Interim report January-June 2022
Q2 2022 (Q2 2021)
- Order intake decreased 91 per cent year-on-year to SEK 4 million (41). Impairment of previous orders had a negative impact on order intake
- Sales increased 33 per cent to SEK 163 million (123)
- Operating profit totalled SEK 45 million (-3), corresponding to 28 per cent (-2) of revenue
- Adjusted operating profit totalled SEK 45 million (12)
- Earnings after tax totalled SEK 35 million (-5)
- Earnings per share amounted to SEK 0.58 (-0.1)
- Cash flow from operating activities totalled SEK 58 million (-39)
Events during the second quarter of 2022
- On 29 June, Permascand announced a write-down of one order, which decreased the value of the order backlog by approximately SEK 63 million. The order, which was placed in 2018, will not be delivered. The delivery of the order was previously estimated for the second quarter of 2023, which implies that sales for the current calendar year will not be negatively affected.
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.
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.
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.
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
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.
To participate via telephone please dial-in on the numbers below.
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/