Valoe Corporation Business Review January – September 2023
Valoe
Oyj Liiketoimintakatsaus
16.11.2023 klo
20.45
Valoe Corporation Business Review January – September 2023
THE THIRD QUARTER OF 2023 IN BRIEF
Financial Situation
In July - September 2023, the net sales of Valoe Group, under
the IFRS standards, were EUR about 0.2 million (in 2022 EUR 0.4
million). The EBITDA was about EUR -0.8 million (EUR -0.8 million),
the EBIT was ca. EUR -1.3 million (EUR -1.3 million), and the
profit for the period was ca. EUR -2.1 million (EUR -1.7
million).
In January - September 2023, the net sales of Valoe Group, under
the IFRS standards, were EUR about 1.1 million (in 2022 EUR 0.9
million). The EBITDA was about EUR -2.4 million (EUR -2.7 million),
the EBIT was ca. EUR -3.7 million (EUR -3.9 million), and the
profit for the period was ca. EUR -5.3 million (EUR -5.3 million).
At the end of the reporting period, Valoe Group’s equity ratio
including capital loans was -26.9 percent (-3.8 %).
|
7-9/2023 |
7-9/2022 |
1-9/2023 |
1-9/2022 |
1-12/2022 |
|
|
|
|
|
|
Net sales |
185 |
423 |
1 095 |
917 |
1 305 |
|
|
|
|
|
|
EBITDA |
-843 |
-832 |
-2 376 |
-2 651 |
-3 877 |
|
|
|
|
|
|
Operating
profit |
-1 271 |
-1 255 |
-3 650 |
-3 920 |
-5 587 |
|
|
|
|
|
|
Profit for the
period |
-2 083 |
-1 680 |
-5 308 |
-5 331 |
-7 668 |
The working capital situation tightened further during the
reporting period. To improve the situation, in July 202 we issued a
convertible bond of max EUR 0.6 million (Convertible Bond 1/2023).
The maximum loan amount of the Convertible Bond 1/2023 was first
increased to EUR 1.0 million on 15 August 2023 and again to EUR 3.0
million after the reporting period, on 3 November 2023. Unless the
subscription period of the Convertible Bond 1/2023 is not extended,
it will end on 17 November 2023.
In August 2023, we initiated the change
negotiations with an outcome where Valoe resolved to adjust its
operations by temporarily laying off part of its staff mainly for a
maximum of 90 days. The layoffs will be implemented in a way that
maintains the company's production and operational capacity as well
as the ability to manufacture the current production demand from
the company’s customers and also to ensure potential new
orders.
During the reporting period, the company decided
on two share issues to the company itself without consideration.
The third share issue to the company itself without consideration
was conducted after the end of the reporting period at the end of
October 2023. On 3 August 2023, the company resolved to subscribe a
total of 25,000,000 new shares directed to it on the basis of the
share issue without consideration to the company itself resolved by
the company on 30 May 2023. On 21 September 2023, the company
resolved on a share issue of a total of 19,000,000 new shares to
the company itself without consideration and subscribed all shares
directed to it. After the reporting period, in a share issue
resolved in October 2023, the company subscribed for 29,000,000 new
shares. After the above-mentioned share issues, the total number of
the shares in the Company was 621,859,607 shares.
On 17 August 2023, the Financial Supervisory Authority approved
the registration document as well as the securities note and the
summary, which together form the Prospectus relating to admission
to trading of in total 85,250,206 shares in the company. The
Prospectus has been published on Valoe’s website
www.valoe.fi/julkaisut on 17 August 2023.
Option Scheme for the Board of Directors
In accordance with the decision and authorisation of the Annual
General Meeting held in May 2023, we resolved on the terms of
option scheme for the Board of Directors. The terms have been
disclosed in a stock exchange release on 20 July 2023. A total of
15,000,000 stock options were issued without consideration to the
Chairman of the Board of Directors, and 15,000,000 stock options
were issued to the members of the Board of Directors, 7,500,000
options per Board member. The eligible recipients of the stock
options subscribed for all the stock options offered to them, and
the Board of Directors approved all the subscriptions made. The
stock options may be exercised, i.e., the shares may be subscribed
for, only if the company's operating cash flow in the fourth
quarter of the financial year 2023 is positive.
New Management Team
In July 2023, we expanded the expertise of our Management Team
and appointed Tuukka Savisalo, CTO; Teemu Pulkkinen, who is
responsible for Valoe’s solar module systems and the OddForm®
business; and Matts Kempe, who is responsible for the sales and
marketing at Valoe, to the Management Team. CEO Iikka Savisalo,
Chairman of the Management Team; CFO Seija Kurki; and Senior Vice
President Jose Basso, who is responsible for Valoe’s solar cell
business, continue in the Management Team.
R&D
The cornerstones of our strategy are product development and in
particular the development of innovative photovoltaic applications
for vehicles. In August 2023, we disclosed that we are one of the
partners in the EU’s new project called GIANTS (Green Intelligent
Affordable Nano Transport Solutions) aiming at developing
affordable light electric vehicles suited for urban traffic
solutions. will a new EU GIANTS project to develop light electric
vehicles for global urban mobility. Among others, Toyota, Renault,
Valeo and Valoe's customer Clean Motion are also involved in the
project. Valoe’s task is to develop the efficiency, cost
competitiveness and technological standard of the integrated solar
panel system to enable the use of solar power in L-Class vehicles.
The project aims to make a vehicle that is mainly independent of
the electricity grid. The platform designed in the project will be
demonstrated and validated in two cases, one for advanced markets
and one low-cost solution for the emerging market. The GIANTS
project will last 3.5 years and have a cost budget of EUR 15
million, of which EUR 12 million will be provided by a grant.
Valoe’s and Valoe Cells’ total share of the grant is approximately
EUR 0.45 million.
Extraordinary General Meeting
Valoe’s Extraordinary General Meeting was held after the
reporting period, on 27 October 2023. The General Meeting resolved
on a reverse share split and thereto related directed share issue
without consideration, redemption of shares and cancellation of
shares. After these measures, the new number of shares in the
Company is 3,116,630. The new number of shares was registered with
the Trade Register maintained by the Finnish Patent and
Registration Office on 31 October 2023, and trading with the merged
shares commenced on 1 November 2023 with a new ISIN code
FI4000561576. Valoe's trading code VALOE remained the same.
THE MANAGING DIRECTOR’S REPORT
After Sono Motors cancelled its Sion car project in early 2023,
Valoe's outlook for 2023 changed. The positive cash flow projected
for the rest of the year did not materialise and the company had to
adjust its operations to the new situation. Besides the Sion car
project, Sono Motors has been an important product development
customer for Valoe. The product development projects paid for by
Sono Motors have provided Valoe with cash flow for several years.
In these projects, we have also been able to develop our capacity
for other automotive projects as well. At present, it seems clear
that the Sion project will go down in history as an innovative
concept car that will not be seen on the road despite good
pre-sales.
However, Valoe's prominent role in the Sion project and the
general interest in using solar energy in transport and other new
applications has generated several interesting projects with
established vehicle manufacturers and their supply chains.
According to our view, photovoltaic solutions will most likely be
part of the standard technology offering in the automotive industry
in the coming years. Valoe has a good chance of achieving a
significant market share in this still tiny but strongly growing
market. Valoe's OddForm® technology and the IBC solar cell enable
flexible, visual, and industrially feasible solutions that cannot
be achieved with traditional solar panel technology.
However, in 2023, Valoe has had insufficient financial resources
to develop such business that would enable us to achieve our future
market share target. Instead of building a solid business, we had
to focus on raising short-term financing and ensuring business
continuity. Perhaps the most important of our tasks is to build
financing facility base that allows our business to continue in an
orderly manner until projects still in the product development
phase turn cash positive. According to the current view, a positive
cash flow could be achieved in the last quarter of the 2024
financial year.
Solar Energy and Vehicles
Valoe is currently working on several projects aimed at
establishing a new industrial way of integrating solar energy into
vehicles. In the first phase, we will see glass or polymer based
photovoltaic roofing solutions. Such vehicles have already been
introduced, and we expect the major automotive brands to introduce
several car models including solar roofs in 2025 and 2026. In the
next phase, vehicle windows and other suitable surfaces such as the
hood will also be used for solar integration. Valoe is developing a
solution for its customer where a solar panel is integrated into
the car’s rear window. Valoe's direct customers are expected to be
the established Tier 1 suppliers in the automotive industry. Valoe
has also made significant progress in protecting the intellectual
property rights of its technology. In the future, patents may
significantly improve the company's ability to maintain its
position as competition in the sector becomes more intense.
Solar Energy and Refrigerated Transport
One of Valoe's most potential ongoing projects is a pilot
project with TIP Group to replace diesel energy used to cool
refrigerated trailers with solar power. Based on current
experience, Valoe believes it can achieve a fossil-free operating
range of 8-10 hours under good conditions. This could result in
annual diesel savings of up to 10,000-12,000 litres per each
trailer with a solar system.
Integrating photovoltaic systems into refrigerated trailers is a
demanding task. The amounts of electricity required are sometimes
very high, and the operating environment sets out many unexpected
requirements on the system. Trailers travel all over Europe and
operate in a wide range of environments, including ships. The
constant change of tractor units and drivers also creates
challenges for the introduction and training of new systems.
Systems must operate reliably in all these changing conditions.
While developing the right system is a demanding task, it also
creates a very high threshold for competition. We therefore believe
that, once the system has been successfully tested, Valoe has an
excellent opportunity to achieve significant market share and thus
growth as the use of solar electricity becomes more widespread in
European refrigerated transport.
Solar Energy and IoT
In 2023, Valoe received an order to develop a photovoltaic
component for a consumer electronics product. As the project
progressed, the company discovered the significant benefits of the
back contact technology when the component is integrated into an
electronic device. Traditional stringing technology cannot be
applied when connecting tiny photovoltaic components. The Internet
of Things (IoT) is a perfect example of an environment where
photovoltaics can be utilized. The operating time of various
electronic devices is based on battery life, thus creating
constraints on the availability of the devices. Using small
photovoltaic components, the operating time of the product is
significantly extended, even to the point where charging the
battery is not at all needed. According to Valoe, such components
can be used in various communication modules, monitoring devices,
consumer electronics and GIS applications. The infinite operating
time will also enable applications that are not yet feasible with
current technology. In the IoT environment, product development
cycles are much shorter than in the automotive industry and the
cash flow is therefore much closer. We expect Valoe's first
micro-scale solar energy component to enter the market in a
mass-market product of a major consumer electronics manufacturer as
early as the first half of financial year 2024.
Financing is Our Challenge
The company's working capital situation tightened further during
the reporting period.
The cancellation of the Sono Motors’ Sion car and the loss of
cash flows related to Sono Motors have significantly impacted our
operations during the period. Although we have been able to make
good progress on our projects, both technically and contractually,
and our customers have been satisfied with our deliveries,
operating with the current financial resources has been very
difficult and has been, and continues to be, associated with
extremely significant financial risks.
In the current financing negotiations, we must be able to
establish new financing arrangements that will allow us to make
long-term operating plans and implement our projects on time. The
long-term success of the ongoing projects and highly profitable
prospects still in the sales pipeline requires significantly
greater financial resources than at present. We aim to have our
financing facilities in place by the end of the 2023 financial
year. If the financing negotiations were to fail or take an
unreasonably long time to conclude, this would at worst affect the
continuity of Valoe's operations.
VALOE’S FUTURE OUTLOOK
Market Guidance
Due to the cancellation of the Sono Motors Sion car project,
Valoe has not yet been able to replace this lost cash flow.
Although new, very promising orders that might lead to mass
production has been received, we estimate that it will take 3 to 12
months to start mass production, depending on the order. Under
these circumstances, Valoe will not publish market guidance for
2023.
RISKS AND UNCERTAINTIES
The company's main risk relates to the sufficiency of its
financing. The company's working capital situation tightened
further during the reporting period. At the date of this review,
the company's working capital is insufficient to cover its current
needs for the next 12 months and that the company requires
immediate additional funding, which we are negotiating with
existing and new investors. In addition, we have entered into
negotiations to restructure the company’s short-term debt with its
major creditors. If these negotiations were to fail or take an
unreasonably long time to conclude, this would at worst affect the
continuity of Valoe's operations.
Valoe has several cooperation agreements that aim at large-scale
customer collaboration. The full implementation of these agreements
involves many uncertainties. If the collaboration agreements would
not be executed as originally planned, reducing the company's
estimated revenue from the relevant agreements, it would have an
adverse effect on the company's results of operations and/or
financial situation and/or the value of the company's
securities.
There are uncertainties and risks involved in assessing the
profitability of products and services and in meeting quality
standards for products and services. Especially, recent general
economic uncertainty, increased inflation and changes in energy
prices may have negative effect on the company's business and
profitability. In this situation, there are specific risks
associated with supply chains, and the company cannot at this time
assess the impact of the risks on the availability and pricing of
materials and services, and therefore on the company's financial
situation and operations. In particular, a sharp rise in inflation
will increase the price of the raw materials and energy used by
Valoe. The critical raw materials Valoe uses include, e.g., special
plastics, metals, glass and silicon wafers, spare parts and
components for machines and equipment, and professional services
related to operations. Valoe's solar panel production at the Juva
plant and solar cell production in Lithuania are both
energy-intensive activities, which means that unfavourable price
developments in energy prices directly affect the company's
profitability, and thus its operating results and financial
position.
The statements, projections and market guidance in this Report
and in Valoe’s strategy are targeted to the future and based on the
management’s current estimates. Therefore, they involve risks and
uncertainty by their nature and may be affected by changes in the
general financial situation and in Valoe’s and its customers’
business environment.
These and other risks are described in more detail in the Annual
Report published on 27 April 2023 and the Prospectus published on
17 August 2023, which are available on the company's website at
www.valoe.fi.
Mikkeli, 16 November 2023
Valoe Oyj
Board of Directors
Further information: Iikka Savisalo, CEO, Tel. +358 40 521 6082,
iikka.savisalo@valoe.com
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