Varta in the stranglehold of the banks: battery producer needs money
Dhe stricken battery manufacturer Varta urgently needs new money and has to save drastically, also under pressure from the banks. Now the majority shareholder, the Austrian billionaire Michael Tojner, is to support the group with a capital increase of 50 million euros. This was announced by the traditional company from Ellwangen near Aalen on Monday.
However, the condition for the capital increase is an agreement with the banks, which depends on their approval of the company’s savings program. The Varta share price lost up to 15 percent on Monday.
Varta has long been considered a great German battery hope, but has recently collapsed in the course. Since the summer of 2021, the company has lost 85 percent of its value on the stock exchange. About a year ago, the group had paid a dividend of around 100 million euros, Tojner holds a good half of the shares in the company.
Advisors and examiners should help
In the past year, the group slipped into the red after previously high margins. The AppleThe group had reduced orders for Varta batteries for its Airpod headphones, and the company was also affected by the costs: “Our material costs rose by 25 percent over the course of the year. They make up 50 percent of our total costs,” said the new boss Markus Hackstein in December in an interview with the FAZ. The Austrian had replaced Herbert Schein, who had been very successful for a long time, in September. Other board members were also replaced.
In order to keep costs down, Hackstein relied on external expertise. Consultants from the Boston Consulting Group should develop savings proposals. In a report by the auditors from KPMG, Varta has now also had its “restructuring ability and clear growth prospects” certified, according to the press release. The report “confirms that what we say is true,” said a company spokesman. It should now convince the banks.
On the one hand, procurement should be improved for the austerity course, which Hackstein had already indicated in December. On the other hand, he announced further cuts for the employees. Savings in personnel costs are “unfortunately inevitable”, he is quoted in the statement. “We have therefore offered the works council to start talks immediately about the design of the specific measures.” 500 employees are already on short-time work. Further investments have been put on hold, including a number of construction projects.
Combative tones came from the union on Monday. “As a works council and IG Metal we will consider all possibilities to secure jobs,” said the responsible IG Metall representative Fabian Fink of the FAZ. “Before you think about downsizing, there is still a long way to go. We would not accept that so easily.” The employer has not yet presented any ideas anyway.
Observers consider drastic savings to be unavoidable. “A staff restructuring is necessary,” said Robert-Jan van der Horst, Varta analyst at Warburg Research.
Very thin liquidity cushion
A company spokesman did not want to explain what would happen if Varta did not reach an agreement with the banks. “I can’t say anything about that,” he said simply. We are very confident that an agreement will be reached. According to analyst van der Horst, Varta’s cash cushion was “very thin” recently. At the end of the third quarter at the end of September it was only 32 million euros. Varta now needs the 50 million euros to fill up the liquidity cushion and “remain able to act”.
Despite the austerity measures, this also includes further investments. The company should grow “with and in the future markets of the energy transition and e-mobility,” said Tojner, chairman of the supervisory board and major shareholder. The measures now announced would create the conditions for this.
Despite the tense financial situation, none of those involved considers Varta to be threatened. Although he recommends selling the stock, van der Horst said Varta has a product that is good and a market in which the company can produce at competitive prices. “It will continue.” IG Metall representative Fink made a very similar statement. And when asked in December whether Varta would become a case for the insolvency administrator, Hackstein replied: “We don’t assume so. We assume that Varta will still be around in 140 years.”