First quarter 2023 (Q1 2022)

• Order intake decreased 84 per cent year-on-year to SEK 31 million (191)
• Sales decreased 20 per cent to SEK 111 million (139)
• Operating profit totalled SEK 8 million (31), corresponding to 8 per cent (22) of revenue
• Adjusted operating profit totalled SEK 8 million (31)
• Profit after tax totalled SEK 6 million (24)
• Earnings per share amounted to SEK 0.10 (0.40)
• Cash flow from operating activities totalled SEK -37 million (22)

Events during the first quarter of 2023

• On 14 March, Permascand announced that the company had appointed Nariman Askarieh as interim Global Chief Commercial Officer (CCO)

CEO comment

This quarter, we focused on strengthening our operational capacity for the future. The shift in our revenue mix is increasingly evident driven by continued strong development in Industrial Solutions while Electrification & Renewables continues to grow. The trend is positive, but our growing segments did not manage to reach levels that compensate for Water Treatment, which is performing at a lower level than historically. Even though our activity levels remained high and our customer dialogues intense, the quarter was characterized by a turbulent global situation where customers are cautious in their investment decisions.

We made several operational advances during the quarter, and we are continuing to invest for growth. This includes issues such as continued automation of parts of production for electrodes and electrochemical cells, new coating technology, and continued work on the completion of our technology and innovation center to strengthen our position in the field of hydrogen. These efforts in products and product development, combined with the cutting-edge competence we recruited during the year, will be key to ensuring a leading position and increasing efficiency in our processes and working methods for the future. The investments increased our workforce by 10 per cent, mainly in sales and research and development, and led to costs increasing SEK 9 million compared with the year-earlier period.

We can confirm that several customers have been cautious about placing orders with regard to conditions in the world market and therefore postponed their orders. Order intake for the first quarter totalled SEK 31 million, attributable primarily to Electrification & Renewables, a segment with great potential.

Sales totalled SEK 111 million, down 20 per cent from the year-earlier quarter. Primarily, this is an effect of a changed revenue mix, where Industrial Solutions and Electrification & Renewables are continuing to grow, though not to the degree that they will yet compensate for the weak market performance in Water Treatment.

Gross profit for the quarter totalled SEK 32 million, corresponding to a gross margin of 29 per cent. During the quarter, we had a production mix consisting of smaller production series and Greenfield orders, which were sold with lower profitability than in normal aftermarket business. We are also experiencing continued price pressure within Water Treatment. Our flexible and scalable production ensures positive margins even at lower production volumes.

Electrification & Renewables
Both the order intake and revenue increased compared to the year-earlier period, albeit from lower levels. The activity level remains high and we are making continual progress within the development and partnership agreements we have entered in the segment. The segment was characterized by intense business development and partnership with new customers – particularly in green hydrogen and lithium extraction. As part of our Technology and Innovation Centre for green hydrogen, we are adding personnel and equipment, and are entering into several international partnerships with universities, research institutions, customers and partners. Completion of the Centre is planned for 2023.

Industrial Solutions
Industrial Solutions continued to perform strongly, and during the quarter, we achieved nearly record-high revenue from delivering on the robust order intake from earlier quarters, mainly due to delivering of greenfield orders. We continue to see growing interest from both new and existing customers, driven by the green transition. Still, we are feeling the effects of the short-term world market situation.

Water Treatment
As previously communicated, we have been experiencing a weaker and more volatile market in Water Treatment driven by customer inventory build-up. During the quarter, we experienced challenges in leveraging economies of scale in our production as a result of smaller production series and production of new products. Combined with the price pressure in the market, it weighed down our gross margin for the quarter. Efforts are progressing to strengthen our offering in industrial water treatment, which is a field where we see potential for growth and aftermarket business.

Outlook
Even if it is relatively difficult to predict how global conditions will impact our customers’ willingness to invest going forward, we can confirm that we have a stronger quarter ahead of us. It is reassuring that we have Industrial Solutions, a stable and profitable business, and Electrification & Renewables which represents a promising area for the future that we are investing in with our own cash flows. We have ongoing constructive customer dialogues and expect that the postponed investment decisions will lead to order intake in the future. Moreover, we are experiencing continued high levels of customer activity. We are noting increasing demand both in Electrification & Renewables and in Industrial Solutions which is expected to lead to orders that will compensate for the slowdown in Water Treatment, where the installation cycle in ballast water treatment has peaked. These orders include the first commercial order within hydrogen business, which is expected to come in before the year is finished.
We are sure that customers' willingness to invest returns, and we see no reason to revise our view of our continued journey of growth. Permascand is well positioned in the global green transition thanks to our technology. With continued investments for the future and operational advances in the quarter, we have favorable conditions for long-term, sustainable, and profitable growth.

Peter Lundström, CEO Permascand

Report presentation
CEO Peter Lundström and CFO Linda Ekman will present the report in a conference call today 10 May at 10:30 CEST. The presentation will be held in English and will conclude with a Q&A session.

Webcast
https://ir.financialhearings.com/permascand-top-holding-q1-2023

Registration
To participate via teleconference, please register via the link below. After registration, you will be provided with telephone numbers and a conference ID to access the conference. You can ask questions verbally via the telephone conference.
https://conference.financialhearings.com/teleconference/?id=200746

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

First quarter 2022 (Q1 2021)

• Order intake increased 238 percent year-on-year to SEK 191 million (57)
• Sales increased 86 per cent to SEK 139 million (75)
• Operating profit totalled SEK 31 million (-3), corresponding to 22 per cent (-4) of revenue
• Adjusted operating profit totalled SEK 31 million (2)
• Earnings after tax totalled SEK 24 million (-6)
• Earnings per share amounted to SEK 0.40 (-0.11)
• Cash flow from operating activities totalled MSEK 22 (-14)

Events during the first quarter of 2022

• On 11 February 2022, Permascand announced that the company had received two orders from a world-leading supplier of chlorate regarding delivery of electrochemical cells and correlated equipment for a Greenfield project in South America. The total order value of SEK 100 million was included in order intake in the first quarter of 2022, with start of delivery planned during the second half of 2022 and early 2023.

CEO comment

The start of the year was marked by high activity, with numerous customer inquiries and sustained interest in all business segments. The quarter’s strong sales and solid gross margin were enabled by the strategic initiatives and investments Permascand carried out – and continues to carry out – for efficient and scalable production.

Order intake for the first quarter of the year totalled SEK 191 million, corresponding to an increase of 236 per cent compared with the year-earlier period. Sales increased 86 per cent year-on-year to SEK 139 million, making the quarter the strongest in Permascand’s history when it comes to sales. The increase was driven primarily by the Water Treatment segment, where we successfully delivered from the robust order backlog we brought with us into the quarter. At the same time, Electrification & Renewables and Industrial Solutions developed steadily during the quarter. Gross profit totalled SEK 52 million, an increase from SEK 18 million in the year-earlier period. This means a stronger gross margin, which was a direct result of the scalability we have established in our production processes. I am particularly satisfied that we are starting the year strong, as the first quarter in previous years has been weaker than the other quarters of the year.

We are following our growth plan and successfully delivered good levels of profitability owing to our strategy, in which we proactively ensure robust production capacity and a buffer inventory of input goods and raw materials, and lock price levels in relation both to customers and to suppliers. In this way, we tie up capital over the short term but ensure control over the cost structure. This makes our operation flexible and relatively protected from volatile prices for input goods and raw materials as well as unpredictable supply chains as a result of turbulence in the world.

Electrification & Renewables
The testing and research efforts in Electrification & Renewables have generated increased interest from existing and potential future partners, including a Norwegian initiative named HYDROGENi. Our innovation initiative to enable largescale and cost-effective production of green hydrogen for energy storage has progressed in accordance with plans. This investment includes the construction of a technology and innovation center, investments in the company’s research teams, and advanced research and development in products and production methods.
After the end of the quarter, we signed a letter of intent with RES, an independent developer of renewable energy and energy storage, for joint development of a commercial research center at a new production facility for green hydrogen, for which RES is pursuing development and establishment in Ånge Municipality. Permascand sees its greatest commercial potential in the market for green hydrogen produced through electrolysis. Our long-term objective is to become the leading independent supplier of catalytic coatings, electrodes, and electrochemical cells.

Industrial Solutions
The level of activity and interest in Industrial Solutions has increased, which is reflected in events such as a major order for a Greenfield project in South America that was received during the quarter. We have reinforced the company’s organisation in North America by, for example, recruiting a new Director of Sales for the region. We consider North America to be the market with the greatest potential for growth and aftermarket business. The market conditions are favourable and there is a substantial underlying need for maintenance of industrial facilities, where Permascand’s solutions support maximum performance and durability in production.

Water Treatment
Shipping has for a long time been heavily affected by the market environment, where uncertainty as a result of the pandemic previously led to deferred investment decisions. We have now seen increased demand already in the first quarter, which is slightly earlier than we expected. This is reflected in our robust revenues in the segment as it accounted for the majority of the company’s sales in the quarter. Permascand is well positioned to meet demand for systems that can efficiently purify ballast water. Demand is expected to increase further in pace with normalisation of the market after the dampening effect that resulted from the pandemic.

Outlook
We will continue to benefit from our investments for more efficient and more scalable production. Moreover, the company’s investments in hydrogen development will positively impact product development in all segments, and further boost our capability to meet customer demand. With sustained interest from our customers and a robust order intake behind us, conditions are good for creating profitable growth not only over the rest of the year but over the longer term as well.

Peter Lundström, CEO

Report presentation
CEO Peter Lundström and CFO Linda Ekman will present the report in a conference call today 10 May at 10:00 CEST. The presentation will be held in English and will conclude with a Q&A session.

Webcast
https://tv.streamfabriken.com/permascand-top-holding-q1-2022

Phone number
To participate via telephone please dial-in on the numbers below.
SE: +46 8 5055 8366
UK: +44 333 300 9031
US: +1 64 6722 4903

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