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

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.