Alfen's 2024 Earnings: EPS Misses Expectations, but the Future Looks Bright

Alfen, the Dutch energy solutions specialist, has reported its full-year 2024 earnings, and it's safe to say that the results have left investors with a mix of emotions. While the company's revenue increased by 10% in the first half of the year, driven by its Energy Storage Systems & Smart Grid Solutions businesses, the adjusted EBITDA margin took a hit, dropping to 5.5% of revenue compared to 9.4% in the same period last year. This has led to an EPS miss, leaving investors wondering what the future holds for Alfen.



So, what went wrong for Alfen in 2024? The primary factors contributing to the EPS miss were the decline in Energy Storage Systems revenue and production issues with its concrete manufacturer for Smart Grid Solutions. Let's dive into these challenges and explore how Alfen is addressing them.

1. Energy Storage Systems revenue decline: Alfen's Energy Storage Systems business experienced a significant decline in revenue due to rapidly declining battery prices, which led to a delay in large deals and a more competitive market environment. To improve visibility on this business line, Alfen has decided to start communicating its backlog on a quarterly basis. As of mid-August, the value of its total ESS backlog of signed projects was €88.3m, which will convert into revenue in 2024 and 2025. Despite the challenges, Alfen has sufficient backlog to cover its revenue guidance for ESS in 2024.
2. Smart Grid Solutions production issues: Alfen faced production issues with its concrete manufacturer, which led to a temporary reduction in the production of transformer substations. The company has taken steps to address this issue, such as ramping up production week by week and prioritizing new substations over rebuilds and repairs. Alfen expects to reach its anticipated capacity in Q4, with production exceeding 100 substations a week.



Alfen has also taken profitability measures to address the lower than expected revenue, such as reducing travel and procurement costs. Additionally, the company has started a strategy validation and organizational right-sizing project, which is expected to continue into Q3. Alfen will communicate an update on the progress of this project during its Q3 trading update on November 7, 2024.

In conclusion, while Alfen's 2024 earnings have missed expectations, the company is taking proactive steps to address the challenges it faces. The decline in Energy Storage Systems revenue and production issues with its concrete manufacturer are temporary setbacks, and Alfen is well-positioned to bounce back in the coming quarters. As investors, it's essential to stay focused on the long-term prospects of the company and not get too caught up in short-term fluctuations. Alfen's commitment to innovation, sustainability, and growth makes it an attractive investment opportunity in the heart of the energy transition.