Solar Foods CMD discusses reviewed strategy for 2025-2030

Translation: Original published in Finnish on 12/10/2024 at 9:34 am EET.

In its 2025-2030 strategy period, Solar Foods will focus in particular on the Health & Performance Nutrition segment in the US, where its spearhead product, Solein, was approved during the fall. At the same time, the company is advancing the phased investment plan for the future Factory 02 production plant. With the capacity provided by the new industrial-scale production facility, the company aims to achieve a positive EBITDA in 2030. 

The Health & Performance Nutrition segment seems to be a justified focus area

Solar Foods is holding a Capital Markets Day today at 4.00 pm EET, which can be followed here. We believe the four key themes of the Capital Markets Day will be 1) Solein's commercialization plan, 2) the scaling plan for the future industrial-scale Factory 02, 3) a snapshot of the company's R&D and 4) financial targets.

In our view, the focus on Health & Performance Nutrition during the strategy period appears to be a sound decision, as the segment as a whole is growing and product price points are typically at healthy levels. Solein's high protein content, good amino acid profile and attractive nutritional and sustainability profile make it an attractive product for this segment, we believe.  In this segment, Solar Foods will focus on ready-to-use powders, ready-to-drink beverages and protein bars tailored to the needs of the market. Solar Foods estimates the market price of Solein per kilo in this segment to be EUR 16-25 in 2025-2026 and EUR 13-20 in 2027-2030. In general, the price ranges are in the same ballpark as our forecasts, although we see a slight need to refine the forecast parameter for the price per kilo.

The industrial-scale Factory 02 will be built and commissioned in phases

In the press release, Solar Foods outlined the phased construction of the future Factory 02. The plant would be constructed and commissioned in three phases between 2028 and 2030, and the company expects each phase to generate positive cash flow. The construction of the plant involves two major investment cycles, but in general the piecemeal nature of the investment makes it easier to finance the construction project. According to the company, the capital requirement for the first investment phase could be reduced from 134 MEUR to 69 MEUR if the plant is built as a brownfield project and uses externally sourced hydrogen. We believe that the ability to adjust CapEx needs is critical for Solar Foods, as the company's current balance sheet position or future operating cash flows are not sufficient to cover the investment in an industrial-scale production facility. 

Aiming for positive EBITDA in 2030

Solar Foods expects to achieve positive EBITDA by 2030, driven by higher product prices, new markets, continued productivity improvements and a new phased investment plan. The company will maintain its operating targets and provide financial guidance for fiscal year 2025 in its earnings release on February 27, 2025. In general, the Capital Markets Day seems understandably focused on the first industrial-scale plant, but for the investor, visibility into the longer-term potential is also an interesting part of the investment story given the early stage of development of Solar Foods and the industry as a whole.