CEO Richard Berkling comments:

Preparing for growing OEM markets

Although PowerCell showed moderate growth in the second quarter, our recently announced order from a leading European OEM manufacturer of propulsion systems to the marine cruise industry indicates that the energy transition is underway in critical sectors such as aviation, marine and industrial Power Generation. OEM manufacturers are now beginning to take a lead in the transition, pushing their industries towards commercial applications. We also see more national and supranational initiatives aimed at stimulating the continued expansion of the hydrogen industry. With our new financing through Nordea, supported by European Investment Fund's "InvestEU Sustainability Guarantee", we have good conditions to meet the strong demand we see and take on OEM orders.

In the quarter, net sales increased 6 percent to SEK 66.3 million, which is lower than we would like to see and is a consequence of the somewhat softer market that we reported in the first quarter. Still, demand for our offering is strong and growing, driven by increased focus on OEM sales where our Industrialized Innovation offering serve our customers well with the combination of industrialized core products that are adapted and integrated into the OEM solution.

The gross margin amounted to 16.6 percent (34.9) in the second quarter, negatively impacted by inventory revaluation and a less favorable product mix.

Since the beginning of 2024, we have been working to secure working capital funding due to the transition from the earlier phase of project sales to more market-driven growth through long-term OEM contracts. During the second quarter we signed a loan with Nordea of SEK 50 million. The loan is secured through a credit guarantee from the European Investment Fund's "InvestEU Sustainability Guarantee". This new financing means that we can enter into larger customer commitments and expand future serial deliveries.

Positive reception of our new Marine System 225

The marine market is still an innovation driven market and although we have what we believe is the best marine fuel cell system we constantly work to improve customer value. With the launch in the quarter of the Marine System 225 we have increased power and improved operating efficiency in this powerful, yet compact and advanced power generation system.

Continuous improvement is important in a technology shift and we build on our experience and customer feedback from all segment – on land, at sea and in the air. With the diverse applications, demanding yet collaborative customers, we have extensive data to refine how our products create value in different customer applications.

Marine System 225 is attracting great interest and we have recently received a first order from a leading European OEM manufacturer of propulsion systems to the marine cruise industry.

In the quarter, we signed an order from O.S. Energy of two 100 kW marine fuel cell systems for power generation for the Transship II sustainable vessel project. This order represents a strategic expansion of our offering to the smaller commercial and leisure vessel segments, including both retrofits and newbuilds, and shows that our technology is ready for wider uptake.

State incentives speed up industry development

We are in a transition time from early stages of project sales to long-term OEM contracts that are more complex in nature. The speed of transition is also affected by the development of supporting value chains as well as the funding to push infrastructure projects into Final Investment Decision, (FID). Although operating in a changing market we see more state initiatives which accelerate the transition as hydrogen-electric solutions and fuel cell systems are an important part of the solution to reach an emission-free society. It is good for the development of the industry that we see government initiatives in the US, the EU, Japan and Australia, among others, which aim to stimulate and speed up the development of the hydrogen industry. In the short term, we see that above all new customers are affected by the macroeconomic uncertainty and at the same time we are in a transition phase to larger commercial projects.

The megatrend for an emission-free society and the demand we are facing make me confident about PowerCell's positioning with a well industrialized production process and product portfolio to manage the transition from the early stages of a project driven explorative market to a commercially driven market with long-term OEM deliveries, concludes CEO Richard Berkling.

Link to the report: https://powercell.se/en/reports-and-presentations

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Next report: Interim report third quarter 2024 Thursday 17 October

The English version is an in house-translation. In case of any discrepancy, the Swedish text will prevail.