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REC Silicon ASA

Recommendation: Buy · Target Price: NOK6.0 · Current Share Price: NOK 3.1
Strong Q1 numbers - mixed outlook

Strong EBITDA contribution from Butte
Better than expected cash position
Likely too early to restart Moses Lake - maintaining optionality is focus
Will continue dialog with silicon anode companies aiming for pilot testing

Strong Butte margins in Q1

REC reported Q1 revenues of USD 24.5m (-13% vs ARCe) and an EBITDA of USD 1.0m, which is up from USD -3.0m last quarter and better than our estimate of USD -2.1m. The standalone Butte EBITDA came in at USD 8.0m (+27% vs. ARCe), up from USD 5.3m in Q4. Lower revenues than we expected were driven by lower silane volumes sold (730 MT, i.e. -14% vs guidance of 850 MT), however this was more than offset by improved margins, explaining the EBITDA beat. The cash development was better than expected, driven partly by a significant reduction in working capital, and partly by the fact that the JV payment and the full interest payment likely will be incurred in Q2 rather than in Q1.
Likely too early to restart Moses Lake

REC highlights in the presentation that the polysilicon market may decline ~15% from 2019 to 2020 as a consequence of less PV installation activity driven by Covid-19, and as such may not rebalance before 2022. Hence, it will likely be prudent to postpone a restart-decision until there is more visibility on a market tightening. Furthermore, it would be necessary to verify compliance by China with the phase 1 trade agreement.
Maintaining full optionality is focus

As it may be too early to reopen Moses Lake and potential Butte-bidders have delayed their due diligence process in the midst of Covid-19, the company's plan is to run as smoothly as possible to maintain full optionality. We find it encouraging that REC will "continue dialog with silicon anode battery companies for pilot testing and industrial scale production of silicon anode materials»

Arctic Securities AS

Daniel Stenslet

Godt Q1, sitter videre med min post i Rec.
12.05.2020 kl 14:20 336

Du glemte en publisering når du klippet og limte det du har "lånt" og lagt ut fra en annen REC-tråd, så her er den oppdateringen du mangler:

"REC (Sell tp NOK1.0): Q1 2020 first look: Figures in line, market challenging in all aspects

Q1 2020 first look: Figures in line, market challenging in all aspects

SpareBank1 Markets acted as Sole Bookrunner in connection with the Private Placement in REC Silicon.


REC just reported Q1 2020 EBITDA of USD1.0m, in line with our estimated USD0.5m, and net profit of USD-10.7m (including USD5.1m currency gain) was in slightly weaker than our estimated USD-9.6m. The EBITDA of USD-2.8m from Moses Lake (cold stacked) was slightly better than our estimated USD-4.5m due to cost reductions, while the EBITDA of USD8.0m from Butte was weaker than our estimated USD10.5m. The cash position was unchanged at USD30m, mainly driven by positive working capital changes of USD5.1m.

In the outlook section, REC comments that the demand for polysilicon may decline by 15% in 2020 vs 2019, and the major overcapacity may not be balanced until 2022 (or later). Thus, the decision to restart Moses Lake was postponed, and we do not expect a restart of the facility in the a few years. The market for silane gas is negatively impacted by COVID-19, and the revenue from Butte fell 24% YoY. Due to REC being at the beginning of the supply chain, orders lag relative to end user demand, and Q2 figures will probably be weaker.

The cash position of USD30m was unchanged due to a positive working capital movement of USD5.1m. In a challenging market for both Moses Lake and Butte, we continue to be worried about the balance sheet, and there is still uncertainty regarding the indemnify loan of USD19m which Nordea partially called in December 2019, but has not been paid yet.

All over, the report was as expected. The outlook for 2020 remains challenging and the cash position is slim. However, REC also devote one slide to battery producers (although no volume or timing guidance), and last time it focused on that, the share increased on rather weak results. Thus, difficult to assess the share price reaction, but we argue that focus should be on the short-term foreseeable future.

Best regards,

Jonas Meyer
Equity Analyst"
Redigert 12.05.2020 kl 14:21 Du må logge inn for å svare