Dowlais shares moved down a gear on Tuesday after the automotive engineering firm released disappointing first-half results.
The company was listed in London in April last year, and shares have been on a one-way journey so far, with the stock losing more than half of its value. Today’s 4% decline takes Dowlais to fresh all-time record lows.
According to results released this morning, Dowlais’s 5% revenue drop last year was due to slow demand for its electric vehicle components amid a wider softening in the market.
Although Dowlais said they outperformed the wider market, the challenging conditions will be hard for investors to swallow, especially because profit before tax fell 32% over the period.
“It’s gone from bad to worse during the first half of the year for Dowlais, the automotive engineering specialist. It’s been a mixed bag in the electric vehicle market. China’s having a very strong year but demand in Europe is dropping. Overall light vehicle production is now expected to fall globally by 3.6% in the second half of the year,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“This volatility has hit sales of Dowlais’ ePowertrains and the 1.9% decline in sales over the first quarter has accelerated to a drop of 5% for the first six months. The indefinite postponement of a contract to supply a 3-in-1 eDrive system for high performance SUVs comes as another disappointment. The group is diversifying its focus across various classes of electric vehicle in a drive for more sustainable medium-term growth but the immediate future looks challenging.
“There were some brighter spots with the much smaller powder metallurgy unit trading in line with the same period last year. But the difficulties are causing management to take a hard look at the business.”
Dowlais was listed just as questions started to be asked about the adoption of EVs, and this is reflected in their numbers. This stock is heavily reliant on global EV sales, and Dowlais’s fortunes are intertwined with those of the major EV manufacturers.
For those investors convinced of a pick up in EV sales, today’s drop may provide an interesting buying opportunity.