More Tritium in the news ... in Todays AFR: Inside Tritium’s battle for survival

For those outside the paywall ....

When embattled Tritium chief executive Jane Hunter approached National Reconstruction Fund (NRF) chairman Martijn Wilder in September about the possibility of accessing capital, there was hope the Brisbane fast-charger company could be the “first cab off the rank” from the Albanese government’s $15 billion manufacturing fund.

The company’s factory in Brisbane had been a regular stop for federal and state politicians wanting to talk up the “Aussie success story” taking new technology to the world.

When Tritium – which listed on the Nasdaq with a “double unicorn” $2 billion valuation in 2021 but is now struggling with major liquidity issues – was asked when it needed the money, the company said by November.

Given the NRF had yet to hold its first board meeting, let alone receive its investment mandate from the Albanese government, it was a sign of how desperate the company was for cash.

When Tritium then asked the NRF to sign a non-disclosure agreement and not talk to other potential investors, it was another “red flag moment”, according to those familiar with the discussions.

Some basic due diligence on Tritium would reveal the company had not turned a profit since it listed two years ago, has had a major turnover in staff and was burning through cash.

Even if the NRF was up-and-running, there was no guarantee Tritium, which has been issued a show-cause notice by the Nasdaq about the under-performance of its shares, would have received government funding to keep it going.

The dire state of Tritium’s finances was confirmed this week when the company announced it would close its Brisbane factory – at a cost of 200 jobs – and consolidate its operations in the United States to save itself.

This follows revelations in The Australian Financial Review last month the company had asked the Queensland government for an equity injection of up to $90 million. The Palaszczuk government declined.

Tritium, whose major shareholders include AFR Rich Listers Trevor St Baker and Brian Flannery, has been frantically talking to potential strategic investors in recent months in an attempt to turn the company around.

It has held unsuccessful discussions with the Queensland Investment Corporation and the Clean Energy Finance Corporation.

It is understood Tritium has been in negotiations with a Taiwanese consumer electronics company about becoming a strategic investor, but Mr St Baker’s 24 per cent equity stake and debt holdings could be a hurdle.

Mr St Baker’s family company has tipped significant funds into Tritium over the past 12 months, including a $20 million secured loan in December last year and a $35 million unsecured loan in May this year.

Coal and energy entrepreneur Trevor St Baker has a 24 per cent stake in Tritium. 

Any potential new strategic investor would have to be happy with Mr St Baker, who is also a non-executive director on the Tritium board due to his significant stake in the company.

An independent auditor’s report by PwC, included in Tritium’s annual report published in September, said the company had incurred a net loss of $US120.3 million ($189 million) last financial year, with cash outflows of US$151.2 million.

Its net liability position was $US134 million which lead PwC to note that a “material uncertainty exists that may cast doubt on the group’s ability to continue as a going concern”.

Ms Hunter, a former Boeing executive, is confident Tritium can return to profitability next year, focusing on its US factory in Tennessee.

“This transition is aligned with the company’s plan to be profitable in 2024,” she said.

But some investors think otherwise, noting the company’s fast-charger is a great product – with a rollout of 14,500 chargers installed in 47 countries – but that the company is not well run, was burning cash and could face the prospect of being kicked off the Nasdaq next year.

Other investors believe Tritium is in a “death spiral” from which it may never recover.

Mr Flannery – whose investment in Tritium dates back to 2017 – said he was disappointed in the company’s performance and decision-making, saying it should have moved to the US a year ago. He said he wouldn’t be tipping more money into the company.

“This has shocked me. I think they have let it go too far,” he told the Financial Review earlier this month.

Mr Flannery’s 8 per cent stake in Tritium at listing in May 2021 was worth $US96 million. His current 5 per cent stake is valued at $US1.7 million.

Tritium’s share price is $US0.20 which gives the company a market valuation of $US34 million, a far cry from the equity valuation of $1.5 billion at the time of the listing in May 2021.

Some investors are questioning why Tritium is keeping another 200 staff at its headquarters and research and development facilities in Brisbane when most of its customer base is in Europe or North America.

The Queensland government this week said it was “disappointed” Tritium had announced the closure of its Brisbane factory this week.

“It’s always disappointing when a company makes a decision to move operations interstate or overseas, especially one that is homegrown,” a spokeswoman for the Palaszczuk government said.

“The Queensland government will provide support to any of the impacted workers that needs it.”

But it was telling that when Tritium asked the Queensland government – whose ministers have held a string of press conferences at their Murarrie factory over the years – for a potential equity stake of up to $90 million, the request fell on deaf ears.

It was the third time the company, which has a global workforce of 700, including 400 in Brisbane, had pitched to them.

“Why would we give them an equity contribution which is a multiple of their market cap? It’s hard to justify,” a Palaszczuk government insider said.

It is a question that other potential investors will be asking of Tritium at the moment too.

@Rick you are right on the money, but I am happy to take a long view on $RFT.

Even if the company (Tritum) fails, a buyer will potentially pick up the assets and the IP at a fire sale price. If the point forward operating economics at the expanded Tennessee plant are OK, then if $RFT was going to be a continuing supplier, there is not necessarily any reason why they wouldn't continue to make progress.

Tritum burned about $43m last year, ending June with around $30m cash left. The hefty debt is mainly short term debt working capital, but across all the categories it adds up to an eye-watering $387m. On top of that, the ongoing annual operating expenses are almost $90m. (I wonder if the NASDAQ listing, the press coverage and the fleeting $2bn market cap got to their heads?)

So the countdown clock is a few months. Its not viable. And from my reading, it needs a comprehensive restructuring.

I am not sure how far into the Tennessee plant expansion they are - I think there is quite a bit of capex to go. So that's not ideal from a buyer's perspective.

The problem is that Tritium is not yet at sufficient scale - across the Brisbane+Tennessee(current) facilities production 11k units p.a., COGS exceeds Revenue. I'm guessing they need the US to be at scale (30K units) and then to shut down the Australian operation if they can't get it to wash its face. (Pure speculation here).

$RFT has had a sustainable business for many years, whereas Tritium has (to my knowledge) not shown that it has established the same.

I make these comments without my usual depth of thought and analysis, but a rocky patch for Tritium and even the end of it, doesn't mean an end to its product, tech, market and potential for $RFT.

All that said, I don't think $RFT holders should be expecting to hear about any follow-on order from Tritium, any time soon! I'm certainly not.

Thanks for posting that article Rick.

Tritium seems to be on it knees, that is for sure and this obviously isn't good for RFT. Its kind of sad that with so much revenue Tritium isn't able to stand on its own two feet, which may mean the industry is quite competitive and they can't sell their products at enough of a margin to cover their overheads. Hopefully RFT can diversify away from Tritium, as it certainly isn't helping the share price along with the lack of news on orders past December.