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Once upon a time, Novonix Ltd (ASX: NVX) shares were valued at $12.47. However, that was more than eight months ago — in a far different environment to what we know today.
Indeed, the battery technology company joined countless other unprofitable shares which were catapulted to all-time highs amid rampant speculation. Loose monetary policy, in the form of ultra-low interest rates, fueled such investments into the stratosphere.
Yet, here we are less than a year later with a Novonix share price that is one-quarter of its former glory. Undoubtedly, the ‘cheap money’ tap has been turned off amid the reinstitution of interest rate increases by central banks.
Unremarkably, it’s companies caught without a positive cash flow machine of their own that have suffered the most. Unfortunately for Novonix shareholders, the once high-flying company is a member of that camp.
Cash earner or burner?
Considering profits hold greater importance in this environment, how close is Novonix to profitability? To answer that question, let’s take a look at the company’s latest quarterly activities report.
On 27 July, ASX-listed Novonix served up its accounts for the quarter ending 30 June 2022. According to the release, the battery and materials company collected $2.55 million in receipts from customers. This brought the value over the last 12 months to $9.03 million.
However, staff costs alone consumed $4.52 million in the quarter. Once other costs are added in, such as research and development, admin and the rest, Novonix’s operational cash flow for the quarter ends up at a $7.96 million outflow.
In short, Novonix chewed through $4.75 million in the last quarter. Fortunately, the company has a considerable stash of cash, sitting at $207.08 million even after the June quarter.
Can Novonix become a profitable ASX company?
No one can predict the future, not even Novonix itself. But what is the game plan for potential future profitability? Well, it comes down to the success of the company’s synthetic graphite.
Ultimately, Novonix needs to scale its production of synthetic graphite over the coming years to increase revenue. If successful, there is some possibility that the business can achieve scale, and revenue will exceed expenses.
However, scaling takes time. At present, Novonix plans to produce 10,000 metric tons by 2023. Further plans would see production increase to 40,000 tons by 2025 and 150,000 tons by 2030.
As a result, ASX-listed Novonix will likely rely on its cash pile to see it through the near term. The Novonix share price is down 76% since the beginning of the year.