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REC Silicon ASA (NASDAQ:RECSL) reported a challenging first quarter of 2025, with a focus on restructuring and strategic initiatives to navigate market uncertainties. The company reported an EBITDA loss of $4.6 million from continuing operations, alongside a slight increase in total sales volume. According to InvestingPro data, the company’s trailing twelve-month EBITDA stands at -$19.8 million, with a concerning cash burn rate. The stock experienced a slight decline, reflecting investor concerns over ongoing market challenges and restructuring efforts, with shares down nearly 80% over the past year.
Key Takeaways
- REC Silicon reported a Q1 2025 EBITDA loss of $4.6 million.
- The company is focusing on the silicon anode market for future growth.
- REC Silicon received a $40 million loan from Hanwha International.
- Market conditions remain challenging with trade actions and demand softness.
- The company is undergoing major restructuring to reduce SG&A costs.
Company Performance
REC Silicon’s performance in the first quarter of 2025 was marked by a slight increase in total sales volume, despite a 12% decrease in higher-margin gases compared to the previous quarter. The company is navigating a challenging sales environment with ongoing trade actions and weak channel inventories impacting demand. Despite these hurdles, REC Silicon is focusing on strategic initiatives, including potential shipments to new markets and restructuring efforts aimed at cost reduction.
Financial Highlights
- EBITDA loss: $4.6 million from continuing operations
- Revenue: Not specified in the summary
- Decrease in higher-margin gases: 12% compared to Q4 2024
- Loan received: $40 million from Hanwha International
Outlook & Guidance
REC Silicon is expecting potential improvements in the latter half of 2025, contingent upon the resolution of trade and market uncertainties. The company is targeting 580 metric tons of gas sales for the year and is exploring strategic partnerships and property sales to support long-term financing. InvestingPro data indicates analysts anticipate a 38% revenue decline this year, with earnings per share forecasted at -$0.34 in 2025 and -$0.16 in 2026. The company’s overall financial health score stands at 1.34, rated as WEAK by InvestingPro’s comprehensive analysis system.
Executive Commentary
CEO Curt Levens emphasized the company’s focus on sustainability and strategic reshoring, stating, "We are very focused on putting the company in a position where we can be sustainable." Levens also highlighted the importance of the reshoring strategy, noting that "the opportunity is still visible," underscoring the company’s commitment to strengthening its market position.
Risks and Challenges
- Trade actions and policy uncertainty continue to pose significant challenges.
- Market softness and project delays are impacting demand and sales.
- The company faces competition in high-margin gas segments.
- Operational restructuring and cost-cutting measures may affect short-term performance.
Q&A
During the earnings call, significant attention was paid to Hanwha’s voluntary cash offer at 2.2 kroner per share, with the board recommending shareholders accept the offer. Analysts inquired about the company’s plans for individual plant assets, to which executives responded that there are no current plans to sell. The potential for a virtual annual general meeting was also discussed.
The earnings call highlighted REC Silicon’s strategic shifts and ongoing challenges, with a focus on long-term sustainability and market adaptation.
Full transcript - REC Silicon ASA (RECSI) Q1 2025:
Curt Levens, CEO, REC Silicon: Good morning, and welcome to the REC Silicon First Quarter twenty twenty five Presentation. I’m Curt Levens, CEO of REC Silicon. Today, we’re going to talk about, some highlights and updates both from q one and then subsequent events, our normal financial review. We’ll touch on strategic direction issues, based upon activities as we described, during the last quarterly presentation as well as a trade policy update given all of the activity that has been, over the past two months and then provide with a summary. So our major restructuring activities have been accomplished and ongoing are a number of other restructuring activities.
This will be a process that, we will be continuing throughout the remainder of the year. We had an EBITDA loss of 4,600,000.0 from continuing operations. Hanwha and its affiliates launched a voluntary share purchase offer. We are still working on the further financing options for restructuring, and we have a little more discussion about those on a couple slides. Let’s say that right now, it is a very challenging environment for sales revenues, a result of a number of issues coming together, trade actions, both new and existing, channel inventories in some segments that are a little bit weaker or where there’s imbalances between the demand in the regions and market softness with regards to the pull on the demand end all continue to impact our sales revenues and, therefore, our cash flow.
So even though, North America and Korea were our largest regions in this past quarter, they definitely remain weaker than previous high run rates due to specific semi segments and channel inventory for some high margin gases and OLED producers. Still, Southeast Asia and China shipments remain limited. And if, some of you recall, China shipments for us, for Sideline, was something that we were able to take advantage of given our brand and quality, when when we had capacity that was available in terms of our module fleet. That is much more limited now as a result of of trade actions, and we can talk about that later. There was a slight increase in total sales volume, as you know.
However, mix effect was not as favorable. Our SG and A is coming down. However, we are going to continue to reduce and optimize what we can so that as we exit the year, we should be at a our our target is to be at an even lower number than what we run now, plus minus. Again, the primary challenge with our Butte operations are sales related. Our revenue and EBITDA were affected by product mix, driven by a 12% decrease in our higher margin gases versus q four shipments.
In terms of tariff mitigation, we have significant portion of our key input materials fixed already, and, in fact, some were already on hand, before the tariff, the latest tariff rounds had started. What that means is that we feel for direct input materials that we should be less exposed this year. However, there are still some unknown on indirect impacts, due to our suppliers and various equipment and other materials as well are still unknown at this point. But we think that the effects will not be as great as as they would have been, had it been affecting our raw materials more. Wanna note that we expect that our CapEx peaked in q one as we finished out projects, and and the remainder of that is due to maintenance capital and projects that we’re finishing up in in our Butte operations.
Our interest paid will represent an ongoing challenge until we have fully bottomed on restructuring costs and our Butte revenue profile gets back on track. We will need additional financing during this period. As previously announced, we received a $40,000,000 loan from Hanwha International in the quarter. The current effort is to extend the standard charter of 50,000,000 loan that matures in June for another year. We’re currently exploring the sale of property adjacent to our facilities as well in order to help with our long term financing efforts.
Q one revealed a number of project delays in all of our targeted markets, particularly in April and, in The United States as well. In some cases, we’re tracking, delays of at least a year. The reshoring play is an important part of our strategy. We will continue to monitor and meet with stakeholders and be flexible and reactive and, in some cases, anticipate as needed. Reasons cited for these delays include construction, technology challenges or change in technology, policy uncertainty, and trade actions.
The adjustments we have made and are making are much more steer than the 2019 time period and have cut across many more functions within the company. We are very focused on our putting the company in a position where we can be sustainable. We have provided some targets, and we will endeavor to improve and refine as much as possible on the Moses Lake target and SGA target. So we exit the year closer to a terminal run rate while in this mode. For revenues, we are targeting 580 metric tons of gas sales.
Given recent events and associated uncertainty, we do not want to guide beyond the quarter. However, discussions and public statements from various companies indicate that a better second half may be possible, pending resolution of the current trade and market overhangs.
Moderator/Questioner, REC Silicon: On
Curt Levens, CEO, REC Silicon: this slide, there’s excerpts from the release. We encourage everyone to please read the release. This is a very thorough and detailed document in order to get information regarding the voluntary cash offer. I wanna note that this is a it is a structured process that follows regulatory steps and guidelines, and our function is to make sure that we are there to support the board and any other, entity in terms of from a logistics standpoint of, providing the information that’s required. Yes.
Tariffs have affected us. Both the existing tariffs as well as the new liberation day tariffs, They did result in some some order cancellations and pushouts. However, we’ve been working on mitigating those. Fortunately, they’re not affecting us in our top two largest silane consuming countries. However, China, as I had indicated, is very limited at this time.
Right now, the biggest impact seems to be a lack of clarity from our customers and end users’ standpoint with potential for further slowing of some projects and decision making and, hopefully, some acceleration of other projects. Projects. So in summary, we’ll continue to move quickly and aggressively to get us to a steady state on Moses Lake and support costs for for our current envisioned operating mode. We are strengthening our sales efforts to anticipate and move quickly in this market in order to defend share where necessary and increase it in our targeted areas. Our strategy remains the right one, and the opportunity is still visible.
However, the time span uncertainty and ongoing funding need make for a more difficult and risky approach. We are still working on available avenues to finance, and we will continue to do that. And as we have more information, we will release it. Thank you, and, we’ll take some questions.
Moderator/Questioner, REC Silicon: Okay. Getting into the questions submitted. Can you get into more detail on the selling sales to the silicon anode market? In the presentation, it stated that there have been delays, but it also makes it sound like the second half of the year, there will be some increased sales.
Curt Levens, CEO, REC Silicon: Yeah. I mean, right now, from silicon anode manufacturers, it’s a it’s across the board. It goes from those that, are projecting delays, those that now we know are being delayed because we should have been supplying them by now, to, those that have also, recently a smaller one who closed down their facility here in in Moses Lake. So, it’s a it’s kind of a mixture. And we are hopeful based upon discussions that we will start supplying in the second half of the year.
Moderator/Questioner, REC Silicon: I guess to to kinda go along with that, can you go into more detail on what discussions or offtake agreements REC may have with customers such as g fourteen or CELA Nano technology?
Curt Levens, CEO, REC Silicon: Well, yeah. I mean, CELA, we had we had disclosed before that we have a contract with them. And, we are, again, hoping to begin shipments to them in this year, in the second half. The g 14, again, we would like to supply beyond we do supply their facility. They’re a smaller facility now.
We would we would like to be able to supply them more here when their facility starts up. So, obviously, any discussions we have that are ongoing, I don’t wanna comment on other than to say, from our perspective, we would like to be able to supply as many silicon anode producers as we can.
Moderator/Questioner, REC Silicon: Okay. There’s, several questions related to the the cash offer. Mhmm. How is it possible that to recommend a cash offer of 2.2 kroner when US CEO has previously stated that the value of REC Silicon is 3,000,000,000 US dollars. Oh, okay.
I did not state that the value
Curt Levens, CEO, REC Silicon: of REC Silicon was 3,000,000,000 US dollars. What I stated, and and I ended up reiterating it again, was the replacement value of the assets at that time, which which was more than a year ago now, worth $3,000,000,000. Replacement value is for a brand new state of the art facility with the same capacity and the same assets. That is a different thing than market value, and it’s a different thing in any case from market value now. So I think that, that’s best left to some analysts as well as third parties who can make a determination of what a fair value is, for REC.
I think I still wanna reiterate that as a company, we have significant funding issue for operations, and we need to resolve that issue. And and all those sort of things, I think, go into when when someone when a third party will value the company, how they value it.
Moderator/Questioner, REC Silicon: Okay. I guess to kinda go along with that answer, is the cash offer of 2.2 kroner a premium over the latest stock prices, or is is it a reflection of the total value of the company?
Curt Levens, CEO, REC Silicon: I I can’t answer that. I can say if you go back to the release in the release, there’s some language around that which discusses what the premium was over trading. And, the board approved recommending the offer based also upon a fairness opinion. And I’m sure there will be other, analysts who look at it as well.
Moderator/Questioner, REC Silicon: And the recommendation has been for shareholders to accept the offer of 2.2. What alternatives have you considered to optimize shareholder value, and how do these compare with Hanwha’s offer?
Curt Levens, CEO, REC Silicon: Again, the board looked at the offer and decided to, based upon input from third parties, to recommend the voluntary share offer to the shareholders.
Moderator/Questioner, REC Silicon: K. What is the plan for all the non silane related equipment in Moses Lake?
Curt Levens, CEO, REC Silicon: Right now, all of that equipment has been treated as discontinued operations. It is sitting idle.
Moderator/Questioner, REC Silicon: Has the company received any external values valuations for Dubuque and Moses Lake plants individually?
Curt Levens, CEO, REC Silicon: No. We have not.
Moderator/Questioner, REC Silicon: Has a rights issue been considered? There are many shareholders who would consider this.
Curt Levens, CEO, REC Silicon: At this point, again, the board and unconflicted board members have recommended to the shareholders this particular share offer voluntary share offer.
Moderator/Questioner, REC Silicon: There’s quite a few questions here related to the share offer of the meeting. Has REC Silicon or the board reached out to any of the anode battery producers, to suggest a sale of the Moses Lake plant to them?
Curt Levens, CEO, REC Silicon: I can say that REC Silicon has not reached out. However, I would like to point out, again, even when it comes down to other alternatives, there’s nothing that precludes people from pursuing that course of action if that’s something that they wish they know how to get ahold of us or the board, in order to discuss.
Moderator/Questioner, REC Silicon: What is the detailed plan for Moses Lake? Would it be the sale of Moses Lake, partnership with someone, restarting operations?
Curt Levens, CEO, REC Silicon: Yeah. Right now, the current strategy that we have is to restart silane operations after business warrants it because of silicon anode or other consuming segments in this area, would require.
Moderator/Questioner, REC Silicon: Could the the new tariffs affect, Q Cells to send in, to source polysilicon from Southeast Asia Asia and to then look domestically for polysilicon, for example, Moses Lake?
Curt Levens, CEO, REC Silicon: I have no idea what Q CELs would think. And on top of that, I would like to point out that the reason that we ended up disengaging and discontinuing our granular polysilicon in Moses Lake was because the material itself was not adequate and did not meet specification, as I said, and any further modifications required had a level of uncertainty that did not make it tenable for us to move forward. That hasn’t changed. So but I don’t know, what Q Cells is thinking or not thinking.
Moderator/Questioner, REC Silicon: With the proposed delisting from the Oslo exchange, is REC considering listing in The United States?
Curt Levens, CEO, REC Silicon: I have no idea, what if this proposed, delisting goes through, what then and and the shareholder is is gonna do. So I I have no idea.
Moderator/Questioner, REC Silicon: Addressed a similar question. But in order to increase value for the shareholders, what other alternatives or other parties have you pursued?
Curt Levens, CEO, REC Silicon: As I as I had stated before, regarding alternatives, we have not pursued carving up the company or selling out parts or parcels. Having said that, there is nothing to that precludes interested individuals, companies from approaching us or approaching the board or making other offers.
Moderator/Questioner, REC Silicon: Can you disclose who the third parties were that recommended the offer for the board?
Curt Levens, CEO, REC Silicon: Yeah. I believe that, we said that there was a fairness opinion that was provided by Arctic.
Moderator/Questioner, REC Silicon: Will this year’s AGM be a physical meeting or virtual?
Curt Levens, CEO, REC Silicon: The plan right now is for it to be a virtual meeting.
Moderator/Questioner, REC Silicon: There’s numerous questions on this, share offer, but I think I think you essentially addressed the different the different types of questions that are coming in. So, yeah, there’s no other questions that I think that need to be addressed. Okay.
Curt Levens, CEO, REC Silicon: Okay. Well, thank you for attending. And, when there is more information, we will make sure that we, pass it on. And, I would encourage everybody again to read the release on the on the share offer and, you know, look forward for the further information as it comes out from the, other shareholders. Thank you.
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