallen below 30 euros. This year, the decline has continued. The share’s previous plunge was seen in February, when the share fell more than 25 percent after the earnings announcement.
After the most recent price drop, Kempower’s share costs only about 16 euros. The decrease from last October’s peak readings has therefore already been around 70 percent. At Friday’s exchange rate, the company’s market value has already fallen to about 883 million.
of the DC fast charging market demand has been lower than the company has previously estimated, says Kempower.
“After Covid-19, there was a component shortage, which created a higher-than-normal demand for fast charging solutions”, the company justifies this.
According to the company, the introduction of chargers has also been slower than previously expected due to the limited availability of network connections.
According to Kempower, both factors mentioned above have created extra stock on the customer side.
“Several customers also expect full availability of the next-generation charging platform during the second half of 2024.”
Kempower estimates the value of the Kempower chargers in its customers’ stock to be around 100 million euros, and that stocks will slowly decrease in the second half of the year.
This has a significant negative impact on customers’ orders, says Kempower.
According to Kempower, the effect of the extra stocks is clearly visible in the realized order accumulation, when the difference in the order volumes of our largest customers between the first half of this year and the first half of last year is about 75 million.
The acquisition of new customers has not been enough to make up for the decline in orders from existing customers, although it has developed positively, the company says.
In the press release, Kempower hints at future cost savings that could improve the company’s profitability.
“In order to improve its profitability, Kempower is evaluating significant short- and medium-term cost structure changes to optimize the organization’s efficiency,” the announcement reads.
In the result warning Kempower gave an unaudited preview of the figures for the second quarter and the first half of the year.
The order book fell to 101.0 million euros in the second quarter, while last year at the same time it was 138.5 million. Order intake fell to 54.1 million euros, compared to 86.3 million in the comparison period.
Turnover decreased by 21 percent to 57.1 million euros from 72.5 million in the comparison quarter. The operating result was a loss of EUR 8.5 million, -14.9 percent of turnover, while in the comparison quarter it was a profit of EUR 13.9 million.
The order collection for the first half of the year fell to 99 million from 147.7 million in the comparison period.
Analysis company Inderes analyst Pauli Lohi says that he was surprised at how much lower Kempower’s turnover is becoming.
He says that the change to the guidelines was really significant.
“About a third of the recommended turnover left,” says Lohi.
According to Lohe, the analysts expected a clearly higher turnover from the company, so in that sense the profit warning was not expected. The risk of the profit warning itself, on the other hand, was already known.
“Ours too [Inderesin] the forecast was below the previous guidance range.”
In the interim report for the first quarter published back in April, Kempower kept its guidance unchanged, i.e. it expected higher turnover and a positive operating profit margin for the year.
Could we have expected information about changes in the financial outlook from the company earlier?
“Typically, listed companies are quite careful [läpi] their views before they go out to inform. We rarely see profit warnings earlier than this.”
“But of course the scope of the change here was so great that you can wonder if you could have already given someone a wider fork in the instructions, which would also enable these lower scenarios,” says Lohi.
Salmon in my opinion, Kempower’s growth outlook for the next year is quite weak.
“The challenges of customer demand and customers’ high inventory levels are ones that can last for several quarters. It is difficult to estimate at what stage they will be eliminated.”
In the long term, however, the trend of electrification of motoring is not about to reverse, and sales of electric cars will continue to grow, says Lohi.
The outlook for long-term growth is still strong if we consider that at the end of the decade, much more affordable electric cars will also be on the market and the electrification of heavy-duty vehicles will also progress, he says.
Lohi points out that the company has heavily invested in growth over the past year, established factories in the United States and Lahti.
“And then the simultaneous drop in demand. Their combined effect in the short term is really strong.”
Shareholder Juha Varis comments on Kempower’s profit warning in X.
“When demand drops at the same time as the company about doubles its production capacity, the result is pretty ugly on the profit line,” he writes.