Metacon Q2 on Thursday: Gearing up for delivering larger deals

Metacon will release its Q2 results on Thursday. We expect revenue to decline mainly due to lower deliveries and tough comparable figures in Q2’23. Profitability is expected to remain negative as a result of still low absolute level of revenue. Metacon recently announced an order for the supply of a large-scale industrial electrolysis plant valued at ~226 MSEK, which we commented on here. In the upcoming Q2 report, we are looking for any comments regarding the delivery schedule for the order, as well as information regarding the progress of the three ongoing larger electrolyzer projects in Slovakia, Romania and Poland.

We expect absolute revenue to be low, but eyes are on upcoming projects

We estimate Metacon’s Q2 revenue to decrease to 22.8 MSEK from 25.1 MSEK in Q2’23, corresponding to a 9% decline. The decrease is mainly due to challenging comparable figures as Metacon, in the same quarter last year, completed several electrolysis and hydrogen refueling station projects. In Q2, we estimate that Metacon’s revenue will mainly be derived from increased deliveries especially related to ongoing electrolyzer orders in Slovakia. However, given that the company does not report its order book, revenue visibility is low and may vary significantly from our estimates, as was evident in the latest quarter. Nevertheless, since the company has experienced prolonged lead times in the latest quarters, which has affected deliveries, we believe there should be potential for revenue stemming from previously communicated orders.

Profitability still in the red with limited revenues

We expect Metacon’s Q2 adjusted operating profit to remain negative at -14.2 MSEK due to still low absolute level of revenue and gross margin, which does not yet cover the fixed costs. However, we expect raw material and consumable costs to scale down with revenue, given their variable nature. Thus, we estimate the operating loss to decrease slightly. Given the company's relatively low debt levels, our net income estimate is roughly aligned with the operating profit. In terms of cash flow, we anticipate a negative operating result will put pressure on cash flow. As of the end of Q1, Metacon had a cash position of 70.4 MSEK. Considering a quarterly burn rate of around 20 MSEK, the company would run out of cash by ~Q4’24. However, if Metacon starts to receive revenue from the recently announced large-scale electrolysis plant order, this could help cover short-term financing needs. However, given the historical lead times and the size of the project, it seems reasonable to expect that Metacon will start to recognize revenue from this order from 2025. Taking this into account, coupled with investments for the electrolyzer factory, it becomes evident that additional financing will likely be needed this year. However, given the recent significant order now in hand and the establishment of strong partnerships, we believe that Metacon is well-positioned for a possible raise.

We hope to receive better visibility into the existing order book

Metacon’s primary positive driver is revenue growth. We expect the primary growth drivers in 2024 and 2025 to be the three announced major electrolyzer projects in Slovakia, Romania and Poland with a combined order value of 289 MSEK, as well as the recently announced order from Motor Oil, valued at ~226 MSEK. If these orders are realized, it would support Metacon’s cash flow which is critical for the company to establish its Gigafactory. Nevertheless, the lack of transparency regarding the company's order book poses a challenge to revenue visibility, and we believe that increasing this visibility will be critical to assessing future capital requirements. Thus, we seek any updates regarding the progress of these projects, as well as comments on financing options for the factory.