Fourth quarter 2023 (Q4 2022)

• Order intake amounted to SEK 117 million (107), up 9 per cent compared to the same period in the previous year
• Sales decreased 36 per cent to SEK 94 million (147)
• Operating profit totalled SEK -9 million (18)
• Adjusted operating profit totalled SEK -2 million (14)
• Profit after tax totalled SEK -9 million (15)
• Earnings per share amounted to SEK -0.09 (0.25)
• Cash flow from operating activities totalled SEK 27 million (-5)

Jan – Dec 2023 (Jan – Dec 2022)

• Order intake increased year-on-year by 3 per cent to SEK 456 million (445)
• Sales decreased 21 per cent to SEK 451 million (569)
• Operating profit totalled SEK 23 million (105), corresponding to 5 per cent (18) of revenue
• Adjusted operating profit totalled SEK 29 million (95)
• Profit after tax totalled SEK 13 million (81)
• Earnings per share amounted to SEK 0.22 (1.37)
• Cash flow from operating activities totalled SEK -7 million (113)

Key events in the fourth quarter of 2023

• On 19 December, Altor PC presented a public cash offer to the shareholders of Permascand. The Board of Directors of Permascand announced its recommendation to shareholders to accept the offer.

CEO comment

In 2023, we achieved strong growth in Electrification & Renewables and Industrial Solutions, while Water Treatment slowed significantly. During the year we also boosted our pipeline of hydrogen projects, and are well positioned for large-scale manufacture of components for the production of green hydrogen on a commercial scale.

Order intake for the fourth quarter totalled SEK 117 million and is mainly attributable to aftermarket services in Industrial Solutions. This is an increase of 9 per cent year-on-year. After a good start to the period, we experienced a slight slowdown in order intake towards the end of the quarter, mainly in Electrification & Renewables due to the postponement of major investment decisions for hydrogen projects.

Sales for the quarter totalled SEK 94 million. This is a decrease of 36 per cent year-on-year. The lower sales are attributable to reduced sales in Water Treatment, as well as the weak order intake at the beginning of the year.

Gross profit for the quarter totalled SEK 29 million, corresponding to a gross margin of 31 per cent. The gross margin in the quarter is in line with the previous year and is expected to increase as we achieve higher sales volumes and thus better capacity utilisation.

Our development projects in electrode development and manufacturing technology to strengthen Permascand for the future have proceeded according to plan. Our innovation centre – to be inaugurated in June – will play a key role in our ability to continue and also accelerate our efforts in technology development. These developments are necessary to produce and deliver products of even greater efficiency on a large scale.

Electrification & Renewables
Sales in Electrification & Renewables were SEK 25 million in the quarter, which is in line with the corresponding period last year. Although we received a commercial hydrogen order totalling SEK 17 million and a development order amounting to SEK 3 million during the quarter, several hydrogen customers postponed their investment decisions, with increased capital costs, delayed infrastructure and unclear investment support and subsidies referred to as the most compelling reasons. So while we are seeing the number of hydrogen projects announced globally continuing to grow, the timeline for their realisation is moving forward. We are seeing a clear trend of increasing demand for the highly efficient electrodes for advanced alkaline electrolysis that Permascand supplies. These high-performance, long-life electrodes are a necessity for our customers in terms of ensuring that they are able to remain within their budgets for investment and operations. We are well positioned for when the market takes off in this area. Within the segment, we are witnessing greater interest in electrowinning and electricity transmission. These areas are also central to the green transition.

Industrial Solutions
Sales in Industrial Solutions totalled SEK 67 million, which meant sales in this segment were also in line with the corresponding period last year. We are seeing our profitable aftermarket business continue to grow steadily, partly due to our success in increasing our market share in the North American market. In parallel, new projects for new installations, known as greenfield projects, are being negotiated.

Water Treatment
The significant decrease in order intake and revenue in Water Treatment is due to a decline in the global market linked to the installation cycle and customer stockpiling. With the exception of smaller supplementary orders, we are delivering existing orders, with the order book not expected to grow until after 2026, when the aftermarket business in the segment is expected to achieve more significant volumes.

Outlook
The order book amounted to SEK 373 million at the end of the year, of which it is planned that about 80 per cent will be delivered in 2024, while the second half of the year is expected to be stronger, with increasing sales. In terms of order intake, 2024 has started as cautiously as 2023 ended. Due to the postponement of hydrogen projects around the world, we do not expect to receive any commercial-scale hydrogen orders until the second half of 2024 at the earliest. These are likely to be small orders initially.

In terms of the next few years, we are well equipped with good production capacity for strong growth when the production volumes arrive. In line with the global green transition, our long-term ambition is to expand with our customers and follow their plans for establishment around the world so we can provide them with high-efficiency electrodes on a large scale for green hydrogen production. This will require us to meet customer needs for local manufacturing and support, as well as subsequent aftermarket services, no matter where they are located in the world.

In December, Permascand’s Board of Directors issued its recommendation to shareholders to accept Altor’s public cash offer. Altor announced on 5 February that the offer had been accepted by shareholders representing approximately 95 per cent of the total number of outstanding shares and votes in Permascand. The management team remains focused on developing the business and strengthening the company to ensure long-term, sustainable and profitable growth, as well as playing an important role in the green energy transition.

Peter Lundström, CEO Permascand

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

Q4 2022 (Q4 2021)

• Order intake increased 43 per cent year-on-year to SEK 107 million (74)
• Sales increased 13 per cent to SEK 147 million (130)
• Operating profit totalled SEK 18 million (30), corresponding to 12 per cent (23) of revenue
• Adjusted operating profit totalled SEK 14 million (32)
• Profit after tax totalled SEK 15 million (21)
• Earnings per share amounted to SEK 0.25 (0.35)
• Cash flow from operating activities totalled SEK -5 million (33)

Jan–Dec 2022 (Jan–Dec 2021)

• Order intake increased 35 per cent, totalling SEK 508 million (377). Taking into account the write-down of a previous order, net order intake amounted to SEK 445 million.
• Sales increased 41 per cent to SEK 569 million (405)
• Operating profit totalled SEK 105 million (38), corresponding to 18 per cent (9) of revenue
• Adjusted operating profit totalled SEK 95 million (60)
• Earnings after tax totalled SEK 81 million (20)
• Earnings per share before and after dilution amounted to SEK 1.37 (0.37)
• Cash flow from operating activities totalled SEK 113 million (11)

Events during the fourth quarter of 2022

• On 15 December, Permascand announced the signing of a master supply agreement to deliver service and refurbishment of electrochemical cells to a significant client. The estimated value of the agreement is in the range of SEK 30–45 million per year for a period of two years.

CEO comment

The strength of Permascand’s business clearly showed through in the fourth quarter of 2022, where profitable growth and robust order intake were the result of broad and growing demand for the company’s products and solutions in combination with flexible, efficient production capacity.

2022 added up to a record-setting year where we increased sales by 40 per cent compared with full-year 2021. At the same time, we took some key strategic steps on our journey of growth, including through attractive partnership agreements and exciting customer projects.

Order intake for the fourth quarter totalled SEK 107 million. This is an increase of 43 per cent year-on-year. Order placement was primarily in Electrification & Renewables and Industrial Solutions.

Sales totalled SEK 147 million during the quarter, up 13 per cent year-on-year. Sales for the quarter were driven primarily by Industrial Solutions, where we successfully delivered on the robust order intake in late 2021 and early 2022. During the quarter, new patterns in our business segments emerged, as decreased sales and order intake in Water Treatment were offset by a strong quarter in Industrial Solutions, and Electrification & Renewables picked up momentum. This is a sign of strength showing that with efficient, flexible, and scalable production we can meet reduced demand in a segment by switching over and meeting increased demand in other segments.

Gross profit for the quarter totalled SEK 45 million, corresponding to a gross margin of 31 per cent. It is gratifying to once again report stronger profitability after lower capacity utilisation and disruptions to operations temporarily burdened profitability in the third quarter.
 
Electrification & Renewables
Electrification & Renewables returned one of its strongest quarters in the company’s history, with good sales and a robust order intake as a result of the high level of activity in previous quarters. We enter 2023 with a strong order book, demand that continues to increase, and an excellent outlook in the segment.

Our initiative to establish a technology and innovation hub to develop, and be a leader in, the field of hydrogen gas made tremendous steps during the quarter and continues to develop in accordance with plans. Completion of the research center, and the facility where we are introducing a new coating method, is estimated for the summer. As part of this same strategic plan, this spring we will be launching a research partnership with Umeå University and the Swedish Foundation for Strategic Research (SSF in Swedish) with a focus on producing green hydrogen without or with the reduced use of precious metals, with lowered production costs and reduced climate impact as goals. We are continuing to invest in the organization and in our plant to secure our leading position and to enhance the efficiency of our processes and working methods. Naturally, this will have some impact on our profitability over the short term, but this way we will be ready for commercial orders for hydrogen – the first of which is expected to come in during the year. The partnership with RES was strengthened during the year after signing a declaration of intent in April on the joint development of a commercial research center in a new production facility in the town of Alby in Ånge Municipality. This partnership strengthens our prospects for building up a customer portfolio in Sweden and the Nordic region – a welcome contribution to the base of international customers we have today.

Industrial Solutions 
The green transition pushed the growing demand in Industrial Solutions at a faster pace than previously expected. Here, we have won new customers while demand grows among existing customers. One successful advance was the two-year framework agreement for service and recoating of electrochemical cells that we signed with a major existing customer. The agreement is estimated to be worth between SEK 30–45 million per year, with an option to extend for an additional two years.
 
Water Treatment
We experienced a slowdown in Water Treatment during the quarter. The order pattern in marine transport has changed, as order placement today is more frequent at shorter notice and with less scope than in previous years when customers often placed orders on an annual basis. This, combined with a more competitive market with increased price pressures, gave rise to some challenges that we are meeting with the next generation of water purification cells so as to best confront the final phase of the installation cycle, which is expected to reach its peak in 2024.
 
Outlook
Given a high level of activity, we expect the robust order intake in Industrial Solutions to continue and an increase in Electrification & Renewables. We therefore expect that these segments will offset the slowing growth in Water Treatment for ballast water until the segment’s aftermarket business is expected to achieve significant revenue after 2026. We are also seeing growing interest in industrial water purification, though levels remain low. The total ballast water treatment market is expected to remain the same size as before, and our market shares unchanged. In our opinion, orders for remaining installations will be placed at shorter intervals before installation compared to previously. So far, production for Electrification & Renewables is generally in smaller series compared with production in Water Treatment, which initially requires larger production adjustments with lower efficiency as a result. Over the short term, this could lower profitability before larger orders come in and production can take place in larger series and thus with stronger profitability.

We leave a year with record-setting sales, strong profitability, and several key strategic successes behind us. We enter 2023 with confidence owing to the high level of activity with more customer inquiries as well as a strong order book that is more equally divided among our business segments. In conclusion, I would like to extend a warm thanks to all our customers, suppliers, partners, and especially our fantastic employees for their impressive efforts that allow Permascand to continue to develop and facilitate the global green transformation.

Peter Lundström, CEO

Report presentation
CEO Peter Lundström and CFO Linda Ekman will present the report in a conference call today 9 February at 10:30 CET. The presentation will be held in English and will conclude with a Q&A session.

Link to presentation: https://ir.financialhearings.com/permascand-top-holding-q4-2022

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: 0469191#

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

Fourth quarter 2021 (Q4 2020)

• Order intake decreased 10 percent, totaling SEK 74 million (82)
• Sales increased 10 percent to SEK 130 million (118)
• Operating profit totaled SEK 30 million (22), corresponding to 23 percent (19) of revenue
• Adjusted operating profit totaled SEK 32 million (27)
• Earnings after tax totaled SEK 21 million (13)
• Earnings per share before and after dilution amounted to SEK 0.35 (0.26)
• Cash flow from operating activities totaled SEK 33 million (32)

Jan–Dec 2021 (Jan–Dec 2020)

• Order intake decreased 20 percent, totaling SEK 377 million (470)
• Sales decreased 3 percent to SEK 405 million (415)
• Operating profit totaled SEK 38 million (60), corresponding to 9 percent (15) of revenue
• Adjusted operating profit totaled SEK 60 million (65)
• Earnings after tax totaled SEK 20 million (33)
• Earnings per share before and after dilution amounted to SEK 0.37 (0.65)
• Cash flow from operating activities totaled SEK 11 million (53)

Events during the fourth quarter of 2021

• On October 15, 2021, Permascand announced that the company had signed a framework agreement with one of the largest global players in chloralkali and diaphragm technology. The value of the agreement is estimated at between SEK 30–50 million per year during the three-year contract period.

CEO comment: Continued strong profitability despite supply chain disruptions

The fourth quarter of 2021 is testament to the fact that we are on the right path in our continued journey of growth, in which we will continue to deliver profitable growth by capitalizing on rapidly growing markets being driven by megatrends in environment and sustainability.

During the quarter, we continued to be affected primarily by a volatile supply chain that affected customers' decision-making processes in the short term. We thus found many of our customers holding off on placing orders during the quarter. We still displayed strong total figures for the quarter. Sales increased 10 percent to SEK 130 million, and once again we achieved a robust gross profit of SEK 47 million, which corresponds to a gross margin of 36 percent. This is proof that the investments we made in automation has resulted in improved production processes. We delivered an adjusted operating profit of SEK 32 million during the quarter, compared with SEK 27 million in the year-earlier period. This, despite a larger cost base as a result of the investments we made for future growth.

We are experiencing a historically high level of activity, with several customer inquiries in all three of our business segments. The high level of activity is a prerequisite for a strong commercial order intake and sales in the future, which is originating from smaller project orders. To maximize performance and sustainability, Permascand’s solutions are to a great degree tailored to the end customer through dialogue, testing and adaptation. There is no doubt that the underlying demand in the market remains high, given the significant interest from customers looking to initiate discussions and partnership agreements.

Our ambitions in green hydrogen – a sub-segment under Electrification & Renewables – are high. Our largest innovative effort, the construction of a full-scale technology and innovation center and investments in the company’s research team, proceeded according to plan during the quarter. There are strong opportunities in the market for green hydrogen produced via electrolysis, a market in which Permascand has delivered electrodes for electrolysis for over 20 years.

The level of activity in Industrial Solutions remains healthy, and numerous interesting dialogues are in progress. This indicates a strong underlying demand driven by increased awareness of the climate gains that are generated by the use of dimensionally stable anodes. We have also been working intensely on a new type of high-efficiency coating technology that is planned to be put into operation in the second quarter of 2022. The higher efficiency leads to lower costs and a more sustainable production.

Water Treatment was relatively unchanged during the quarter. The pandemic continued to have a short short-term dampening effect on the shipping industry and the growth in the field. The need for systems that can efficiently purify ballast water remains, and we believe that market conditions beyond the pandemic remain unchanged.

Using a flexible approach, we have been highly successful in adapting our operational activities to the prevailing situation. In combination with improvements in automation and robotisation, we will continue to increase our efficiency in the various parts of our operation so that we will be ready when the market situation returns to normal. We look forward to the remainder of 2022, where we will be well positioned to capture additional market shares and strengthen our profitability to increase our lead over our competitors.

Peter Lundström, CEO

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

Link to the presentation: https://tv.streamfabriken.com/permascand-top-holding-q4-2021

Telephone numbers for the conference call:
SE: +46 8 5055 8368
UK: +44 3333 009 031
US: +1 631 913 1422 (Pin: 27301922#)

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