Ann: Redflow H1FY21 Results Announcement, page-33

Had a look through the financial reporting since the move to Thailand, in particular raw materials/consumables costs and the materials/finished goods inventory movements. By my calcs, over the last 2 1/2 years, they've been spending $3 in consumable/raw materials alone to make $1 in revenue (the ratio was even worse in 1H21 at over 5). Given this history, the write-downs of the inventory at the end of each year look questionable to me (ie. I'd expect much bigger writedowns to recoverable value).

By my calc's they need to reduce consumables by >65% just to breakeven with consumable/raw material costs. More still to cover labour and overheads for breakeven EBITDA . And once they've done that ... they'll need to keep going as LiOH batteries keep falling in price.

With only ~$100 of Zn-Br cost in a 10kWhr Redflow battery ... the material is immaterial! Then again, that's also the case for LiOH chemistry at ~$500 per 10kWhr. Makes you wonder why Redflow make such a big deal out of this difference?? ... as ... the other $20,000+ that they appear to be spending to build a battery (that they then sell for ~A$8,000) is of course very very significant!! On the brighter side, the $20,000 other materials/consumables does lend to be reduced with production units ... and even more so by making larger cells (where the "0.6 rule" should hold).

On that, I can't understand why they are fixated on building such small units and then use 100 of them to build a 1MW-hr battery rather than building bigger cells given that their tech is scalable in this way? Especially when they've given up on the 10kWhr (ie. residential) market! This seems a logical advantage to exploit (given LiOH cant be scaled up in the same way). Can anyone explain why they're not making larger cells?

I do like the tech and really hope they can get it competitive and own their niche. The manufacturing cost reductions required are massive - but potentially achievable. However, their strategy makes no sense to me re: their chosen cell size vs their target markets.

So ... I'll continue to sit on the sidelines and watch (rather than join you all on the field). Those forwards are gunna have to work hard to push the cost back from their own 5m line all the way to an attacking position on their opponents 22!

Cheers and good luck