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Q1 2022: Record-high sales and a strong order intake form a solid foundation for the rest of the year

Interim report January-March 2022

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/

Q4 2021: Continued strong profitability despite supply chain disruptions

Year-end report 2021

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/

Q3 2021: Solid foundation for strong growth in 2022

Interim report January-September 2021

Third quarter 2021 (Q3 2020)

  • Order intake decreased 11 percent, totaling SEK 203 million (228)
  • Sales decreased 32 percent, totaling SEK 76 million (111)
  • Operating profit totaled SEK 14 million (21), corresponding to 18 percent (19) of revenue
  • Adjusted operating profit totaled SEK 14 million (21)
  • Earnings after tax totaled SEK 10 million (13)
  • Earnings per share before and after dilution amounted to SEK 0.18 (0.26)
  • Cash flow from operating activities totaled SEK 32 million (-16)

Jan–Sep 2021 (Jan–Sep 2020)

  • Order intake decreased 22 percent, totaling SEK 302 million (389)
  • Sales decreased 8 percent, totaling SEK 274 million (297)
  • Operating profit totaled SEK 8 million (38), corresponding to 3 percent (13) of revenue
  • Adjusted operating profit totaled SEK 28 million (38)
  • Earnings after tax totaled SEK 0 million (20)
  • Earnings per share before and after dilution amounted to SEK -0.01 per share (0.39).
  • Cash flow from operating activities totaled SEK -21 million (21)

Events during the third quarter of 2021

  • On July 2, 2021, Permascand announced that the oversubscription option that the principal owners had issued in conjunction with the company’s listing on Nasdaq First North Growth Market had been partially exercised. In conjunction with this announcement, the stabilization period was concluded.
  • During the quarter, Permascand took the next step with the customer Verdagy and signed a collaboration agreement. The agreement is a continuation of the letter of intent that was signed between the companies in June 2021 and will accelerate commercialization of the electrochemical cell that is the cornerstone of Verdagy’s technology for green hydrogen water electrolysis (the VWE process).
  • On September 30, Permascand announced that the company had received an order of approximately EUR 17.5 million from its largest customer for delivery of electrochemical cells for ballast water treatments systems (BWTS) starting in 2022.

CEO comment: Solid foundation for strong growth in 2022

The third quarter of 2021 was marked by a good level of activity with many customer inquiries in all segments. The lower sales level in the quarter compared with the corresponding period last year is a result of lower order intake earlier in the year, mainly within Water Treatment, due Covid-19. The lower order intake is a result of the pandemic, higher prices for raw materials and supplies as well as supply chain disruptions. However, this lower sales rate had a positive effect in that we are now even better prepared for future growth, and we see that the investments and strategic initiatives that we have carried out to date have generated more efficient processes and working methods. This has had a positive impact on gross profit, which totaled SEK 27 million during the quarter, corresponding to a margin of 35 percent – the highest gross margin ever for Permascand.

Permascand offers customized solutions that are crucial for maximizing performance and durability. On average, we spend four to five years – in dialogue with the customer – to produce, test and adapt our products before the customer submits a final order. Activity levels in this area remained high during the quarter. We are receiving an increasing number of inquiries from potential customers who are looking to initiate partnerships and evaluation procedures together with us, which speaks to strong underlying demand. Despite the continued growth in underlying demand, we still felt the impact of the negative effects of the pandemic during the quarter. On the one hand, this concerned materials supply and generated longer turnaround times than normal – which we successfully offset through existing inventory – and higher prices for raw materials and supplies on the other. The result is that customers have become more hesitant in their investment decision and more cautious in their choice of projects, which we are seeing in the form of a temporary decrease in sales, since part of the deliveries we had relied on were postponed.

In the third quarter, we signed a large and important order in Water Treatment, which indicates that the market in the segment is well on its way toward picking up momentum again. We have also noticed a steady positive trend in our Industrial Solutions and Electrification & Renewables business segments.

Demand in Industrial Solutions remains stable, generating interesting projects. We are also seeing an expanded market, with new Greenfields projects under way. This both generates sales now, and opens the way to new aftermarket opportunities. The framework agreement that was signed during the quarter with one of the leading global players in the chlorine hydroxide and sodium hydroxide market has provided us with a strategically important position for growth in the North American market.

In Electrification & Renewables, there is significant interest in development of cells and production methods, where Permascand can capture a strong position in the continued development of the electrochemical cells that are a crucial part of the technology. During the quarter, we also took the next step in our successful partnership with Verdagy. The prototypes have now been created, and the next step is to produce test cells for test runs and, ultimately, commercialization in an even larger testing facility.

Operationally, the third quarter was reminiscent of the preceding quarter, which was also filled with new partnerships and customer projects. We continue to work with a long-term perspective, and have already seen our efforts begin to pay off despite the slower growth phase. We have extremely robust resources in research and development, and our efforts at a full-scale technology and innovation center in green hydrogen are progressing in accordance with plans. This will strengthen our position and potential for delivering innovative, competitive electrochemical and manufacturing solutions to this rapidly growing global market.

To sum up, the third quarter was a stable one with a healthy level of activity and operational progress despite a challenging market situation. The demand situation at the end of the third quarter was a positive one. We enter the final quarter of the year with a historically strong order book, and we expect that demand will gradually increase. We now have a firm basis for accelerating in pace with the market for the global green energy transition.

Peter Lundström, CEO

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

Q2: Continued profitable growth during an intense first half-year

Interim report January-June 2021

Second quarter 2021 (Q2 2020)

  • Order intake decreased 27 percent, totaling SEK 41 million (57)
  • Sales increased 57 percent to SEK 123 million (78)
  • Operating loss totaled SEK -3 million (1), corresponding to -2 percent (1) of revenue
  • Adjusted operating profit totaled SEK 12 million (1)
  • Earnings after tax totaled SEK -5 million (-3)
  • Earnings per share before and after dilution amounted to SEK -0.1 (-0.06)
  • Cash flow from operating activities totaled SEK -39 million (10)

January-June 2021 (January-June 2020)

  • Order intake decreased 39 percent, totaling SEK 98 million (161)
  • Sales increased 7 percent to SEK 198 million (186)
  • Operating loss totaled SEK -6 million (17), corresponding to -3 percent (9) of revenue
  • Adjusted operating profit totaled SEK 14 million (17)
  • Earnings after tax totaled SEK -11 million (6)
  • Earnings per share before and after dilution amounted to SEK -0.21 (0.13)
  • Cash flow from operating activities totaled SEK -53 million (37)

Events during the second quarter of 2021

  • On April 1, 2021, Permascand announced a comprehensive innovation effort to conduct advanced research and development to enable large-scale and cost-effective production of green hydrogen for energy storage. In total, the company plans investments of around SEK 300 million over the next three years in a full-scale technology and innovation center and investments in the company’s research team.
  • On May 18, 2021, Permascand announced its intention to list the company’s shares on the Nasdaq First North Premier Growth Market. The offering and prospectus were published on May 27, 2021, and the first day of trading in Permascand’s shares took place on June 4, 2021.
  • On June 15, 2021, Permascand announced that the company had signed a letter of intent (LOI) with Verdagy for the joint development of a new electrochemical cell for the production of green hydrogen.

CEO comment: Continued profitable growth during an intense first half-year

We have now closed the books on an eventful first half of 2021, a period characterized with several new collaboration agreements, exciting customer projects and the listing on Nasdaq First North Premier Growth Market. After an intensive period during the listing process, we had the pleasure of ringing the listing bell on June 4, thereby welcoming over 2 300 new shareholders to Permascand. The listing is an important step 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 sustainability and the environment.

Customer demand has continued to recover from the waves of the pandemic that occurred in 2020 and early 2021, and is expected to increase as government authorities ease the restrictions linked to the pandemic. The order intake reflects the dynamic of the industry and decreased as expected, by 27 percent to SEK 41 million. Sales during the second quarter of 2021 increased by 57 percent to SEK 123 million, driven by generally increased demand for our products, primarily in Industrial Solutions and Electrification & Renewables. With a strong order backlog and a flexible approach, we delivered positive adjusted operating profit of SEK 12 million during the quarter, compared with SEK 1 million in the year-earlier period.

Through increased ambitions in green hydrogen – a sub segment to Electrification & Renewables – we are accelerating our efforts in the business area, where Permascand has a great deal of experience in delivering hydrogen electrodes to the hydrogen market. During the quarter, our primary focus was on launching the largest innovation investment in the company’s history. By constructing a full-scale technology and innovation center and through investments in the company’s research team, Permascand will pursue advanced research and development to facilitate large-scale, cost-efficient production of green hydrogen for energy storage, where we hold a unique position. The plan is to launch the technology and innovation center in 2022. In total, we are planning to invest around SEK 300 million over the next three years, and our focus going forward will be to gather the resources and skills needed to develop the next generation of hydrogen electrodes and electrolyzers.

We see a major opportunity in the market for green hydrogen produced via electrolysis, a market in which Permascand has delivered electrodes for electrolysis for over 20 years. Permascand has its greatest potential in green hydrogen, and our long-term ambition is to position ourselves as one of the leading independent suppliers of catalytic coatings, electrodes and electrochemical cells in the field.

In Industrial Solutions, awareness is growing about the climate benefits generated by using dimensionally stable anodes (Permascand DSA® – catalytic coatings on a titanium substrate), which is driving demand in the segment. Our long experience and know-how means we can deliver successful concepts and smart technology adapted to each specific customer. We are now in dialogue with customers in Industrial Solutions regarding other environmental applications outside the segment, in which players such as Chemetry have several exciting projects in their pipelines where Permascand can play a key role in the value chain. One example is the letter of intent with Verdagy, a spin-out from Chemetry, which was signed in the second quarter and attributable to the Electrification & Renewables segment. The partnership with Verdagy builds further on the successful partnership between Permascand and Chemetry for the commercialization of electrochemical cells for Chemetry’s eShuttle® technology, and relates to joint development of a new electrochemical cell for the production of green hydrogen.

COVID-19 continued to impact our customers in Water Treatment during the quarter. Port and border closures and deferments granted by regulatory agencies as a result of the pandemic, in combination with historically high raw materials prices, are expected to continue to dampen growth in the business area over the short term. The need for systems that can efficiently purify ballast water remains, and we believe that market conditions beyond the pandemic remain basically unchanged. We have a strong order book in Water Treatment, and are looking forward to the deliveries ahead of us in the coming quarters.

Using a flexible approach, we have continued to adapt our operations and our working methods to the new reality. This will lead to continual productivity increases in many parts of our operations after COVID-19 as well. Despite a market performance that is difficult to assess from a short-term perspective, we are well positioned to capture additional market shares, strengthen our profitability and increase our lead over our competitors. Permascand is stronger than ever, and we look forward to restrictions being eased and to life returning to normal as soon as possible. I would like to take this opportunity to welcome all our new shareholders and to thank all our employees, suppliers and partners for their hard work during this highly eventful first half of 2021.