Swedish Stirling
Swedish Stirling - South Africa visit lowers estimate risks (ABG Sundal Collier)
2020-02-24 17:22
Investor trip highlights South African potential
Agreements in place with all major SA FrCr producers
Delivery of the second PWR BLOK by Q2’19
Investor trip to South Africa 17-18 February ‘20Swedish Stirling hosted a trip to South Africa on February 17-18 in order to allow investors to see the business at a local level. This included visits to the installed PWR BLOK at Afarak Mougale as well as the TC Smelter where the pilot project for Samancor will be installed. In addition, we spoke to several local Swedish Stirling employees, as well as customers and other industry stakeholders.
Product operating smoothly, SA power issues a plus
The trip provided valuable insight on both the product and its potential, and we now consider the risk to our estimates to be lower. The installed unit at Afarak has now been up and running since Q1’19, and has been able to operate without major setbacks, providing proof of its viability. Speaking to customers also highlighted their eagerness to reduce electricity costs (~33% of total cost base). As previous attempts to reuse flare gas have proven unsuccessful, the Stirling engine’s potential has attracted broad interest within the South African ferrochrome industry (estimated to account for ~20% of the country’s total electricity consumption). Furthermore, South Africa’s severe power issues are reaching a boiling point, so policymakers are looking to secure independent energy generation solutions.
FY’19 strong development and positioning in SA
Swedish Stirling reported its annual figures on 18 February. Sales stood at SEK 45m (+8% vs ABGSCe SEK 42m) while EBIT was SEK -100m (-75m vs. ABGSCe SEK -26m). The reason for the miss vs. ABGSCe was a SEK 76m write-down related to development costs in the solar power business that have now been completely divested; the write-down does not impact cash flow. In terms of estimates, we have lowered our ’20e/’21e sales forecasts somewhat on the back of slight installation delays with the current PWR BLOK or
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