Varta has already had cause to celebrate sensational success in its more than 130-year history: at the end of the 1960s, for instance, the batteries of the German company supplied the energy for Neil Armstrong's camera in the moon landing. Some 30 years later, Varta's silver technology delivered a quantum leap forward in battery power, and in 2018 the company won an award for the "stock market listing of 2017". Priced at EUR 17.50, the share issue was followed by a breathtaking rally. At its peak at the start of December 2019, the MDAX member was trading at more than 600% above the issue price. The last few weeks have seen significant price fluctuations, however.
From a record high of EUR 128, the share price plunged back to EUR 81. Investors are rightly asking themselves: What happened? Essentially, continuing digitalisation has a key bearing on the success of the battery group, opening up enormous growth opportunities. After all, it is only because the company manages to deliver the greatest possible energy density in the smallest space that many applications such as hearing aids or the latest in-ear headsets be possible in the first place. Varta is the leader in the hearing aid market with its micro-batteries, for instance. Although the company is also pushing for pole position in lithium ion batteries in the wearables sector, particularly among hearables, competition there is picking up markedly. And that is precisely where the problem could lie, because Varta underestimated the growth of the market. Instead of a projected rate of increase of around 140%, deliveries of wireless headsets grew by 250% last year. As a consequence, the company was unable to meet the high demand, something that Chinese competitors in particular knew how to exploit. View more information on investment solutions on the topic “Varta: A bundle of SME energy”.
While Varta has a particularly reliable customer in Apple, with whom it has agreed a guaranteed volume contract, other electronics groups such as Samsung, Sony and JBL fell back on suppliers such as Peer EVE or Zenipower from the Middle Kingdom. There is hope for Varta in this regard, however: according to the company, some battery firms have infringed several patents of the Swabians. The long-standing company has already responded by sending out warning letters. It is looking to obtain temporary injunctions as well. To ensure that it can better meet demand, an expansion of production capacity is also on the agenda of the SME. According to the latest statements from Varta boss Herbert Schein, they should be able to manufacture 200 million cells a year from as early as the end of 2021; Varta had previously announced production of over 150 million units from 2022. "The market is growing disproportionately quickly", Schein said in a recent conversation with the Handelsblatt newspaper. And Varta was growing even faster. Analysts even think it is possible that the group could achieve a capacity of 350 million cells in 2022/23. By comparison, in 2018 the figure was around 80 million.
Investment in an expansion of capacity swallows a lot of money, though. Varta has set aside a total of EURm 255 for this purpose. The market is already speculating that the investment required could turn out even higher, necessitating a capital injection sooner or later. Varta is also flirting with the idea of tapping into new business fields such as the automotive industry. Most recently the company has been included in an EU-sponsored consortium for cell production in Europe, to which the two motor manufacturers BMW and PSA are among those that also belong. The development is geared towards highly innovative and sustainable technologies for longer-lasting lithium ion batteries.
