Earnings call transcript: Magnora Q4 2024 highlights strong growth and expansion

Magnora (Market Cap: $127.96M), a prominent player in the renewable energy sector, showcased robust financial performance and strategic expansion in its Q4 2024 earnings call. According to InvestingPro data, the company trades at an attractive P/E ratio of 2.47 and offers an impressive dividend yield of 19.49%. The company reported significant profits and outlined ambitious growth plans, with analysts setting price targets ranging from $2.92 to $4.16. Despite this, the company’s strategic moves and market expansion have positioned it for continued success.

Key Takeaways

• Magnora reported net profits of CHF 579 million returned to shareholders.
• The company expanded into the Italian and German markets, increasing its renewable energy capacity.
• Magnora raised its guidance to achieve 10 gigawatts by the end of 2025.
• The company maintains zero bank debt, with substantial cash reserves.
• Strategic focus on solar PV, onshore wind, and battery storage development.

Company Performance

Magnora demonstrated strong financial and operational performance in Q4 2024, marked by significant net profits and strategic market expansion. InvestingPro analysis shows a healthy current ratio of 2.37, supporting the company’s financial stability. The company successfully entered the Italian and German markets, reflecting its commitment to growth in renewable energy. Magnora’s asset-light strategy and strict capital discipline have enabled it to maintain zero bank debt while holding substantial cash reserves, providing financial flexibility for future investments. InvestingPro’s Financial Health Score rates the company as FAIR, with particularly strong marks in profit and relative value metrics.

Financial Highlights

• Net profits: CHF 579 million returned to shareholders.
• Continuing operations: EUR 282 million generated in 2024.
• Dividends: SEK 300 million returned to shareholders.
• Cash and cash equivalents: AUD 254 million.
• Total (EPA:TTEF) available funds, including credit line: Over AUD 400 million.

Outlook & Guidance

Magnora has raised its guidance to achieve 10 gigawatts by the end of 2025, driven by its expansion into new markets and its focus on developing solar PV, onshore wind, and battery storage projects. The company is targeting project sales ranging from 500,000 to 1.5 million per project and is exploring opportunities in data centers and battery storage, indicating a strong growth trajectory.

Executive Commentary

• "We see exceptional short and medium term sales opportunities for the first time, backed by great local teams across our group." - Company Executive
• "We’re rigging for scale. We’re developing this platform structure and we receive incoming interest for our platform from various type of companies." - Company Executive
• "We have upped our guiding excluding Helios to 10 gigawatt by year end 2025." - Company Executive

Risks and Challenges

• Negative electricity pricing in European markets could impact revenue.
• Competition from Chinese vendors offering significant discounts may pressure margins.
• Industry consolidation and M&A activities could pose integration challenges.
• Dependence on favorable regulatory environments in new markets.
• Potential supply chain disruptions affecting project timelines.

Despite the lack of specific earnings data, Magnora’s strategic initiatives and financial strength suggest a positive outlook for the company. InvestingPro reveals a strong analyst consensus recommendation of 1.33 (Strong Buy), reflecting confidence in the company’s direction. Its focus on renewable energy and market expansion positions it well for future growth, although challenges remain in navigating market dynamics and competitive pressures. For deeper insights into Magnora’s valuation and growth potential, investors can access comprehensive analysis and over 30 additional financial metrics through InvestingPro’s detailed research reports, available for more than 1,400 stocks.

Full transcript - Mines Management (MGN) Q4 2024:

Company Executive/CEO, Magnora: Good morning, and welcome to Magneura’s Q4 and Combined Annual Report for 2024. Highlights of the year and the quarter. Magnolia returned net profits of CHF $579,000,000 to our shareholders, including the effect of the emerging Harmana with the IPO in June. The continuing operation generated EUR $282,000,000 in 2024. Magnolia sold its shares in Helios and received 16 times return on investments, not counting for future earn outs.

We also received the first milestone payment for Avalar, which increases the chances for the second and last payment. Magnaura grew its land bank net for Helios to 6.3 gigawatt in 2024, all based on organic growth. We’ve had a good start of the year and the last month we’ve signed more land and it’s now close to 7.5 gigawatt. Based on the high origination activity, we raised our guiding to 10 gigawatt. Magnaura entered the Italian and German markets in Q4 twenty twenty four and we rapidly built operating businesses in those countries.

For the first time, Magnora has mid sized and large projects that offer substantial revenue potential in almost all markets for 2025. The year witnessed a lot of sales activities and break through in South Africa where the demand for best projects was particularly high, but we’re very excited about the wind projects getting ready to sail as well. We see rapid derisking in our Thales (EPA:TCFP) Wind project, no red flags related to birds or mammals, ongoing studies of wind and wave conditions has commenced, and extensive supply chain studies, good discussions around grid and partnership dialogues. Emphasis is on quality and maturing paid off in 2024 and the land bank looks set to offer marketable projects every year towards 02/1930. In 2024, we returned a record SEK 300,000,000 in dividends and knocked SEK $398,000,000 in gift shares in Hermana IPO and we also acquired SEK 42,700,000.0 in share buybacks.

Despite the extensive return of capital, Magnaire’s cash and cash equivalents stood at AUD $254,000,000 and including the credit line we have over AUD 400,000,000 NUC available. We have low operating costs in the group, providing great flexibility to direct capital where returns are the highest. I’ll quickly go through this slide, which is familiar to most of you. We have a asset light strategy, strict capital discipline. The land bank is growing, zero debt, low cash burn, listed on a slow stock exchange on the main board.

Here you see the activities of month over month and I’ve gone through most of them already through the highlights. Subsequent events, very happy to inform you that the legacy payments of CHF 4,300,000.0 from Shell (LON:SHEL) will be arriving shortly. And Magnaura owns 30% of Hermana, so that will also benefit Magnaura shareholders. In February, we signed additionally nine sixty megawatt in South Africa, and we’re very happy and pleased with the South African team growing up to 20 people. Yesterday, we signed the first deal in Italy with the local co developer and we’ve secured land in three sites combined two fifty megawatt.

This resembles the auction Globalec one in South Africa, enabling us to sell to clients similar to Globalec in Italy. So this is really a breakthrough. We’re very happy with the managing director and our co development partner locally. So very, very pleased with the breakthrough in Italy. We also announced our regular quarterly dividend of 0.187 per share.

The best market is developing rapidly and Magnaur has entered two new markets. I’ve already mentioned the Italian breakthrough yesterday And we also have a strong team in Germany, Five people combined. And we see massive deployment in in of PV in in Germany as well as onshore wind as they’ve phased out coal and nuclear. We also seen many, many hours of negative prices in 2024, motivating the market to implement more battery storage projects. We’re working on 16 leads and some with very high potential.

We’ve returned above SEK 1,000,000,000 to our shareholders since 2018. I’ve gone through the dividends of last year SEK 300,000,000 and we returned SEK $398,000,000 to our shareholders and dividend shares in our legacy business. And we’ll continue to pay dividend when we receive extraordinary cash or buybacks. Quickly through the HermannA spin off, it’s our original business, Sevaan Marine, and it’s now part of HermannA Holding, which is a separately listed company on Oslo Stock Exchange. We hope that Hermana will receive an FID decision from its clients in The UK short to mid term.

Magnora has kept 30% of ownership in Hermannna as financial asset. This can be paid as dividend shares or we receive dividend from Hermannna in the meantime. Solid figures, 16 times return on our platform in Sweden, Helios. Our portfolio size, 6.3 gigawatt at the end of the year. Our return for our shareholders have been 42% on average the last four years.

Combined cash stands at CHF $4.00 4,000,000, including the credit facility. We have zero bank debt. Net profit of the year, the value creation for our shareholders have been CHF $579,000,000. Our land bank has grown steadily since 2021, and you now see that it has gone beyond 6.3 at the end of the year and with an additional 1,000 megawatt in South Africa, we are close to 7.5 gigawatt. Here you see our portfolio separated across technologies.

Solar PV is still the largest. We have a very high focus on onshore wind, and I’ll get back to that when you see the South African slide. Business model stays the same. We grow organically. It’s a cheap way to build our business.

We have vintages projects to sell every quarter, every year, next five years. So we stick to our original business idea, but we still we we see we we continue to see new opportunities for for distressed assets that could provide bolt on opportunities, but we’re going to be very careful. Our strategy, simple rules, diversify. We insist on early sales in markets, especially ones where we haven’t sold anything before to prove the business case and motivate the team. We keep a war chest, so we’re able to have good negotiating power with very large clients.

When things look perfect, we might sell and sell all. We look for entrepreneurs with high integrity, very important for us. We try to remain agile and adaptable, and we try to look into new areas. So data centers could provide some value to some projects, and we have a good team analyzing that market for various projects as we speak. We have no expensive stuff on the balance sheet, so we can’t compete with large companies.

And as we’ve proved before, we exit the green ammonia market because we didn’t see it as a scalable opportunity for Meganora. Business model sell at ready to build or prior to ready to build. It’s important for our clients that we have a firm grid connection date and a clear tariff agreement. We have good clients on our list and partners. And that’s the beauty of this market that we have very large bankable clients or clients with all equity.

Here’s our portfolio across countries. Helios is also represented in Finland through VINCI. So we are not that exposed to single country risk. And in Norway, you’ve seen that in onshore wind and that I haven’t been given a concession in five years. So we tried to have a diversified portfolio.

It enables us to sell projects every quarter, every year for the foreseeable future. And we expect to go enter into new markets short to mid term as well with our same business model. We have a diversified revenue stack, different milestone payments, earn out payments and revenues from project sales or from companies. And this is how we’re going to create value, and our goal is to increase profits every year. Business update, resilient and lean business allows us to seize opportunities.

Even during times of market uncertainty, we can direct capital where we see the highest return and the lowest risk. We also see new movements in the market like negative pricing hours in Europe and we position ourselves for battery storage in markets and use the competence we have in South Africa in the European markets. We also see falling costs for battery storage and solar, and we also see that Chinese vendors provide same equipment at 40% to 50% discount from European vendors. So this increases pricing power for IPPs in South Africa, but also Europe. We think a country like South Africa will be more open to Chinese products, and and we see see that solar PV is still dropping and battery storage is falling quite fast.

We’ve never seen short to mid term or revenue potential from more sources ever. So Norway, good chance. Scotland, offshore wind. England, our best in PV projects. In South Africa, we have a growing portfolio across all technologies.

Also onshore wind, and we’re very excited about that. In Germany, a fast moving team with maturing projects. And then we have Finland and Sweden with Helios. And in Italy, we, as I mentioned, secured our first land and have good indications on grid and permitting. So we believe potential clients in Italy will be able to bid for the auctions similar to what Global Act did in South Africa.

So those are like fifteen years contracts where the client get fixed revenue every year, and these are very attractive for potential clients. First auction is expected in 2025, and it’s combined of up to 18 gigawatt over the next three years. So very, very big infrastructure happening in Italy on battery storage. We think also that markets like Germany and others in Europe will follow suit. So this will be an exciting opportunity.

South Africa, high quality projects nearing maturity and commercialization. Up on the left corner, you see our portfolio combined now close to 5,000 megawatts, but we expect soon to sign more WEF, that’s wind, and another two forty megawatt there and another 1,000 megawatt, 1,100 on solar PV, another 100 in in best. So the portfolio is growing according to our plans and even faster. And increasing the team last year and at the end of twenty twenty three has given good results. On the right side, you see example of potential projects for sale, short to mid term, and these are large onshore wind projects.

And in South Africa, we expect them to be able to fetch from R1,600,000 to R2,000,000. So that’s going to be around 1,000,000 to 1,200,000.0 per megawatt if the client approve of the features and the yield production. Good wind speeds in South Africa in combination with solar PV, like one of the projects there. The client gets very high engine production and adding battery as well. You have very, very interesting load factors.

So South Africa is growing very, very fast and is completely decoupled from the European market, which is good for for us and Meganeora shareholders. Germany, and just to give you give you some update on example sites there, we have different sites, larger and smaller sites across Germany, and we’re very excited to to work with the team there. And and we we based on the amounts of negative prices and the high proportion of renewable energy in the German market, grid battery storage projects are very, very hot in Germany for the time being and for the next foreseeable future and into the 2030s. As you know, they have cut out coal and nuclear power, so renewable is going to fix everything in Germany together with import cables. We strengthened the organization in 2024.

We’ve experienced we have recruited experienced teams in both Italy and Germany and expand our team in South Africa with great success. We have also in sourced more of the accounting and group controlling, into Magnora headquarters and have been able to recruit an analyst and a director of ownership assisting me with M and A and business development opportunities. And very happy with the team, both locally and in Oslo and in other markets. Financials for the quarter. So you have some adjustments, other income, 27.5.

Those are IFRS. See note four in the report. And then operating expenses, $14,400,000 those are non cash. Development and M and A expenses, most of that money is for the start up of the Met Ocean Studies in Scotland that will fall as we’re in 2025 and be around 1,000,000 per month. So it was around 18,000,000 in the start up phase in Q4, so we’re going to fall substantially.

Other items here, net financials are also currency and and interest rate calculations for our Penguins receivable and also for the loans and Technip (EPA:FTI)’s part of the loan in Magnaire Offshore Wind, so they’re non cash. So negative results, 25.3% for the quarter. When you look at the cash flow, most of the net financing was CHF44 million is share buyback and from operating activities CHF33.3 million. And if you exclude the start up of the Magnaire offshore wind, met the Ocean Study at million, you see that operating costs are quite low. The year ended with million in cash and together with the credit line, we have million available.

I’ll jump past this slide. Management owns shares in the company. We’re going to continue to do that. We have loyal shareholders. We are constantly doing Investor Relations, have been to Stockholm, Zurich, London, Cape Town over the last quarter and will continue to do so going forward.

Outlook, we’re rigging for scale. We’re developing this platform structure and we receive incoming interest for our platform from various type of companies. Good discussions around bolt on opportunities and partnerships. We see a lot of M and A activity in the market last year, private equity buying. Medium to large sized developers, we see distressed IPPs and we see that some of them might have development assets that could fit Magnaura.

We received some incoming interest around industry consolidation, so we are open to all type of discussions to increase the value for Magnaura shareholders and increase our earnings short to mid term. We also continue to see bolt on opportunities for what we do with grid connections in the new markets and data centers and battery storage are new opportunities for developers like us that have secured good land and are in grid line queues for grid in various markets. So I think this will be an interesting opportunity to at least investigate. We have upped our guiding excluding Helios to 10 gigawatt by year end 2025. Our sales target, we’re still early in the year.

As I mentioned, we have large projects like Scott Twin onshore wind projects in South Africa, solar projects in South Africa, projects in The UK, and also potentially projects in in Italy for the auction, and maybe earn out projects from Helios and others as well. Hafsling, Magnora Soul in Norway, so plenty of sales opportunities. So over to the price target range 500,000.0 to 1,500,000.0 on average in South Africa. Prices for solar and battery storage is lower than 500,000, but for onshore wind is 1,000,000 to 1,200,000.0. So the combination should be in within that range.

So next slide. So concluding remarks. We see exceptional short and medium term sales opportunities for the first time, backed by great local teams across our group. We have upgraded guiding to 10 gigawatts by 2025 compared to 8.5 if you excluded halos with the old guiding due to strong progress. Robust land bank activity secured 900 megawatts in South Africa and two fifty megawatts in Italy in February alone.

We have solid progress on the development portfolio anticipating grid short term, allowing sale and farm down on both onshore and offshore wind projects. We see enhanced underlying fundamentals, significant CapEx reductions last year, which improves our customers’ economics, especially solar PV modules and best CapEx has fallen 60% since 2022. And you also see that the price curve is far higher than pre COVID, which should enable IPPs to have good returns on their projects. I think and hope that we will benefit from the market shakeout consolidation. It will give us good opportunities, and it will also lower the competition intensity in certain markets.

So this might be good restructuring opportunities for Magnora. Further, substantial value expected from earn outs, milestones Helios and Evolar as well as Hermana, where we still own 30%. With that, I would like to thank you for your time and wish you a great day. If you have any questions, feel free to email me.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.