By Chris Berry
Last week, TSLA released its Q2 2014 earnings. As a proponent of disruptive business models and the raw materials necessary to enable the upheaval, I always listen with rapt attention. The earnings of $0.11 per share on net income of $16 million (non-GAAP), and a loss of $0.50 per share on net income of $62 million (GAAP) were enough to satisfy the market and after a brief dip in after hours trading, the share price rebounded strongly.
As is the case with many of the early-stage companies I follow, I’m more interested in production metrics, though revenue here is accelerating, indicating that TSLA is having no problem selling its cars. I’m willing to tolerate negative earnings and cash flow as long as the company is investing in future growth and increasing sales. This is clearly the case with TSLA which reported record production (8,763 Model S) and deliveries (7,579 Model S) in Q2 and is on track for more than 35,000 deliveries in 2014 with the stated goal of 100,000 deliveries by the end of 2015.
Rather than dissect the numbers here, I think it’s important to look at the main takeaways from the call and consider any questions that arise for the company as they continue on an exciting journey to revolutionize the automotive and energy storage businesses.
By Chris Berry
After a recent slump, solar power has shown tremendous growth. Global photovoltaic (PV) capacity is 139 Gigawatts (GW) as of the end of 2013 and another 44.5 GW is forecast to be added in 2014. One GW is enough electricity to power between 750,000 and 1,000,000 US homes. The 44.5 GW mentioned above is almost a 21% increase y-o-y and equals the output of 10 nuclear reactors, according to Bloomberg.
Overcapacity has resulted from government subsidies and has served to push panel prices down, helping to make solar more cost competitive with other fossil-fuel based sources of electricity. Dozens of panel makers still exist which implies further consolidation in the industry despite the projections mentioned above.
We are focused on finding value along supply chains across an entire industry and to that end the solar panel manufacturing business offers an interesting case study in finding value in a global “low growth” or “slow growth” environment. One of the key questions for market participants is “how will a panel manufacturer compete and thrive in a hyper competitive industry despite the rosy growth prospects?” Price declines and competition will hurt margins which in turn have the potential to impact investment returns.
The key is solar cell efficiency.
By Chris Berry
A Major Hurdle Cleared
When I wrote about EMC Metals (EMC:TSXV, EMMCF:OTCBB) last month, the main issue facing the company was clear: raise approximately $2.6 million by the end of June or risk losing control of the Nyngan scandium deposit. This $2.6 million was broken down in two pieces: AUD $1.4 million was due to EMC's former JV partner to complete the buyout of the JV and award EMC 100% ownership of the Nyngan deposit. In addition to this, $1.2 million was outstanding on a promissory note held by investors close to the company which was due at the end of this month and used Nyngan as collateral. Should EMC fail to raise sufficient funds, they risked losing control of Nyngan.
This would have been significant for a number of reasons including the fact that the deposit is truly world class - a phrase I despise, but I can't think of another way to describe it.
By Chris Berry
- Precious metals roared higher yesterday.
- This was presumably due to a confluence of events including Iraq dissolving into civil war, more unrest in the Ukraine, and Fed Chair Yellen's dovish remarks regarding keeping rates low for an extended period.
- Lest we get too excited, base metals were left in the dust and bond yields fell precipitously.
- These two reliable indicators of growth (and inflationary expectations) lead us to believe that what happened yesterday was either short covering or a profit taking opportunity and nothing more.
Plus Ca Change…..
I'll admit to being surprised at the move in gold and silver yesterday. It's almost as if people were looking for an excuse to take metals prices higher.
Here is the link to Mike's most recent presentation to the FFIEC in Arlington, Virginia earlier this week. It is lengthy, but discusses numerous topics including the Inflation/Deflation debate, Commodities, Banks, Jobs, Currencies, Deficits, and Emerging Markets.
You can download a copy here.
By Chris Berry
It has often been said that the titanium dioxide (TiO2) market has been untouched by innovation for decades since DuPont pioneered the TiO2 chloride production process in the 1940s. There are likely numerous reasons for this, but the ability to maintain a healthy profit margin is likely most prevalent among them. As the saying goes...if it ain’t broke, don’t fix it.
While the price of a number of commodities and chemicals remains high on a historical basis thanks to Chinese demand and the commodity super cycle, this seemingly insatiable appetite has led to an era of abundance and overcapacity which has appeared to put a “lid” on prices while allowing costs of production to continue to creep upwards. Companies must achieve lowest-cost producer status or risk losing market share. The TiO2 market is not at all immune from this scenario and is arguably ripe for new entrants thanks to the lack of innovation in the industry mentioned above. I recently had the opportunity to meet with Argex Titanium (RGX:TSX, ARGEF:OTCBB) company management in Montreal and tour the existing pilot plant and location for the first TiO2 plant in Valleyfield, Quebec.