At the beginning of last year (2021) stood Plug Power (WKN: A1JA81)-Shares still at 61.47 euros. Today it is only 15.04 euros (05/10/2022). Nevertheless, the hydrogen and fuel cell company is growing very strongly. While sales last year (2021) were US$ 502.3 million, by 2025 it should already be US$ 3,000 million.
In the course of the many support measures, there was great euphoria for hydrogen values in 2020. It has largely disappeared with inflation and the now rising interest rates. Today, the Plug Power share is only listed at a price-to-book value ratio of 2.67 (05/10/2022).
Increasing costs put a strain on Plug Power
In the first quarter 2022 could the American company increased its revenue by 95.7% to $140.8 million. This initially means that demand for products will continue to rise, but the operating result is decisive for the share price. On the other hand, it deteriorated from -48.3 to -103.8 million US dollars due to the sharp rise in natural gas and logistics costs. Net income fell from -$60.75 million to -$156.5 million.
Above all, the high natural gas prices are burdening the hydrogen fuel business. The company does not expect a significant turnaround here until 2023.
However, costs are also increasing due to company expansion and business building. With a loss per share of -27 cents, Plug Power missed analyst estimates of -16 cents. The high expenses therefore currently remain a burden for the company and the share. It does not expect any relief in the short term.
Plug Power is working on a margin improvement
Only when the situation on the raw materials markets eases could Plug Power suddenly report soaring results. Meanwhile, the company is trying to reduce logistics costs and improve system efficiency. By 2025, it aims to achieve a 17% operating margin and positive cash flows through business scaling.
Plug Power is targeting a 30% reduction in unit service costs over the next 12 months and 45% by the end of 2023. With its new GenDrive fuel cell, the company has already improved its service margin by 30% compared to the fourth quarter of 2021. The fuel cell business is expected to break even by the end of 2022.
“We are on a learning curve. Every time we double our volume, our system costs drop by 25%. In the electrolyser business, we plan to cut costs by 60 to 70% by 2025,” the quarterly report says.
In the current situation, the solid balance sheet speaks in favor of Plug Power. It has an equity ratio of 77.1%. The cash holdings of almost 2.5 billion US dollars are offset by liabilities of only 1.3 billion US dollars. This is how the company can survive the currently difficult economic situation.
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Christof Welzel does not own any of the shares mentioned. The Motley Fool does not own any of the stocks mentioned.
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