Permascand celebrates winning collaboration with Verdagy as Verdagy launches commercial electrolyzer module, demonstrating low-cost green hydrogen at scale

Permascand’s and Verdagy’s partnership displays great success as Verdagy recently announced and demonstrated the commercial efficacy of its unique water electrolysis technology, eDynamic™, with two significant milestones on the path to cost effective hydrogen at scale.

Verdagy is engineering the world’s largest membrane-based electrochemical cells to drive down the investment and energy required for generating industrial hydrogen. The recent successful pilots validate the durability and scalability of its technology:

  1. Verdagy ran a demonstration-scale Anion Exchange Membrane (AEM) of 3200 cm² , 20kW cell – for 1,000 hours continuously at industry leading high current density in a production environment. The 1,000-hour run demonstrated lifetime durability and minimized risk as they scaled up to the commercial electrolyzer module.
  1. Verdagy launched its three-cell 500 kW commercial electrolyzer module in August 2022 at its Moss Landing pilot plant. Each cell incorporates the largest AEM’s in the world at 28,500 cm². This represents industry-leading current density operations that are higher than traditional and state-of-the art Alkaline Water Electrolyzers (AWE), exceeding expectations for performance.

Peter Lundström, CEO at Permascand, said: “Verdagy’s technology and our ability to scale the manufacture of high-end electrolysis equipment is a successful collaboration to bring innovative green hydrogen technology to the broader market. And the positive outcome of the demonstration shows their ability to solve electrolysis challenges for industrial markets through rapid scaling”.

Verdagy has a rapid path to commercialization and the collaboration with Permascand unlocked low-cost hydrogen production.

Marty Neese, Verdagy’s CEO, stated, “The rapid pace of innovation getting to commercial scale is exactly what is needed to enable the energy transition and make green hydrogen at industrial scale come to life. Permascand is a great partner to bring our cell design to commercialization”.

Verdagy achieves the lowest CapEx in the industry and the lowest H2 (hydrogen) production costs when coupled with renewable energy. In their mission to produce cost-effective hydrogen for industry at scale both pilots demonstrate the technical readiness of Verdagy’s integrated process.
 
About Verdagy
Verdagy is innovating water electrolysis technology for the large-scale production of green hydrogen. Verdagy's industry leading solution achieves both the lowest upfront capital costs and the lowest unit economics for production. Verdagy operates its laboratory and a 25,000 sq. ft. pilot plant facility in Moss Landing, California, to further develop and rapidly scale the technology platform. For more information, visit: www.verdagy.com.

Q2 2022: Record-high sales and continued strong profitability

Interim report January-June 2022

Q2 2022 (Q2 2021)

  • Order intake decreased 91 per cent year-on-year to SEK 4 million (41). Impairment of previous orders had a negative impact on order intake
  • Sales increased 33 per cent to SEK 163 million (123)
  • Operating profit totalled SEK 45 million (-3), corresponding to 28 per cent (-2) of revenue
  • Adjusted operating profit totalled SEK 45 million (12)
  • Earnings after tax totalled SEK 35 million (-5)
  • Earnings per share amounted to SEK 0.58 (-0.1)
  • Cash flow from operating activities totalled SEK 58 million (-39)

Events during the second quarter of 2022

  • On 29 June, Permascand announced a write-down of one order, which decreased the value of the order backlog by approximately SEK 63 million. The order, which was placed in 2018, will not be delivered. The delivery of the order was previously estimated for the second quarter of 2023, which implies that sales for the current calendar year will not be negatively affected.

CEO comment

In the second quarter of the year, we once again achieved record sales alongside high levels of customer activity. We are still benefiting from streamlining and scalability in our production, which resulted in a gross margin of 38 per cent during the quarter.

The value of incoming orders amounted to SEK 67 million, an increase of 63 per cent over the year-earlier period. After the write-down of one order during the quarter, net order intake totalled SEK 4 million. Customer activity levels are generally high in all of our business segments. At the same time, we can note that there was a certain amount of passivity among some customers in the quarter in terms of placing new orders.

Sales totalled SEK 163 million, up 33 per cent year-on-year and approximately 17 per cent stronger than the previous record-breaking quarter, Q1 2022. Strong sales were once again driven primarily by the Water Treatment business segment, where we continued to deliver on our strong order book. While the other segments accounted for a smaller portion of sales in the quarter, the trend has been positive and sales met expectations. 

The gross profit for the quarter totalled SEK 62 million, an increase of SEK 31 million over the year-earlier period. We are following our growth plan and managed to deliver good profitability thanks to our efficient and scalable production. 

In large portions of our projects, our strong buffer inventory of raw material and materials provide flexibility and stability, as volatile prices for materials and raw materials or unpredictable supply chains otherwise can lead to uncertainty.

In the end of the quarter, we decided to write down parts of one order, which entailed an approximately SEK 63 million decrease in the value of the order backlog. A change entailing the cancellation of a project for our customer meant that the order, originally placed in 2018, would not be delivered. As previously announced, the delivery of the order was previously estimated for the second quarter of 2023, which implies that sales for the current calendar year will not be negatively affected. Otherwise, the order book remains stable and other orders will be delivered as expected.

Electrification & Renewables
The activity level remained high and our assessment is that several companies in green hydrogen are accelerating their processes and moving projects ahead of schedule to reach commercialisation. 
Our partnership agreement with Verdagy is based on development where we work together to develop a new electrochemical cell for producing green hydrogen. Like several other partners, Verdagy is accelerating its investments, which can be seen in the form of an intensified level of activity where the next step is to ramp up the demonstration facilities so they reflect the production capacity required in a commercial environment. When our partners then receive commercial orders from their customers, we are ready to do our part and deliver components that make these projects possible.

Industrial Solutions 
We noticed that customer activity also remained high in this segment and we expect it to begin to transition into major orders in autumn 2022. One of the high points of the quarter was an order for continued capacity expansion, which we expect to deliver before the end of the year. In addition to the expansion, demand is strong in maintenance of industrial facilities, where Permascand continuously supports customers in maximising production performance and efficiency. There are currently no signals that demand will slow down in this segment.

Water Treatment
Sales in the Water Treatment segment accounted for the majority of the company’s sales in the quarter. We broke a new sales record in a single quarter. Increased costs and falling prices for shipping, signs of a challenging global market, impact ship owners and put pressure on treatment equipment suppliers. At the same time, negotiations intensified concerning volumes and prices, indicating that there is uncertainty among our end customers. 
Furthermore, we see an opening in new use areas. For example, we have now received our first order in the water treatment segment within industry and public water distribution, where our electrochemical methods are effective. Growing regulatory requirements and expectations regarding sustainability mean that companies around the world are increasingly demanding efficient methods for treating water in these areas as well. This means that we can offer the same kind of technology we use for ballast water in new use areas in a growing end market.

Outlook
We are closing out the first half of the year with record sales and good earnings, while we also foresee continued high customer activity levels for the rest of 2022 that are expected to result in new orders. However, we can note that the global market has grown more difficult during the quarter, with increased caution among customers as a result. Thus, it is relatively more difficult to predict the market situation beyond the end of the year. Nonetheless, there are no signs that the global green transition will slow down – the reverse, in fact – and we are convinced that the companies that can enable this transition will benefit. Permascand is one of those companies. With strong financial earnings behind us and several exciting customer projects on the activity list, we look forward to continued strong development at the company during the second half of 2022.

Peter Lundström, CEO Permascand

Report presentation
CEO Peter Lundström and CFO Linda Ekman will present the report in a conference call today 18 August at 11:00 CEST. The presentation will be held in English and will conclude with a Q&A session.

Webcast
https://tv.streamfabriken.com/permascand-top-holding-q2-2022

Phone number
To participate via telephone please dial-in on the numbers below.
SE: +46-8-5051-6386
UK: +44-20-319-84884
US: +1-412-317-6300, Pin code: 2717689#

Link to report
The report is attached to this announcement and can be found at: https://permascand.com/investors/financial-reports/

Invitation to presentation of Permascand’s Q2 2022 interim report

Permascand will publish its Q2 2022 interim report on 18 August 2022 at 07:45 CEST. In connection with this, Permascand invites investors, analysts and media to a conference call and webcast on the same day at 11:00 CEST.

The presentation will be held by CEO Peter Lundström and CFO Linda Ekman in English and will conclude with a Q&A session. Questions can be asked on the conference call or in written form through the webcast. No preregistration is required.

Date and time
18 August 2022 at 11:00 CEST

Webcast
https://tv.streamfabriken.com/permascand-top-holding-q2-2022

Phone number
To participate via telephone please dial-in on the numbers below.

SE: +46-8-5051-6386
UK: +44-20-319-84884
US: +1-412-317-6300, Pin code: 2717689#

After the presentation a recording of the webcast will be available on the webcast link and on the company’s website www.permascand.com

Permascand revises value of order backlog

Today, Permascand has decided to write down an order that was previously reported as part of the company's order backlog within the Electrification & Renewables business segment. The order backlog is written down by approximately SEK 65 million as the company, after dialogue with the client, estimates that parts of a previous order will no longer be realized within the foreseeable future. The reason is that the client decided to reduce the order due to internal priorities and a changed geographical focus. The delivery of the order was previously estimated for the second quarter of 2023, which implies that sales for the current calendar year will not be negatively affected.

This also entails that Permascand will repay approximately SEK 20 million of the advance payment, received in connection to the placing of the order in 2018. The repayment of SEK 20 million will have a negative impact on the company's cash flow during the fourth quarter of 2022.

Permascand's interim report for the second quarter will be released on August 18, 2022, as previously announced.

Bulletin from Annual General Meeting in Permascand Top Holding AB

At the Annual General Meeting in Permascand Top Holding AB, Reg. No. 559227-6124 (the “company”), on 10 May 2022, which was conducted solely through postal voting pursuant to temporary legislation, it was resolved in accordance with below. For more detailed information on the content of the resolutions, please refer to the notice of the Annual General Meeting, which is available on the company’s website, www.permascand.com.

Adoption of the income statement and balance sheet
It was resolved to adopt the income statement and balance sheet and the consolidated income statement and balance sheet for the financial year 2021.

Resolution on allocation of the company’s result
It was resolved, in accordance with the Board’s proposal, that no dividend is paid for the financial year 2021 and that available profits are carried forward.

Resolution on discharge from liability
It was resolved to discharge all members of the Board of Directors and the Chief Executive Officer from liability for the management of the company's affairs for the financial year 2021.

Determination of the number of Board members and auditors
It was resolved that the number of members of the Board of Directors shall be seven (7) and that one (1) registered auditing company be appointed as auditor.

Fees for the Board and for the auditors
It was resolved that the fees to the members of the Board of Directors shall be as follows:

  • SEK 550,000 to the Chairman of the Board and SEK 225,000 to each of the other Board members elected by the Annual General Meeting who are not employed by the company; and
  • SEK 60,000 to the Chairman of the Remuneration Committee and SEK 20,000 to each of the other members of the Remuneration Committee, and SEK 110,000 to the Chairman of the Audit Committee and SEK 30,000 to each of the other members of the Audit Committee.

It was resolved that the auditor’s fees shall be paid as per approved invoice.

Election of Board of Directors and auditor
It was resolved to re-elect Per Lindberg, Marie Grönborg, Mario Houde, Ingar Jensen and Johan Karlsson as well as new election of Anna Alexandersson and Karl Bergman as members of the Board of Directors for the period until the end of the next Annual General Meeting. Per-Ola Baalerud and Pernilla Lundin had declined re-election. Per Lindberg was re-elected Chairman of the Board.

It was resolved to re-elect the registered auditing company KPMG AB as auditor for the period until the end of the next Annual General Meeting with Helena Nilsson as auditor in charge.

Resolution on issue authorization
It was resolved to authorize the Board of Directors to, during the period up until the next Annual General Meeting, on one or more occasions, resolve to issue shares, warrants and/or convertibles, with our without preferential rights for the shareholders, in the amount not exceeding ten (10) percent of the total number of shares in the company at the time when the authorization is used the first time, to be paid in cash, in kind and/or by way of set-off.

The purpose for the Board of Directors to resolve on issuances with deviation from the shareholders preferential rights in accordance with the above is primarily for the purpose to raise new capital to increase flexibility of the company and possibility to advance the development of the company’s business or in connection with acquisitions of companies.

Issuances of new shares, warrants or convertibles under the authorization shall be made on customary terms and conditions based on current market conditions. If the Board of Directors finds it suitable in order to enable delivery of shares in connection with an issuance as set out above, it may be made at a subscription price corresponding to the shares’ quota value.

Long-term incentive program for members of the Board of Directors
It was not resolved in accordance with Norvestor’s proposal to adopt a long-term incentive program for members of the Board of Directors. The proposal was supported by 85.48 percent of the votes represented at the Annual General Meeting, which means that the required majority of nine-tenths was not reached.