First quarter 2023 (Q1 2022)

• Order intake decreased 84 per cent year-on-year to SEK 31 million (191)
• Sales decreased 20 per cent to SEK 111 million (139)
• Operating profit totalled SEK 8 million (31), corresponding to 8 per cent (22) of revenue
• Adjusted operating profit totalled SEK 8 million (31)
• Profit after tax totalled SEK 6 million (24)
• Earnings per share amounted to SEK 0.10 (0.40)
• Cash flow from operating activities totalled SEK -37 million (22)

Events during the first quarter of 2023

• On 14 March, Permascand announced that the company had appointed Nariman Askarieh as interim Global Chief Commercial Officer (CCO)

CEO comment

This quarter, we focused on strengthening our operational capacity for the future. The shift in our revenue mix is increasingly evident driven by continued strong development in Industrial Solutions while Electrification & Renewables continues to grow. The trend is positive, but our growing segments did not manage to reach levels that compensate for Water Treatment, which is performing at a lower level than historically. Even though our activity levels remained high and our customer dialogues intense, the quarter was characterized by a turbulent global situation where customers are cautious in their investment decisions.

We made several operational advances during the quarter, and we are continuing to invest for growth. This includes issues such as continued automation of parts of production for electrodes and electrochemical cells, new coating technology, and continued work on the completion of our technology and innovation center to strengthen our position in the field of hydrogen. These efforts in products and product development, combined with the cutting-edge competence we recruited during the year, will be key to ensuring a leading position and increasing efficiency in our processes and working methods for the future. The investments increased our workforce by 10 per cent, mainly in sales and research and development, and led to costs increasing SEK 9 million compared with the year-earlier period.

We can confirm that several customers have been cautious about placing orders with regard to conditions in the world market and therefore postponed their orders. Order intake for the first quarter totalled SEK 31 million, attributable primarily to Electrification & Renewables, a segment with great potential.

Sales totalled SEK 111 million, down 20 per cent from the year-earlier quarter. Primarily, this is an effect of a changed revenue mix, where Industrial Solutions and Electrification & Renewables are continuing to grow, though not to the degree that they will yet compensate for the weak market performance in Water Treatment.

Gross profit for the quarter totalled SEK 32 million, corresponding to a gross margin of 29 per cent. During the quarter, we had a production mix consisting of smaller production series and Greenfield orders, which were sold with lower profitability than in normal aftermarket business. We are also experiencing continued price pressure within Water Treatment. Our flexible and scalable production ensures positive margins even at lower production volumes.

Electrification & Renewables
Both the order intake and revenue increased compared to the year-earlier period, albeit from lower levels. The activity level remains high and we are making continual progress within the development and partnership agreements we have entered in the segment. The segment was characterized by intense business development and partnership with new customers – particularly in green hydrogen and lithium extraction. As part of our Technology and Innovation Centre for green hydrogen, we are adding personnel and equipment, and are entering into several international partnerships with universities, research institutions, customers and partners. Completion of the Centre is planned for 2023.

Industrial Solutions
Industrial Solutions continued to perform strongly, and during the quarter, we achieved nearly record-high revenue from delivering on the robust order intake from earlier quarters, mainly due to delivering of greenfield orders. We continue to see growing interest from both new and existing customers, driven by the green transition. Still, we are feeling the effects of the short-term world market situation.

Water Treatment
As previously communicated, we have been experiencing a weaker and more volatile market in Water Treatment driven by customer inventory build-up. During the quarter, we experienced challenges in leveraging economies of scale in our production as a result of smaller production series and production of new products. Combined with the price pressure in the market, it weighed down our gross margin for the quarter. Efforts are progressing to strengthen our offering in industrial water treatment, which is a field where we see potential for growth and aftermarket business.

Outlook
Even if it is relatively difficult to predict how global conditions will impact our customers’ willingness to invest going forward, we can confirm that we have a stronger quarter ahead of us. It is reassuring that we have Industrial Solutions, a stable and profitable business, and Electrification & Renewables which represents a promising area for the future that we are investing in with our own cash flows. We have ongoing constructive customer dialogues and expect that the postponed investment decisions will lead to order intake in the future. Moreover, we are experiencing continued high levels of customer activity. We are noting increasing demand both in Electrification & Renewables and in Industrial Solutions which is expected to lead to orders that will compensate for the slowdown in Water Treatment, where the installation cycle in ballast water treatment has peaked. These orders include the first commercial order within hydrogen business, which is expected to come in before the year is finished.
We are sure that customers' willingness to invest returns, and we see no reason to revise our view of our continued journey of growth. Permascand is well positioned in the global green transition thanks to our technology. With continued investments for the future and operational advances in the quarter, we have favorable conditions for long-term, sustainable, and profitable growth.

Peter Lundström, CEO Permascand

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

Webcast
https://ir.financialhearings.com/permascand-top-holding-q1-2023

Registration
To participate via teleconference, please register via the link below. After registration, you will be provided with telephone numbers and a conference ID to access the conference. You can ask questions verbally via the telephone conference.
https://conference.financialhearings.com/teleconference/?id=200746

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