Interim report January-September 2022
Q3 2022 (Q3 2021)

• Order intake decreased 30 per cent year-on-year to SEK 143 million (203)
• Sales increased 57 per cent to SEK 120 million (76)
• Operating profit totalled SEK 11 million (14), corresponding to 11 per cent (18) of revenue
• Adjusted operating profit totalled SEK 6 million (14)
• Profit after tax totalled SEK 8 million (10)
• Earnings per share amounted to SEK 0.13 (0.18)
• Cash flow from operating activities totalled SEK 39 million (32)

Events during the third quarter of 2022
On 23 September, Permascand announced that the partnership with Verdagy for the joint development of a new electrochemical cell for the production of green hydrogen had reached an important milestone in the form of successful pilot tests that validate the technology’s durability and scalability.

CEO comment

We once again posted robust sales in the third quarter, delivering on our strong order book. It is gratifying to see that in just the first three quarters of 2022, our sales have already surpassed full-year 2021. This is further proof that we are continuing to deliver according to our growth ambition.

Order intake for the quarter totalled SEK 143 million. Despite lower order intake than in the year-earlier quarter, order intake is one of the strongest we have recorded in a quarter, and our order intake for the January to September period was greater than in the corresponding year-earlier period. We are pleased to see that order intake once again picked up speed after the lower level in the second quarter. An important reason for this is falling prices in the global market for materials and raw materials. The year-earlier quarter was an exceptional period, where the entire annual order intake from one of our largest customers was concentrated in one and the same quarter.

Sales totalled SEK 120 million during the quarter, up 57 per cent year-on-year. Sales were primarily driven by sales in Water Treatment, where we successfully delivered on our order book, primarily derived from the strong order intake in Q3 2021 and on an ongoing basis in 2022. Industrial Solutions also performed favourably while sales in Electrification & Renewables were in line with the year-earlier quarter.

The recent turmoil in the global market has led to a shift in market dynamics meaning that the time between order intake and delivery has become shorter. Now our customers place several smaller orders rather than fewer large ones, which can sometimes entail variations that result in misleading comparative quarterly figures. Permascand’s performance should be viewed in the context of longer cycles. There it is clear that we are demonstrating a positive trend over time.

Gross profit for the quarter totalled SEK 26 million. Changes in capacity utilization have temporarily affected the result and reported gross margin negatively. The gross margin in the quarter was also negatively impacted by increased pricing pressure in Water Treatment.
 
Furthermore, during the quarter we encountered some operational challenges that disrupted our normally efficient operations and production. These included delayed deliveries of spare parts for machinery, employee absenteeism and disruptions to the power supply from a failing switchyard. Increased costs resulting from the interruptions have, to a certain extent, been reflected in the somewhat lower profitability for the quarter. Despite these challenges, we delivered solid figures and profitable growth and we are continuously reviewing our processes to further strengthen our supply chain and create better stability and resilience against long lead times and volatile prices.

Electrification & Renewables
The level of activity remains high and new milestones are continuously being reached. One of these is our partnership with Verdagy, where we successfully worked together to develop a new electrochemical cell for producing green hydrogen. During the quarter, we could announce successful pilot tests that validated the technology’s durability and scalability, which is a precondition for taking the next step and reaching a commercial scale. We look forward to the first commercial order in hydrogen, which is expected to come in 2023. In the area of power transmission, we are seeing increased interest in our expertise in corrosion protection related to investments in green electricity supply.
 
Industrial Solutions 
In line with previous assessments, the activity level and demand remained high in Industrial Solutions, with a strong order intake and sales for the quarter as a result. We have a strong order book in the segment and several future new-build projects are being evaluated.
 
Water Treatment
We once again reported favourable order intake and strong sales in Water Treatment for the quarter, in parallel with the start of several new customer projects. We have an overall strong position in the market together with our customers, enabling us to continue to capitalise on the installations required in order for marine transport to meet regulatory requirements. It is also gratifying that we delivered our first order for industrial water treatment during the quarter.
 
Outlook
We are still experiencing a high level of activity among our customers and we have great expectations that ongoing projects will lead to order placements towards the end of the year and in the beginning of 2023. In line with the previous year, we expect stronger order intake in the fourth quarter for delivery next year, and negotiations involving several customer projects are in their final stage. With an impressive sales record on an annualised basis, robust order books and strong finances, we are continuing to develop on our profitable journey of growth and achieving our financial targets as we progress.

Peter Lundström, CEO Permascand

Report presentation
CEO Peter Lundström and CFO Linda Ekman will present the report in a conference call today 11 November at 10:30 CET. The presentation will be held in English and will conclude with a Q&A session.

Webcast
https://ir.financialhearings.com/permascand-top-holding-q3-2022

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: 9111060#

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

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/

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/

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/

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/