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Why the Carbon Revolution share price crashed 15% on Tuesday

We look at what caused the wheel maker’s share price to fall off a cliff on Tuesday.

The Carbon Revolution share price (ticker: CBR) dropped sharply in the twilight of trade on Monday, after the company told the market that FY21 wheel sales would come in lower than previously guided.

The stock sold off heavily in response, plunging 5% into the close. The stock continued to fall on Tuesday as the market fully digested the news, with the Carbon share price down 15% to $1.30 per share by 11:23 AM.

It’s been a horror show since Carbon listed in 2020, with the stock down 60%, at the time of writing, since the IPO.

Market update in focus

Carbon’s Management yesterday told the market that covid related supply issues have resulted in one of its key customers suspending vehicle production. As a result of that suspension, the company said the FY21 forward orders for its wheels would be reduced by 1,800 units.

Production of the currently suspended wheels is expected to resume in late June.

‘The net impact of the changes being announced today is that Carbon Revolution now expects FY21 wheel sales to be approximately 1,800 below FY20 sales.’

The company reassured the market that these developments would not impact Carbon’s industrialisation program.

Building a war chest

This comes after the company recently announced and subsequently completed a ~$95 million capital raise – from both retail and institutional investors.

Carbon’s CEO, Jack Dingle, said the purpose of the capital raise was to reach the 'funding required to proceed with construction of Phase 1 of the first Mega-Line.'

The Mega-line is set to help the company boost wheel production by 75,000 wheels on an annual basis.

'The management team is now focused on executing the Mega-line strategy which in the first instance includes collaborating with our OEM customers on detailed engineering and design work, and successfully delivering on the key milestones of the vehicle programs that relate to these formal agreements.'

Q3 update

That capital raise announcement coincided with the company’s Q3 update, which marked a return to growth for the wheel maker. Here management highlighted a strong rebound in revenue growth, following a difficult first-half in FY21.

Specifically, third quarter revenues increased 61.2% on a quarter-over-quarter basis, coming in at $9.0 million. That top-line improvement was driven by a 58.9% quarter-over-quarter increase in wheels sold, with total wheels sold coming in at 3,134. Wheels sold figures were however lower on a year-over-year basis.

'The winter seasonality impact on a key customer program has now passed and sales orders have increased to normal levels.'

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