Topic: Nabaltec published final Q1 figures and reiterated the FY23 guidance. Its boehmite capacity expansion is on track to benefit from the ramp up of European and North American EV battery industries.

Q1 sales grew 4% yoy to € 57m. While sales of Speciality Alumina decreased by 5% yoy due to weak end markets such as construction and filled customer inventories (volumes -20% yoy), which was only partially compensated by price increases. Functional Fillers’s sales grew 8.7% yoy thanks to a more solid US business. Boehmite volumes should have remained flat yoy due to a so far only slow ramp up of European battery plants by customers such as SKI and LG Chem.

Q1 EBIT decreased 27% yoy to € 5.2m, (margin -3.9pp yoy to 9.1%) due to several cost increases since the beginning of the year, including salary increases, the expiry of price hedges for 50% of the used electricity and alumina, the key raw material. Those effects were particularly visible within Speciality Alumina, as its margin decreased to 0%. Positively, the margin of Functional Fillers remained largely flat yoy at 13%, mainly due to less volatile raw materials but also a more stable demand environment.

Strong cash flow. Despite the EBIT reduction, the op. CF came in at € 11.6m (-8.4% yoy) thanks to an improvement of working capital. As a result, Nabaltec’s net cash grew to € 20m (vs € 12.5m a year ago), which should be more than sufficient to fund the ongoing capacity expansions and pay dividends.

FY guidance confirmed. For FY23, management expects 3-5% yoy sales growth (eNuW: 1.7%) and an EBIT margin of only 8-10% (eNuW: 9.9%). Based on preliminary discussions with customers, management expects an improving demand situation from Q3 onwards. Assuming that Q2 will show only limited improvements compared to Q1, our FY estimates imply a second half of the year with sales flat yoy and an EBIT margin down by 1.8pp (to 10.7%) compared to last year’s figure.

While boehmite showed muted growth, the gradual ramp up of EV-battery production capacities and the construction of new sites in Europe and the US (<10% of boehmite sales), which should be further accelerated massive subsidy programs such as the IRA, should fuel boehmite sales growth. Mind you, the current capacity expansion to 24kt (€ 72m sales potential) should be completed by the end of 2024e.

Reiterate BUY with an unchanged € 36 PT based on FCFY 2024e.