Industrials Sector Stock under the spotlight: FLC

While the industrial/manufacturing sector and the materials sector are comparable, there are two crucial differences. Unlike the materials sector, the corporations in the industrial/manufacturing sector do not manufacture raw materials. Also, the businesses in the industrial/manufacturing sector offer both products and services as compared to businesses in the materials sector that focus primarily on manufacturing products.

The industrials sector in Australia has seen a decline over the last few months. There was a continued decline in new orders indicating a weak business environment. According to the Australian Bureau of Statistics, the industrial sector indicators were muted in the 3^rd quarter of 2019. A decline in producer prices negated the marginal increase in industrial products output.

The industrials sector is broken into four broad sub-sectors:

• Commercial and Professional Services
• Capital Goods
• Transportation
• Industrial sector ETFs

Let us discuss a stock from the Industrial sector - Fluence Corporation Limited

Fluence Corporation Limited (ASX: FLC)

Fluence Corporation Limited provides decentralised water and wastewater treatment solutions. The company’s solutions include Energy efficient technologies, Constructive and operating water assets under Build Operate Transfer (BOT) and tailored finance packages to finance water and wastewater treatment plants. Fluence has more than 7,000 references and 300 trained water professionals across 70 countries.

Execution of Contract between Contract Fluence Corporation and Ivory Coast awaited

Fluence Corporation had stated earlier that it had signed a commercial agreement worth €165 million with the Federal Government of Ivory Coast. The deal signed is for the turnkey supply of a 150,000 m3 per day surface-water treatment plant. On 02 January 2020, Fluence Corporation announced that it is expected that the execution of the financing agreements could take place early as today or may take some more time.

The Government of Ivory Coast has been provided third-party financing through a loan from Israel Discount Bank (IDB) with support from the State of Israel through its Export Credit Agency. The company understands that the Government of Ivory Coast, ASHRA and IDB, have all agreed on the legal agreements and the agreements are pending for execution.

The delayed financing agreements may result in a short-term deferral of revenue that was expected to be recognised in 2019.

Fluence Corporation Secured US$3 Million Follow-On Aspiral^TM order from Kaitian

On 30 December 2019, Fluence Corporation had announced that it had secured the follow-on Aspiral^TM order from Aerospace Kaitian Environmental Technology Co. Ltd worth over US$3 Million.

Kaitian’s bulk order for 15 wastewater treatment plants included Aspiral™ L3 and L4 units. The units would serve over a dozen towns and rural areas in Anhui, China. The order follows an MOU signed with Kaitian in August 2019 to meet the capacity of 40,000 m³ per day or more through the end of 2021.

The company’s Director and CEO commented:

Completion of the Share Purchase Plan

On 18 November 2019, the company has completed the Share Purchase Plan and raised more than 2.3 million (before costs). The company has received strong support from shareholders, and the issuance to applicants of the new shares under the Share Purchase Plan as well as granting by ASX of quotation of shares will take place on 20 November 2019.

The proceeds of the plan with $36.0 million raised in a recent share placement, would help the company’s growth plan by supporting:

• Continued expansion in China for MABR sales
• Geographical expansion of Smart Products Solutions Offerings
• Cost Optimisation
• General working capital for the business

FLC Receives US$5m Containerised Order in Argentina

On 12 November 2019, Fluence had announced the execution of a contract worth over US$5 million to provide a 10,320 m3 /day pre-engineered and containerised Smart Products Solution water treatment system to a greenfield lithium mining project in Argentina. The delivery of the water treatment system is projected in late 2020, with commissioning likely in early 2021.

Gained Strong Momentum for MABR Products in 1H 2019

On 30 August 2019, Fluence had announced the financial results for the six months ended 30 June 2019, A few highlights of results are as follows:

• The company had received the largest individual order of 40 Aspiral^TM units in China from ITEST.
• Fluence had secured the commercial orders in Jamaica.
• First commercial SUBRE order secured in China early in the second half of 2019.
• 64 cumulative MABR project wins in China.
• The revenue from MABR products was expected to be about US$20 million.
• The company had awarded €165 million Ivory Coast contract and Egyptian joint venture awarded a US$20 million supply agreement in New Mansoura, Egypt.
• FLC revenue had decreased by 27.5 per cent to 23.7 million compared to the corresponding previous year
• The company had recorded a Net Loss after tax of 17.5 million, showing a dip of 72.2 per cent from PCP.
• Cash and Cash Equivalent of the company stood at $15.6 million
• FLC’s total liabilities had reduced to 34.8 million from 51.0million in 2018.

Outlook

• Sustainable EBITDA profitability and annual recurring revenue were still expected to occur by Q4 2019.
• The revenue from smart product solutions was expected to be US$26 million, with 18 per cent growth over 2018.
• Bimini project in the Bahamas in the final stages and expected to start selling water shortly.
• The company’s San Quintin project was expected to resume construction in Q4 2019.

To read out about the company’s September update click here

Stock Performance of Fluence Corporation Limited

The stock of FLC closed at $0.445 on 03 January 2020, a decline of 2.198 per cent from its previous closing price. The company has a market cap of $284.21 million and has ~624.64 million outstanding shares. The 52-week high and low value of the stock is at $0.630 and $0.300, respectively. The stock has generated a negative return of 17.27 per cent in the last three months and a positive return of 4.60 per cent over the previous six months.