Meyer Burger Technology AG (MBTN) Earnings Call Transcript & Summary

Hello, ladies and gentlemen. Good morning, and welcome to the Meyer Burger Technology AG conference call regarding the half year figures of 2024. [Operator Instructions] So let me now turn the floor over to Franz Richter, Executive Chairman.

Yes. Thank you very much, and good morning, everybody. I'm Franz Richter, the Executive Chairman of Meyer Burger since a couple of weeks. And we are right now working on, again, a transition through these, right now, a little bit difficult times. Today, we report about the half year figures, which we published yesterday late night, and we will go through a presentation. Together with me here is Martin Jäschke from the finance team. So if there are questions afterwards for the number part, he will be available to answer those questions. So we'll talk about the half year report and we'll talk, of course, about the market business, the financial statements and then probably, most interestingly, the outlook, how do we see our time and how do we see our business going forward. But let's start with the market and business review. A little bit of chronology of the events since the beginning of this year. It started in January, we prepared -- or the company to close module production in Germany to really eliminate losses. We had the ramp of -- or the installation of the module production in the States and so the decision was made that we prepare if the market doesn't pick up, and we are not really selling in Europe and Germany, we were ready to close. And that happened then in March. In March, we decided and closed the module production in Freiberg in Saxony. And as you know, there are 2 parts in the solar, module production and solar cell itself, which is done in Thalheim, which is north of Leipzig. So there, we have the solar cell production and the module production where the cells are integrated into modules. That was closed in Freiberg and transferred to the States to Phoenix in Arizona. And in April, we had decided to build the cell production in Colorado Springs, and of course, a significant increase. There was a steep ramp from this 1.4 gigawatt in Thalheim -- production we have in Thalheim, to another 2 gigawatts in Colorado Springs. And in June, in parallel, we, of course, then also ramped the module production in Arizona. In April, we had the rights issue to finance the Colorado Springs investment with a rights issue of CHF 206 million. That was successfully accomplished. But then as we went further, and due to the significant price increase in infrastructure in August, we had to decide that -- and to recognize that the finance was not really viable. We had issues, as I said, with price increases. We couldn't really carry over cost to the market, to customers. So finally we had to accept that, that project with the cell production in Colorado Springs was not possible. And hence, we had to restructure, and in September, we had to come up with a new plan and how to work from there on. What we did, basically, was then that we decided to refocus on, basically, as I call it, refocus on what we have. On the left-hand side, you see the initial U.S.-only production. So that was the plan that we would -- as there is a lack of support, in political support, in Europe, we had the plan to transition completely to the U.S., at least with the module and have the cell manufacturing in Colorado, module production in Phoenix. As I said, price increases, Chinese competition, so the tariffs which we had to pay for wafers to get from China into the U.S., so that all didn't work out. Finally, we closed and moved the concept, on the right-hand side, where we do have the cell production in Germany. The existing cell production, that is what we have. And then also have the ramp of the module production in Phoenix, Arizona. And both together are complete, providing us a capacity of 1.4 gigawatt. We have 1.4-gigawatt cell production running in Thalheim already. So that is an existing production. It's well established and with good results, I will come to that in a minute. And the module capacity in Phoenix is in the ramp. And with that, we are with the 1.4 gigawatt cell and module capacity going forward. The rights offering, of course, now we can say what happened to the money. And of course, as I said, the intention was to finance Colorado Springs from that rights offering. From the proceeds we received, about CHF 40 million went into the investment into Colorado. Of course, we also increased and ramped up the Phoenix module production, which we will continue to use. Then we had CHF 70 million on the balance sheet and some money went into the operations in Europe. So with this being said, now on the left-hand side, you see Colorado Springs, that red x. So we are discontinuing Colorado Springs, the cell production there. And of course, there are already prepayments, there are already equipment, there's already investments done, which are now sitting and will not be used. And of course, we have to take write-offs on that and we will come to that financial impact later on. However, those equipment are still there. And we will see going forward how we can, yes, make use out of these equipment and these assets, which are right now written down. So with this, we have to go -- we had to restructure the company. We are going through a restructuring process. And we engaged in a restructuring adviser, external experts who guide us and help us and analyze and basically then also audit the plan, the business plan going forward that this is a viable plan. And we have, in principle, the 1.4 gigawatt production, which is already completely -- almost completed, not complete, but to a very high degree already sold in long-term contracts. So that is a pretty stable business plan. And of course, we have to look how we adjust our cost, our infrastructure here in Europe. And that is what this restructuring program is showing, that we will reduce workforce significantly. We will have also cost-cutting -- or let's say, cost reduction measures with the short-term -- short work -- that is short-time work in Germany as possible in Hohenstein for the time being. And then, of course, we have to explore other additional revenues from other markets or from other use of the equipment, of the technology, what we did change in 2020 from an equipment supplier to instead a module manufacturer, we are now reopening to a special, let's say, partners, not to all -- to the whole market, but with partners in partnerships to use our equipment with partners for that industry. As I said, focus on what we have. We do have a very efficient, very much complete installed cell production in Thalheim. And you see here the 3 charts. On the left-hand side, the production volume, we are at plan. So that is 1.4 gigawatts that is fully established. You see the yield. We are above the plan, this gray line is the yield planning over the time during that ramp-up. Of course, there's always room for optimization. That is why you see this gray line, straight line going upwards over time. But the reality is today we are above our planned numbers. And also the cell efficiency, we are above the plan. So that production is running at a very efficient -- in a very efficient way and so we can trust very much that we have a very stable production here. The module production in Phoenix, Arizona or Goodyear, it's part of Phoenix, we are ramping 2 lines. So the first line is in the ramp and our first modules are coming out. The second line will start ramping end of this year. So that, in total, by about mid next year, third quarter, we will also here have the capacity of 1.4 gigawatt. Then installed, there's a third line we had invested, which is right now also sitting there, which is not going into production as of today, what our plans are. So again, these solar cells will come from Germany, from Thalheim and will be integrated into modules in Phoenix. Also for the U.S. market, again, those modules still have a very high quality level. This is, again, certified by another test in the States. So we are, from the start on, we are very high in quality. And especially for these applications where utility application, stability, temperature, moisture, hail resistance, it's very important for some areas. So that positioning works very well that we also in the States have positioned ourselves as the high-quality module producer, module provider for utility applications. And especially in the U.S., very different from Europe, we do have a support. There are different measures, which help a lot. First of all, we do have long-term agreements with customers. And also during the last weeks, we got a lot of support with those customers and in direct discussions. So they are very interested that there is a non-Chinese cell module production established in the U.S. So we get a lot of support also in terms of pricing, volume. And so therefore, we are pretty safe from the market. We do have support measures from politics, the IRA, well known; other support mechanisms like the Forced Labor Prevention Act that we are a little bit more covered from unfair competition. And it's really then more direct, really a competition in the market and not influenced by subsidies in other areas. So if we come to the financial statement and numbers. Of course, the first half year, those numbers are very much impacted by the shrink of revenue. It was very difficult to sell modules here in Europe because we do not have any support from politics, from any measure. So we are very much facing a very low price competition from Chinese modules. And hence, our revenues went down significantly. It's very difficult to sell. We do sell in special applications. There are still some niche markets where our modules can be sold in Europe, but it's very low volume, and of course, also significant price concessions we have to make. And hence, the revenue in the first half year went down to below CHF 50 million. And also the EBITDA is basically, of course, because prices are low and we are not utilizing our production. So we are very much, yes, selling -- or producing to stock and selling off the stock and that only stopped after we stopped the production in Freiberg. And now we are selling off the stock in Europe. And if you look to the EBIT, of course, there is a significant depreciation since we cut off the module manufacturing in Freiberg. Also the Colorado, the assets had to be written down. And also, as I said, we are selling our modules at lower price. That means also the modules, the inventory had to be adjusted. And as a consequence, of course, also net results are pretty negative. If you look at the few key metrics for the first half year. For the FTE, number goes down. We are reducing in sales force and that is, as we said also in the restructuring program, from this 1,050, 1,100 half year that will go further down to about 850. So there is significant further reduction in employees -- number of employees. The cash looks better because, of course, the capital increase was about this CHF 206 million from the capital increase, but also significant losses reduced the cash. The inventories, as I said are written down. And PP&E is also adjusted. There's write-offs onetime, and I will come to this a little bit later. And hence, the equity went down exactly the same way because of the negative losses cuts into the equity. On the next slide, you see the bridge of these. Most of the negative results are, of course, coming from onetime write-offs, onetime effects. So one-offs. And then the adjustment of inventories, you see on the left-hand side the EBITDA. From operative EBITDA is minus CHF 58 million. And the one-offs, another CHF 66 million. There are different -- on the right-hand side, you see the different elements there. Of course, the inventory adjustment provisions from contracts, we'll be able to adapt that. Some impairments on prepayments, all this is cumulated in the CHF 66 million. Some ordinary depreciation and others, it's a minor number. And then the reduction of useful lives. If you don't use the manufacturing, well, of course, the inventory has to be written down. Another impairment on the cash-generating units because the prices are now differently -- was also some write-downs on that part. And then we have the intangibles and the assets in the U.S. The inventory -- or the PP&E for Colorado which is, of course, another significant write-down. And in total, brings us the EBIT significantly to negative -- minus CHF 322 million. So that is, of course, the dramatic situation right now. On the outlook, as I said before, we are facing a significant funding gap. The installation -- the investments in the capacity increase in Colorado cannot be utilized. There's a significant gap, we mentioned that in the upper double-digit range. Right now, we are in discussions and negotiations with bondholders. We have 2 bonds outstanding '27, '29, and here this is basically where we are in negotiations so that we get fresh money in. And parallel to that, of course, we have to restructure the company as it was set up here especially in Europe, where we had to basically -- European company, that has to be changed. We have to adapt to the production, as I said, focus on what we have, this production, some R&D. But we have to restructure the whole company in a way that we can really, yes, create that business based on this 1.4 gigawatt capacity. So we expect -- because of the negotiations with a group of bondholders, we expect that we will, within the next few days -- unfortunately, we couldn't finalize this within the reporting time frame, so until yesterday, so there is little bit further discussions needed. But we are very positive that within the next days, we will -- or few weeks, we will be able to report results here that we can close that gap. And then we look what is the future from there on. We then have a company basically based on 1.4 gigawatt capacity cell and module. And for the first time since many, many years, we will have a business plan for the next 4 or 5 years, which has no funding gap at all anymore. So that is the goal for that whole discussion we have right now, that we have to have a clear, fully funded business plan which then gives us, provides us about CHF 350 million, CHF 400 million in revenue with the CHF 70 million EBITDA number, starting when we are fully ramped. The first full year where we add capacity will be '26. And then from then on, we will have a plan -- we will have a business that's CHF 350 million, CHF 400 million with CHF 70 million EBITDA. And of course, until then we do have also time to sell off some assets. We are not going to use any more, for example, equipment lines in Freiberg, which is closed. There is a value we have -- right now very low valuation in our plan. But -- so the whole plan is created to provide stability, no open holes within the plan, so we will be able to really execute on that plan and to come to that business. As I said, the 1.4 gigawatt, CHF 350 million, CHF 400 million revenue and CHF 70 million EBITDA. So with this outlook, I'm done with my presentation and we are ready to take your questions. Thank you very much.

[Operator Instructions] The first question comes from Alessandro Foletti of Octavian.

Yes. Can you hear me now?

Yes.

Sorry for that. First of all, I would like to wish you good luck and a lot of strength for the coming weeks and months. I have maybe 2 or 3 questions, the first one on the funding gap. How do you plan to close it?

As I said, we are right now in discussion with our bondholders because the bondholder, there are 2 bonds outstanding, convertible bonds, maturities '27, '29 and we are in the final discussion with those bondholders or group of bondholders to restructure this to provide fresh money to the company to close that funding gap and then provide -- going on with the business, as I described. This is the basically the measure we have to close that gap. So there will be no other, I don't see any other. So the stock market, that's no option. So we are not looking for any investors' money. We are working here with those bondholders to close that gap.

But if I may, if you have outstanding bond and you restructure, the pure restructuring of the bond does not bring additional cash, right? So you...

No, no, it brings additional cash...

[ It's meant to stand you up. ] Is that correct?

It's a restructuring. And as I said -- and the details will be published when we have that. But the consequence from that is that we will have fresh capital to the company, that we will close our gap and then we can execute on our plan. So -- but the details will be disclosed when we are there.

Okay. And then the second one, maybe on your inventory. Part of it has been written down. But can you indicate, of the modules that you have produced and I believe they might sitting in Germany, how much of that have you sold? And how much do you think you can still sell?

I mean, again, the plant, there is about 200 megawatts sitting right in the inventory. There is -- we do sell those modules, and of course, we are continuing to sell, and there are also some changes you'll see, some political, and yes, changes in the rules in Italy. And there are some projects where we still can sell that. That will take some time. There's always a problem, is if you sell very fast and you want to sell very fast, it has an impact on price. If you have a little bit more time, you can find those applications where you can get a better price. And that is also what happened -- what we had with the discussion with bondholders. So we have to close that gap now to not, let's say, fire sale -- fire sell all the inventory we have right now. So that has to be done at the maximum value.

Okay. And then maybe I would have 2 more, if I may. So with your clients, where you have offtake agreements and you will need to produce, as I understand, first modules this year already. How is it going with them? Are you in discussion with them as well? Are they sort of willing to support you to, I don't know, maybe increase their balances, for example, or give you more flexibility on our deliveries, et cetera?

Of course. I mean, I visited them. We are in discussion, an ongoing discussion all the time. We do see significant support and a strong support. As I mentioned before, there is an interest for having Meyer Burger in the market. That is obvious from all customers we have talked to. So there is a good support. The details, of course, we can't talk about the details very much. But yes, we do see that support and that continues.

So for the moment, the relations there are still, so to say, on the green light?

Absolutely.

Okay. And then maybe my last question, regarding your plants in Freiberg and in Colorado. Do you still have any running costs coming out of those?

No, I mean, this is -- of course, yes, there are some remaining costs. This is all covered by our business plan. That is all taken care of. And of course, that is now the question of negotiations, what to do, how to make use out of that. But as I said, we are very -- this is a very conservative plan, which has been reviewed by an external organization so that we get a better trust level. And this is the biggest and the most important thing that we have to create. We have a history. I mean, it's not new. We have a history and we have to create more trust. And therefore, we have tried to come up with a very conservative plan that we can execute as we have planned. And those costs you have mentioned, which are still ongoing, there are some remaining costs on -- in our plants. Of course, we are working on that to reduce that as much as possible.

But can you give an indication of what kind of cost is there?

No, no. I cannot -- this is cost to find somewhere there. So rent and then it's a question how do we, again, get out of that contract. There is, of course, some material which -- we cannot talk about the prices because we are in negotiations. And I think that is -- right now, we have to see when we finish that and then we can open that.

But maybe on the employee side, can you say if you sort of are done with that?

No. As I said, we are at 1,050. We have the plans to go down to 850. However, we also have to see, there is an increase in FTEs in U.S. So we will have a little bit further decrease here in Europe. But also here, we first have to talk with the units and the organization. And then I think, first, we will have a plan, establish in more detail, define, then we will talk to the people first.

[Operator Instructions] So a new question just came in. It's from Andrea Infurna, Azimut.

Just wanted to ask, please. This external adviser you have appointed for this new business plan, how much is the time do you have to expect in order to have some news regarding this? And let's say that the restructuring that you are doing with the convertible bondholders is just to, let's say, rely on a hypothetical new structure of the company. But are there -- is it possible to, let's say, to ask which kind of guarantees you would like to give them at this stage? If it's participation in the equity, if it is something related to the pledge of certain assets, it's something that we could ask now? Or it's probably also coming later after this adviser?

I mean, these are 2 elements. The restructuring adviser is independent from the restructuring of the bonds, first of all. I mean, we started that independently because when that business with Colorado, the cell manufacturing in the U.S., when that fell apart, we, of course, had to think about what to do, what is the plan, what can we do. Is it over or do we have an opportunity? And again, my philosophy here was always let's focus on what we have. We do have a running production. We do have existing contracts. We are -- we do know our production and capability. So we can do -- can make something out of that. But we needed to come up with a plan, what does it mean to the whole structure of the company? There is a significant impact. It's a painful restructuring, but we have to go through to make the company survive. The other part is the refinancing because there is a funding gap. We do have -- without external money, there's not -- no way that the company can survive. But the only source I can see right now is the existing bondholders. There is a discussion, I will not go into any details. Of course, there is consequences with that. No money is for free. But this provides us a base plan. 1.4 gigawatt, that is only the base for stability, for a stable operation of the company. We do not plan in the finance right now that there are many opportunities. And of course, there are opportunities. We are the only Western-started cell manufacturer with quality. We do have IP. We do have written-down assets. So there is a significant upside potential. We will then work on to create a story for the market. And as soon as we have more clarity here, we can talk about that. But at this point in time, I will not do any -- give out any detailed information because these are running negotiations and we would sabotage ourselves.

Yes. So my point was more referring to the fact that, of course, you have to save. It's CHF 1 million more that you will pay in interest expenses from now on. But my question was referring to the fact that, I mean, at this stage, I suppose that you would like to have an exit strategy with 0 debt in the future, having completely haircut the bonds under this point of view. Because, I mean, the restructuring plan that you have to do with your adviser, of course, you cannot pay any interest at the moment. But the thing here is, are you going to do a haircut of the convertibles? Or are you going to completely do 100% restructuring?

Again, I mean, as I said, the restructuring will be done anyhow. That is what we do to really get the company in a shape to focus on the production of 1.4-gigawatt capacity. There were many other things. We will just focus on that because that is a stable plan going forward. And as I said, first time in years that we have no funding gap if we succeed in our discussion, which is the second part, with our bondholders. And here, we are in discussion to close that gap that we are fully funded for the next years. And to what -- in detail what we are doing there, that is not to be disclosed right now. That is part of our negotiation that we can only talk when that is finished.

Okay. And when you say next weeks in order to have an outcome from this restructuring, can you give us a bit more clearer view on that regarding the restructuring of the bond and the adviser plan?

The restructuring -- I mean, as I said, this is ongoing negotiations. I cannot give you an exact date. We will be very soon -- that is what I'm personally convinced. We will have a result pretty soon without giving the exact date. But I'm convinced we will have a solution there. And when we have that, we will then publish more details to what it means when we have it. But before we have anything, I'm not going to tell you anything what it could be or should be or maybe.

Next question is a follow-up question of Alessandro Foletti, Octavian.

Yes. I would like to ask you a question on your CapEx plans. But first, I would like to ask you, Mr. Richter, if you agree with me in the view that, let's say, in the last 3, 4, 5 years, your discipline on capital spending was not really very high and this helped, sort of contributed to bring the company in the situation we are now. Is that a fair view to say it?

Well, I mean, of course, as always, you have plans. There are opportunities. You have to go after opportunities and it's a decision you make at the time. And of course, if that works, everybody is happy and then you look bright and great. And if that does not work out for whatever reasons, then you look differently. No question about it. The only point is, what I can say to -- at no time I would say there was a plan which was totally out of range. We had a lot of commitments from different sides, from the policies. There was expectations. There was a lot of discussions, but in the end, it didn't work out. And today, it's a little bit meaningless to see -- I mean, to look back and say, well, we should have done something different here and there. Fine. You can -- other people have to look at that. But today, we have to look what is possible. Do we have something? I just -- my personal feeling is we have a company, which has a lot of hidden assets, which are, of course, right now undervalued. And so if you come up with a stable business plan with CHF 400 million and CHF 70 million EBITDA, that looks different from what I see today the market cap is. And that has a reason, exactly what you said. That is where we are right now. And now we look forward and see what can we build based on that what we have.

Understood. On one point, I do disagree a little bit when you say that looking back is meaningless. It is true that it doesn't change anything, but the reason I'm asking about this is because when I look at your future plan, the CHF 300 million, CHF 70 million EBITDA and particularly what you said about looking into potentially a situation where you have no funding gap, I believe personally that one of the key points will be that you then really bring this discipline on capital spending going forward, which is why I'm asking about the past in order to learn for the future in this sense, you understand?

You are not talking to a 25-year-old boy, so I'm now in the upper 60s and I have made my experiences. And you're absolutely right, you always look back to learn something. That's fully, fully okay. And that is, of course what we do and what we did and -- but the time has changed. We are not looking for any steep expansion, steep growth, which is a different scenario. We are now very much down on a safe ground. And yes, of course, capital spending and we have to do restructuring. That needs discipline. That is also what we are focusing on right now, and we will execute on that. And that part, I agree with you, that there is a discipline necessary. And we are set up to do -- to accomplish it.

The next question comes from Alessio Mastrandrea of Bloomberg.

Sorry if I missed this earlier. But is there any news regarding any sort of support from Germany, given all the Chinese dumping?

No. There is no news. We -- again, if you base your business on what I call the safe plan, what we have, look what we have, I'd just say there is nothing. So it's meaningless to talk about do we expect anything around on support. We look what is there, what do we have. If there are openings, if something opens up, we are happy to consider whatever that provides us. But our story is clearly focusing on the market in the U.S. and where solar is considered as strategic. And think about all those countries with a high number of citizens, people, whether it's China, whether it's India, whether it's U.S., solar is seen as a strategic, important source for energy. It's the cheapest one. And as I've said and has showed you in this presentation, there is an infrastructure. There is a support infrastructure in the U.S., and that is where we have to focus. If something else comes, fine, we will consider. But the focus is clearly the market in the U.S.

Next, we have a follow-up question from Andrea Infurna, Azimut.