Hello, everyone, and welcome to the Q1 2021 results of Soltech Power Holdings. And thank you very much for joining us. I am Maritzel Perez, Head of Investor Relations. And with me, as always, are our CEO, Raul Morales our CFO, Jose Nunez and the CEO of Power Disc, Pablo Otin. They will guide you through the presentation and afterwards there will be time for Q and A.
From now, you can upload your questions to the platform. Now I would like to hand over to Raul Morales. Please Raul, go ahead.
Thank you, Maricel. Good afternoon, everyone. Now let's just start with the highlights of the period. I am on Page 6. We finished Q1 2021 with an all time high order backlog.
Our order backlog Reached €306,000,000 coming from €119,000,000 in full year 2020 and €183,000,000 in Q1 2020. It provides us a good visibility for the full year 2021. Revenues reached €28,400,000 Lower than in Q1 2020 due to lower activity levels as a consequence of the increase in prices of raw materials And solar modules that affected our clients as a continuation of the trend that we stated during the Q4 of the year 2020, as I will explain later on. Regarding our Project Development division, PowerTis has been able to rotate 95 Megawatts in Spain due to the agreement with Total. Additionally, we have partially recognized in our books the impact of the sale of 249 Megawatts to Aquila that took place in December 2020.
PowerTease reached 6 gigawatts of pipeline as of March 2021. And as of today, we have already new projects in Denmark. As Paolo will explain later, during this year, we expect to enter new markets, including U. S. A.
And Colombia. Going to further details about the global business environment, we believe the increase in the price of solar panels has contributed To some delays in finalizing certain negotiations and some delays in executing contracts already signed, delaying revenue recognition. There are additional challenges in the supply chain that we began to see in the Q4 and that have created fragile conditions in the supply chain worldwide. Retritions due to COVID seem to be finishing even if they are still certain areas very affected. Nevertheless, the perspectives for the whole years worldwide remain very strong in the medium and long term, and our visibility and guidance for the full year Remain intact.
It is important to understand that our industry has high seasonality during the year With often a stronger second half, we have taken several actions to provide us with the necessary visibility for the year. We have reinforced our presence in strategic markets, such as the U. S. With further contracts, as through the right positioning of properties. Our global diversification is key to avoid risks.
As we have stated in several occasions, we pass through steel prices to our clients Through different formulas. What we have very clear is that we do not take this risk and it will not impact our financials. We have reinforced our relation with key suppliers worldwide, improving our ability to produce globally and increasing our manufacturing capacity. As we can see on the screen, we have a track record of 8.6 gigawatts and a global diversified presence, Which is key to avoid risks and also to take advantage of the opportunities that we see in the different markets. LATAM represented 45% of our revenues Europe 17% North America 27% Middle East 8% Asia Pacific 3%.
Going to the business, we had a Q1 with extraordinary backlog and pipeline. We have been able to close important contracts during the 1st months of the year. We signed a contract of 8 52 megawatts in Brazil for the largest bifacial trucker project in Latin America with a focus in EMEA. And also in March, we signed a contract with Arenal to supply solar truckers for 3 59 megawatts in Brazil. Despite the difficult market conditions, we are demonstrating a strong contract closing capacity.
Regarding our pipeline, We have over 25 gigawatts of projects with different probabilities, which accounts €2,600,000,000 We have a strong and solid pipeline and backlog, and our vision in the medium and long term for the sector and for the business is very strong. Finally, I would like to remark that second quarter results will be better than first quarter and second half of the year will be better than the first one. With this, I hand over to Paolo.
Thanks, Raul. Good morning, afternoon, everyone, and glad to be with you all today. Our team's goal for this 2020, as presented in our year end call, focus on growth and execution. We aim to double the size of the company in this calendar year, [SPEAKER MARTIN PEREZ DE SOLAY:] Both in terms of megawatts in the pipeline as well as the number of markets in which we operate and to increase the megawatts under construction in our initial markets, Brazil, Spain and Italy. Regarding these initial markets, we have managed to fulfill our growth goals by adding 1 gigawatt in this quarter And more importantly, by increasing the quality of the pipeline as we will see in the next slide.
On new markets, we are glad to report the start of operations in Denmark, An upcoming market in which Soltech has been quite active in the past and a market in which agrivoltaic solutions will be particularly important. PowerTeach is leading the way on agrivoltaic projects, especially in Italy, and so Soltek Technology is particularly well suited for this type of solutions. We're making good progress as well in U. S. A.
And Colombia. In summary, we are restating our goal of 1 gigawatt of pipeline in new markets before the end of the year. We're now moving on to Slide 13 in which we provide full details on our portfolio. No surprises here and the numbers [SPEAKER JOSE RAFAEL FERNANDEZ:] We
are reporting are in line
with projections. In backlog, we have seen a slight increase from the figures reported in Q4 2020 after restructuring the sales in Brazil, With additional projects from Spain moving into backlog, this trend will continue through the year. Advanced stage and early stage perform in language projections. And while not presented here, we have a significant increase in the identified opportunity category. In this quarter, we are in full expansion mode in all markets.
The identified opportunity category will grow significantly through the year. Looking at market risk, our portfolio is maintaining a healthy exposure Between soft and hard currencies, in this quarter, the mix is 60five-thirty 5 in favor of hard currencies. We anticipate a similar ratio through the year. On one end, Brazil will overtake Spain as a larger market. On the other, USA will balance off with new projects.
Regarding project sales, we have sold our project to Total in Spain of 95 Megawatt It met certain conditions to recognize half of the sale to Aquila in Italy for circa €6,000,000 For the year 2021, we maintain our guidance of 1 gigawatt of project sales, which could be total or partial depending on the market. With that, over to you, Jose.
Thank you, Pablo. Let's have a look now
at our Q1 2021 financials. As you can see on the Slide 15, our consolidated revenues reached €28,400,000 coming from €60,800,000 at the end of Q1 2020. Almost 100% of the revenues were generated by Soltek Industrial, Which continued to be affected by delays caused by the increase in the price of raw materials and solar PV modules. The fact that our sales recognition suffered delays Negatively impacted our financials, but at the same time, clearly improved our backlog as it has already been explained before. Therefore, despite these Q1 results, our expectations remain high due to the good visibility we have and our guidance for the year stands.
We already see improvements in revenues in Q2, and we We expect to significantly increase our execution in the second half of the year. Consolidated adjusted EBITDA reached negative €7,100,000 decrease compared to the Q1 2020 figure, negative €2,400,000 while consolidated net income was negative €4,500,000 versus €300,000 at the end of March 2020. If we look now at the 2 businesses, Soltech Industrial sales were down from €60,900,000 to €28,400,000 EBITDA was negative €8,600,000 coming from negative €1,100,000 at the end of Q1, While net income was negative €6,700,000 compared to negative €2,500,000 at the end of March 2020. PowerTease, on the other side, achieved a positive EBITDA of €2,100,000 compared to the Q1 2020 figure €1,000,000 and a positive net income of 2 €700,000 compared to €2,500,000 at the end of March 2020 after transferring a new project to Total in Spain, La Ferramica, 95 Megawatts and being able to partially recognize income from the first Italian project sold to Agua around EUR 6,000,000 On Slide 16, we can have a look at the breakdown of our revenues by geography at the end of March 2021. As you can see, 60% of our sales came from Latin America, reinforcing our position in that market, while at the same time, we kept a significant share of our sales coming from Spain and North America, 26% and 11%, respectively.
On the next slide, Slide 17, we have calculated net financial debt as of March 2021. As you can see, net financial debt was negative. So we had a net cash position of €7,300,000 at the end of that period, Coming from a net financial debt position of €105,600,000 at the end of 212020 and a net cash position of €11,500,000 at the end of last year. Without further delay, I leave the floor again to Raul to provide the closing remarks. Raul?
Thank you, Jose. For the outlook And guidance for the year, I would like to reinforce our good visibility for 2021. In short, we maintain our guidance. I pass back to Marichelle.
Okay, great. Thank you, Raul. We can go now to the Q and A session.
Okay.
First question is coming from Edouard Bottomley from Berenberg. How do you see revenues developing throughout the year? We know you will grow in 2021 and that Q1 was bad and the disruptions remain. How do you see Q2 and H2? Okay.
Thank you, Edward. Basically, as we have explained during the presentation, what we see is that Q2 is going to be better than Q1 2021. And the second half of the year is definitely going to be better than the first half of the year. So we see our execution increasing towards the end of the year, okay?
So next question is from Edouard Bottomley from Wernberg. What is your growth Scenario in 2021 assuming in terms of disruptions. I mean non disruption are already discounted. We've been talking This presentation and the last one, the result presentation that we saw that increase in transportation costs In raw materials and solar panels, I mean, the disruption are already taken into account. We believe that We are confident that it's going to be a better scenario for the second quarter and for the second half of the year, much better As we've been seeing this disruption all this time, so we took all kind of measures And we passed through all the prices of steel and also transportation costs.
So only one is we are positive with it.
Okay. Next question are in fact several questions coming from Georges Guimaraes from JB Capital. [SPEAKER JOSE RAFAEL FERNANDEZ:] I'll take the first one and then Raul will take the other ones. It says the first one is, is it possible to clarify what you mean with reiterated guidance? Is it EBITDA for 2020 EBITDA margin for 2021, EBITDA margin for 2021, 2023.
Well, basically, when we talk about The fact that our guidance stands, we're talking about everything, okay? As we explained during the IPO process and afterwards In the different presentations we've had at the end of Q3 and then for the full year, we explained That basically for the purpose of our guidance, we're taking 2019 as our base case. And Basically, in 2019, if we're talking about margins, we managed to achieve a 6.22 EBITDA margin for Soltech Industrial. What we're talking about is that we will be building on that particular margin for Soltech Industrial. And from there, We're planning to get closer over the years to 7% based on the integration with Povertise and obviously the operational leverage that we're going to be achieving, okay?
In terms of sales, basically we said that we again took 2019 as our base year And we're saying that essentially we have 2 revenue streams. The first one is related to the projects, The trackers that we're selling and construction services that we're selling to 3rd parties. And for that particular stream, what we're saying is that we will basically take The market share we had at the end of 2019, which was 10%, if we do not take into consideration safe harboring in the U. S. [SPEAKER JEAN PIERRE CLAMADIEU:] And that 10% will be on market share for the coming years.
Therefore, we will grow as the market grows. So we're considering, based on the different studies Prepared an analysis prepared by the consulting firms that the market will grow between 15% 20% in the coming years. So that's The pace that we're assuming we're going to grow. We're keeping, as I said, our market share constant, which is a conservative approach [SPEAKER JEAN FRANCOIS VAN BOXMEER:] To some degree. And we're growing at the same pace as the market.
The second revenue stream is related to the projects developed by Powervitx. We're not just selling projects, [SPEAKER
MARTIN PEREZ DE SOLAY:] Construction services and trackers to 3rd
parties, but we're also selling projects to and trackers and construction services to PowerTease. Now for that particular second revenue stream, what we're saying is that about 15% of the amount of megawatts We're selling for the first string will be delivered to PowerTease including the full suite of additional services, so absolutely everything, Installation, BOP and EPC services, okay? Mal? [SPEAKER MARTIN PEREZ DE
SOLAY:] So yes, The second part the second, third and fourth part of the question from Jorge Guimaraes. I'm going to read everything together because All the questions are linked. The profit warning issued by Array yesterday is a major event For the sector, Erez seems to be questioning the ability of companies to pass on the customer higher costs, namely with raw materials and logistics. What is your view about this? Could you see a situation where truck manufacturers need to accommodate higher costs on lower margins?
3rd part, if companies are not able to pass on costs to clients, do you fear that Soltech will be in worse situation versus its peers due to its lower margins? Peers with EBITDA margins of 15% can accommodate lower prices, reduce margins and get contracts. Soltech with margins in the 6% When normalized cannot compete with that and either enter into losses or losses, are you worried about such situation? When do you see the steel cost to come back? Well, I mean this is very simple.
We've been talking all about the same in this result presentation and on the first one. And we've been talking all the time that we pass all the prices And we lock the prices from our steel supplier at the same time that we signed the contract with our customers. So it's a pass through Kost. So, margins Do not suffer, so because it's a fixed margin and a gross margin with certain costs. And that if the costs increase, Obviously, the sale price increases.
So that is clear. So margins, they don't have to suffer. And the steel prices, it's difficult to forecast what is going to happen. Obviously, we are nearly in all time highs. So that's why now prices are higher than before, but our margins remain the same.
Just that but it doesn't matter if it's the Increase of cost of steel or transportation cost or whatever are the cost involved in our products, we pass through all the cost To the customer, I cannot be other way. So it's not a question if we are going to absorb that increase in our margin, Because it's a fixed margin that we are on our cost and it's fixed. So basically, yes, the next question from Edward Bottomley. From where and where, how do you anticipate the return to normal in terms of raw materials shipping and personnel costs through the rest of this year? So this is I mean, this is obviously, it's difficult to know because we are talking about a worldwide disruption.
So we are seeing Increases in prices not only in steel, also in aluminum, also in copper, In almost in all our raw materials, so this is obviously linked with the pandemic situation. So as far as everything come to normal, this should be normalized. This is the theory. Obviously, no one knows what is going to happen. But I must say That in terms of peaks, we believe that we have achieved that peak or we are very close to that peak.
And we are moving very fast to trespassing that increases to our customers. So that is we in theory, we are not going to suffer more I mean increases Or if we have done those increases, we are going to pass through them to our customers.
Next question is, you give us more information about Denmark? How relevant is that as a solar market? And what is your aim? What your aim is there? Is this a platform to take on the Nordics and Germany more broadly?
Edward, the Danish market is relatively small. We're talking about Our goal baseline goal of 5.5 gigawatt by 2,030 based on the government's goal. And we take the effort on that nature. We don't anticipate to build gigawatt of projects over there. But while relatively small in each market, it's very attractive because of the nature of the products that the country the buyers are willing to buy.
And in this particular case, it's particularly well suited for Soltek Technology. What we've seen in Denmark is basically agrivoltaic Facilities in which you have to get you need to leave a space for agriculture, for farming. And the 2P the 2 important trackers from Soltek are particularly well suited because we give enough space between rows To basically utilize the land in more than just solar production. So it's a relatively small market, but very attractive Porcelain:] To interpret prices, margins and our ability to capture opportunities. Now looking at the second part of the question, we're currently just focusing on one market at a time.
So right now, the effort is Denmark, the Danish market, and we're not planning to extend that team over the neighboring countries.
Okay. Next question is coming is actually a long wind has several questions within. It's coming from Flora Tedhali from Tejbank. I'll take the first one and then Raul will take the second one and Pablo the last one. So the first one is what's your outlook guidance for [SPEAKER JOSE RAFAEL FERNANDEZ:] 2021 for industrial.
Basically, what we've mentioned before, we take 2019 as a base case. [SPEAKER JOSE RAFAEL FERNANDEZ:] From there, we're in terms of margins, what we're assuming in terms of EBITDA margins, we're assuming that we'll be able to maintain Basically, the margins that we had back then in 2019, in that particular case, was 6.22 percent and from there to grow in the coming years to 7 That's our guidance in terms of EBITDA margins, and I've already mentioned about the guidance in terms of sales. Now, Raul will answer the next question on the price of modules.
Yes. The question is about How can we recover the industrial margin and when it's going to normalize the price of steel and soil volumes And what could be the EBITDA margin for this year? Obviously, we don't know, but we believe that we are close to the peak at least with the SORA modules. So With still we don't know, but we believe that must be close, but let's see. But again, we've done we are not losing margin for that.
We are keeping our margin constant as we've been Telling all these times. And we continue with our guidance and our EBITDA is going to follow In the 5%, 7% rate as we've been talking. So again, that's The prices is going to increase or not depending on the cost of the steel, but again, we pass through all the costs.
So the third question is I'm going to translate is, are Power T Sales already committed affected by these price evolutions. Do you have any way to predict margins Versus these changing contracts, so sort of literal translation. So the answer is the impact is relatively limited. [SPEAKER JEAN FRANCOIS XAVIER BOUVIGNIES:] And in the case of Spain and Italy, we are able to pass through because the current structures. And [SPEAKER JEAN FRANCOIS VAN BOXMEER:] We shouldn't forget that the PPA energy prices right now in both markets are in all time high.
So We have a combination of that allow us to sort of limit that impact. We could have limited impact in Brazil Because we have a situation right now in which we have committed sales. In this particular case, the impact has been limited By two elements. One element is we are delaying our committed time for delivering power. Basically, we're extending the deadline under the PPA.
So that was Action number 1. And action number 2 is that we've seen as well a spike in the inflation in every contract that we have. And the revenue contract that we have in Brazil is linked to IPCA, I. E. Inflation.
So in the long run, all this Spike in commodities will pass through the inflation as we've seen. I believe there has been news today yesterday On that nature worldwide and we will basically recapture some of the value through the inflation. Question from Heather Bonnley, Berenberg. How many more projects do you expect to retain as part of the Total agreement? So currently, we have 2 more projects under the agreement with Total, which we're planning to rotate with them.
Question number from Virgenia Santander. How much cash inflow do you still well, there are several questions. I'm going to take the first one. How much cash inflow do you still have pending recognition from PowerTease SSL this 2021. On that one, the answer is we still have a cash flow recognition from a project in Brazil And it's roughly BRL45 million.
Okay. The second part of the question It's what are ASP doing in new contracts? How do you deal with the higher transportation costs? Our revenues accelerating in Q2 'twenty one from what you have seen over the last 6 weeks, would you expect EBITDA to move back to positive territory in this quarter? If revenues hold back on further delays, are you worried about your balance sheet situation moving forward and about your fixed cost structure?
So I mean, ASPs obviously are increasing. So that's clear, because the costs are increasing and we are passing through Those costs. And so ASPs, so now we are selling at higher prices than we were selling just 1 year ago, just for instance. So how are we dealing with the higher transportation costs? Obviously, passing through them and increasing also the final Right.
So, the traffic, that's the only way that we have to deal with this. And our revenues accelerated in Q2, 'twenty one, Well, we have seen over the last 6 weeks, yes, Q2 is going to be much stronger than Q1. And as we said before, Second half will be stronger than first half of the year. So yes, definitely that is because a situation that doesn't I've been with the writing, so because in the rest of the world, the increases in raw materials after partition, I mean, it was noticed the last two quarters and we've been seeing this. Now Most of our customers, they cannot delay more of their projects because they have to supply their energy because they have I see our PPAs to commit.
So obviously, the EBITDA We'll I mean, we'll increase for sure. And when that's we will see, but probably next quarter. And revenues, yes, we are not worried because we have the visibility for the whole year And we have also very important backlog of more than €300,000,000 at the end of Q1 as we said before.
Okay. Next question is from Juan Berrios from Ceki Capital. Can we get more insights on margins and cost pressures? Okay. So basically, As it has already been explained before, when we're talking about increases in the price of raw materials, in case of steel as Rod has I explained before the price of all the components.
It's basically a pass through to our customers. Now then and I've seen all the questions [SPEAKER JEAN FRANCOIS PRUNEAU:] Probably related to this particular issue, some people are asking, okay, why do you have negative Margin at the end of this quarter, okay, or lower margins than last year. Well, it's not because of the projects. It's because of the structure we have. Keep in mind that the sales at the end of Q1 were very low, dollars 28,000,000.
Dollars 28,000,000 obviously is not enough to cover our structure cost, [SPEAKER JEAN
FRANCOIS VAN
BOXMEER:] Okay. But this is obviously something that just happened in Q1. We already mentioned that in Q2, [SPEAKER JOSE RAFAEL FERNANDEZ:] We expect higher revenues in Q1 and the visibility that we have for the second half of the year is great. So Obviously, this is just a temporary issue that will eventually also be corrected and throughout the year we'll be able to generate a positive EBITDA.
Next question from Niraj Kumar Sinha From NKS Industries, who do you find your main competitor in 2P on global front? Thanks. Well, So it depends on the region. So in Europe, I would say, Idematech and PV hardware. In Asia, I would say Artec and U.
S, I would say, FTC. Okay. So
next question is coming from Francisco Javier Cebreo from LKS Green. It's Juan Barrios from Oseg Hill Capital. If there is a pass through to clients why margins are lower than last year, what EBITDA margin should we expect? I guess I just I answered a few minutes ago the first part of the question. The margins that we expect are the ones that are, we mentioned before, between 6% 7% for the coming years, taking as our base case the 2019 sorry, 2019 figures.
Okay?
So next question from Okay. Guimaraes from GB Capital. Sorry to insist on the same question. Is any the risk that Companies have started to compete on prices and not pass to client, 100% of cost increase, the incentive to do so is large, many things. Well, so believe me, I do not see the risk because I mean the industry margins are Fin, about as I said 6%, 7%, 8%.
We don't take into account what Ray said before. That's the customary margin. So it doesn't make any sense to reduce Those margins. So I believe that all competitors are going to I mean, are going to pass through those costs.
Okay. There are no more questions at the platform at this moment. So thank you very much for Your attendance to this webcast, we are all available to answer your questions if you have any further questions at Investor Relations' team. Thank you.