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Capital Calls

16 August 2021 By Breakingviews columnists


– Oatly

– Sonos vs. Google

– Germany/Lufthansa

– India’s electric vehicles

Bubbling over.  Oatly still has some froth. The Swedish oat milk producer on Monday reported revenue of $286 million in the first six months of the year, up 59% year-on-year. Boss Toni Petersson now expects full-year revenue exceeding $690 million, above analysts’ forecasts of $681 million. Shares rose 3%.

Still, Oatly’s operating losses ballooned to $77 million, compared with $9.5 million in the first half of 2020. Its gross margin fell from 32.4% to 28.1% due to higher logistics expenses and shipment rates. Petersson expects new manufacturing plants in Asia and the United States to better meet demand and eventually cut costs, but inflation and climate change could complicate how he sources oats.

Then there’s short seller Spruce Point’s allegations of issues like accounting irregularities, which have fueled a 25% drop in Oatly’s market value in the last month to only slightly above its $17 IPO price. Oatly does trade at about 8 times 2022 sales, above traditional milk producers’ 2 times. Petersson needs to control his costs better to get investors comfortable again.  (By Karen Kwok)

Speaker repair. A patent ruling in favor of Sonos is being heard by investors. Shares of the wireless-speaker company opened up more than 10% on Monday after a U.S. trade judge said in a preliminary ruling that Alphabet’s Google infringed its patents. Such fights are background noise for U.S. technology firms, but they can help smaller players keep up.

Sonos uses voice technology from Google, and the giant says the $5 billion speaker firm sought its help. Meanwhile, with its move into connected devices, it’s no surprise Google encroached on Sonos’ turf.

The stakes are disproportionate. The roughly $500 million in equity value Sonos gained early on Monday equates to an irrelevant 0.03% of Alphabet’s market capitalization. Conversely the connected-speaker business presents few barriers to entry, and Alphabet, with some $136 billion in cash, could easily dominate. The bigger threat from the ruling is a possible import ban on some Google products. It’s only one step, but Sonos’ initial victory, like its speakers, packs a punch into a small unit.  (By Lauren Silva Laughlin)

Landing prep. Airline pilots try to avoid rocky landings. The German government is doing its bit to assist Deutsche Lufthansa as the battered airline prepares its approach for an equity raise following a torrid pandemic. Berlin said on Monday it plans to sell a quarter of the 20% stake acquired last year via a 9 billion euro bailout. The news sent Lufthansa’s shares down 4% on Monday.

The capital hike will likely go better if investors can see the German government’s stake getting smaller. They will fret that ongoing state ownership could limit Lufthansa Chief Executive Carsten Spohr’s scope to make necessary job cuts. On the other hand, selling down a bigger stake prior to a capital increase that could restore Lufthansa’s fortunes, and therefore its share price, doesn’t sound great for the taxpayer. Hence the halfway house. (By Aimee Donnellan)

Charged up. Ola is charging up India’s electrification push. An affiliate of the SoftBank-backed ride-sharing outfit launched the battery-powered S1 scooter on Sunday. It’s the first model to roll out of its Futurefactory, which the company says will eventually produce 10 million scooters a year – equivalent to 15% of global capacity. Ola Electric wants to make electric cars too.

The bold initiative led by Bhavish Aggarwal has the scale and design savvy to lead disruption. About 15 million two-wheelers were sold in India in the year to March, accounting for some 80% of all vehicles sold domestically. The S1’s high-tech features, including voice-controls and a sensor-based locking system, will appeal to the country’s young population.

Aggressive pricing will speed take up. The basic S1 will cost 99,999 rupees ($1,348), which compares favourably with the small but growing number of rival offerings. After factoring in government subsidies, it could be almost as attractive as the popular, traditional-powered Honda Activa too. Highly taxed retail fuel is another compelling financial reason for Indian commuters to go green. (By Una Galani)


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