Belgian company Umicore, known for its recycling operations and production of materials for electric car batteries, has seen its stock price plummet by 30 percent over the past year. The decline from 29 to 20 euros per share has raised questions among investors, especially with the unexpected departure of CEO Mathias Miedreich, who will be replaced by longtime employee Bart Sap. Analyst Tom Simonts of KBC Securities suggests that investors are worried about the company's aggressive investment strategy.
Umicore, headquartered in Brussels, also has significant operations in Hoboken and Olen, employing 1,900 and 1,100 people respectively. Despite a net profit of 447 million euros in 2023, down from 593 million euros in 2022, the company is not facing immediate financial distress. However, the rapid stock price decline and leadership changes indicate underlying concerns.
One primary reason for Umicore's declining stock price is the slower-than-expected growth in electric car sales. While Belgium's market benefits from a high number of company cars, other countries still predominantly favor diesel and gasoline vehicles. This lag in electric vehicle (EV) adoption raises questions about the timing and scale of Umicore's 3.8 billion euro investment program (2022-2026), much of which focuses on battery materials.
The rise of cheaper Chinese electric cars also impacts Umicore. Chinese manufacturers and Tesla use less expensive LFP (lithium iron phosphate) batteries, as opposed to the NMC (nickel manganese cobalt) batteries for which Umicore supplies cathode materials. This shift has led investors to question whether Umicore has misjudged market trends.
Tom Simonts explains that while investors' concerns are valid, they may also be premature. Different battery technologies, including those supported by Umicore, offer various advantages such as longer range. He believes that as EV adoption grows, Umicore's investments will pay off, leading to a potential rebound in stock prices.
Umicore also produces catalysts for diesel cars, which help reduce harmful emissions. However, with the decline in diesel car sales, demand for these catalysts has decreased.
The company has faced a significant drop in rhodium prices, which fell from $16,000 to $4,500 per ton over two years. Rhodium is used to reduce car exhaust impact, and its price spike during the COVID-19 pandemic was due to supply disruptions in South Africa. Prices are now stabilizing at more typical levels.
Adding to the intrigue, it was revealed that the Belgian government owns 5 percent of Umicore's shares through the federal investment company SFPIM. These shares were purchased at a low market price, meaning any recovery in Umicore's stock value could benefit the public treasury.
Umicore's challenges are multifaceted, involving slower EV market growth, competitive pressures from Chinese manufacturers, and declines in diesel car catalyst demand and rhodium prices. The company's strategic focus on long-term investments in EV battery materials could eventually lead to a rebound in its stock price, but for now, investor skepticism remains high. The recent CEO change further adds to the uncertainty, with new leadership potentially bringing a fresh perspective on navigating these turbulent times.
