FINANCIAL RESULTS SECOND QUARTER 2025
- Net sales amounted to SEK 6.5 million (31.7)
- Net sales, excluding metals for electrolysis, amounted to SEK 6.5 million (31.7) [1]
- Total revenue amounted to SEK 14.7 million (24.7)
- Operating profit amounted to SEK -15.8 million (-4.6)
- Operating profit after financial items amounted to SEK -15.8 million (-3.8)
- Cash flow amounted to SEK 2.8 million (-11.5)
- Net cash, end of period, amounted to SEK 30.8 million (85.7)
- Liquidity ratio amounted to 70% (136)
- Adjusted liquidity ratio amounted to 107% (198) [2]
- Order backlog coating systems at period end amounted to SEK 0 million (0) [3]
- Order backlog Coating Services at period end amounted to SEK 1.7 million (2.3) [3]
FINANCIAL RESULTS JANUARY-JUNE 2025
- Net sales amounted to SEK 16.0 million (35.7)
- Net sales, excluding metals for electrolysis, amounted to SEK 16.0 million (35.7) [1]
- Total revenue amounted to SEK 34.4 million (32.2)
- Operating profit amounted to SEK -30.1 million (-20.5)
- Operating profit after financial items amounted to SEK -30.0 million (-19.7)
- Cash flow amounted to SEK -2.8 million (-34.0)
BUSINESS HIGHLIGHTS DURING THE SECOND QUARTER 2025
- Letter of Intent from FTXT (China) about continued volume supply of coating services for automotive fuel cells from Coating Service Center China
- Coating services supply agreement with European PEM electrolyzer manufacturer for production at Coating Service Center Sweden
BUSINESS HIGHLIGHTS AFTER THE PERIOD
- Doubled volume forecast for coating services during 2025 from FTXT
- 24 hours a day production, 6 days per week, at Coating Service Center China to meet the increasing order volumes
[1] Metals for electrolysis are for certain customers invoiced in a cost-neutral manner not affecting operating profit.
[2] Includes the part of the inventory that has been financed by customer pre-payments.
[3] Future agreed leasing revenue of SEK 10.6 million over 45 months for a production line leased out by the subsidiary in China is not included in the backlog figures.
CEO's COMMENTARY
The second quarter was characterized by commercial achievements, but also by continued uncertainty globally and postponed investment decisions by our customers. That the quarter did not contain any system deliveries is disappointing, but in line with an expected challenging market environment - and above all a result of extended decision-making processes rather than a lack of demand. Against this background, we have proactively implemented a savings program. We are simultaneously preparing for increased activity within Coating Services, where customers are moving from sampling to initial production and we continue to work with new and existing customers ahead of substantial investment decisions.
Net sales
Net sales for the second quarter amounted to SEK 6.5 million (31.7). The decrease is mainly explained by the lack of system deliveries in the quarter. Adjusted for this, net sales from other activities were in line with the comparable quarter last year. We are in a clearly cautious market situation, but at the same time we see that interest in our solutions remains, and that several customers are advancing in their evaluations.
Coating Services activity gradually increased during the quarter with more sampling activities within the hydrogen business area and key customers' start or restart of production. In China, partly due to a doubled volume forecast by FTXT for 2025 confirmed after the period end, we have since July returned to two shifts, which means two 10-hour shifts and four hours for preparations. An upgraded INLINECOATER IC2000, together with increased automation and improved quality control, have strengthened our operational efficiency and enabled higher production throughput with existing staffing. This improves our readiness to meet increased volumes.
Net sales for the rolling 12-month period amounted to SEK 90 million, which is a departure from the upward trend we saw in the previous year. The development illustrates how dependence on individual larger orders can create volatility in the growth curve. Our long-term growth ambition remains firm, and we are actively working to broaden the revenue base and increase the stability of the business over time.
Cost-cutting program and measures to increase liquidity implemented
Cash flow from operating activities amounted to SEK -15.9 million (-12.1) during the second quarter. While working capital management actions - including the transition to a generic precious metals inventory - have had a positive effect, a strained liquidity situation remains. The low business activity during the quarter underlines the need for continued financial discipline.
Against this backdrop, we implemented a cost-cutting program during the quarter. A total of ten roles have been affected through a combination of staff reductions, reduced use of consultants, and adjustments in staffing and working hours. In addition, we introduced a temporary freeze on salary adjustments. Overall, the measures are expected to reduce our personnel costs in the parent company (excluding the Chinese operations) by approximately 20 percent. The effect is gradual, with some initiatives having an immediate impact while others gain full effect over time. The program has been implemented while maintaining technical and delivery capacity.
During the quarter, we raised capital through loans of just over SEK 20 million connected to our Chinese operations. The loans have favorable terms and provide financing for the local operations, reducing the need for liquidity from the parent company. Together with other measures, this strengthens our financial flexibility. Increased sales remain the strongest lever for achieving positive cash flow. With several operational and financial initiatives in place, we are well-equipped to meet a challenging market situation and are prepared to act proactively when required.
Continued strong sales pipeline
We continue to see a strong sales pipeline with a wide geographical spread. We added new paying customers during the quarter, and we received several significant sampling orders from customers in Europe and North America. During the second quarter, we received one of our largest sampling orders to date from a leading player in the aerospace industry - a segment where the technical advantages of hydrogen are particularly clear.
These developments reflect how customers are stepwise approaching investment decisions. Sampling orders are often the first step in a longer qualification process, where the technology is verified before a decision on larger volume production. A clear example is the recently signed supply agreement with a European manufacturer of PEM electrolyzers, which was announced on June 24. After a year of recurring sample orders, the agreement marks a shift from the test phase to production preparations, an important milestone that confirms that we are technically relevant when customers industrialize.
While many investment decisions are delayed, we see tangible progress in existing customer relationships. During the quarter, for example, Waveland in China decided to increase the capacity of its leased INLINECOATER equipment. The upgrade means an increased contract value of approximately SEK 2.5 million, distributed over the remaining four years of the contract period. The deal generates stable, recurring revenue and has an attractive gross margin, which underlines the profitability of the service business.
Market development
The hydrogen market is developing at different speeds in different parts of the world. Over the past six months, we have seen both uncertainty and progress, depending on the application and on the geographical context. Our global presence allows us to follow developments closely and to act where the opportunities are the most compelling.
In the United States, the investment climate has been characterized by political uncertainty, which has temporarily slowed down decision-making. With the July 4 adoption of new Congressional tax and spending legislation, there are now clear rules of the game for hydrogen, which after the final hearing in the US Senate became better than the industry had feared. Tax reductions for fossil-free hydrogen production and fuel cell investments were consolidated, albeit with new end dates. This gives our customers new time windows to act within and creates a clear driving force to move forward with their plans.
In China, we are seeing a recalibration of the government support systems, from an exclusive focus on fuel cell vehicles to also include production via electrolysis and industrial consumption of green hydrogen. Impact Coatings has grown its business in China in recent years, despite an overall market downturn. This demonstrates the value of our local presence and our ability to meet clear industrial needs.
Korea also continues to be a relevant market. Investments in fuel cells and electrolysis are largely driven by energy supply and industrial needs rather than climate ambitions. We see the market for fuel cells broadening to a wider variety of energy carriers and fuels, such as methanol, ammonia and natural gas. This creates demand for reliable technology in applications where our coatings have strong relevance, regardless of the hydrogen classification. Korea, together with China, the US and Europe, is one of our strategically prioritized markets, where we see many opportunities for long-term business development.
Overall, the commercial basis for hydrogen technologies applied in both green and non-green areas remains strong. We see that customers continue to prepare for future expansion, which is leading to a clear shift in the hydrogen market, from symbolic projects to deals based on industrial needs and verified technology. Investment decisions take longer, but the discussions are more focused and concrete. The demands on technical reliability, business logic and delivery capacity are increasing. This benefits players with a strong offering, industrial presence and technological leadership, and Impact Coatings is well positioned there.
Outlook
During the first half of the year, we have taken measures to reduce costs and increase our financial sustainability. The savings program has been implemented and initiatives to reduce working capital have had an effect. At the same time, we continue to act proactively to adapt to market conditions and secure long-term liquidity.
We also continue to develop technologies that broaden and deepen our relevance in hydrogen-based energy applications. Our coating for iridium oxide has shown strong technical results. It forms the basis for an expanded offering in electrolysis, where we combine internal development with partnerships. We are currently working with several players in the area, who complement each other technically and strategically, and where our coatings play a central role in various types of system solutions.
In parallel, we are driving development in solid oxide applications (SOFC/SOEC), where our coatings have shown good performance in development tests with potential customers. This positions us in a commercially driven growing segment with broad industrial relevance, for example for supplying data centers with energy.
In summary, we are well positioned to meet the next phase of market development. With coating systems in inventory, increased technical relevance and a global infrastructure in place, we are ready to deliver when customers ultimately decide to invest. 2025 is a challenging year, but it is also a year in which the foundation is laid for the next phase of our growth. We are convinced that hard work and customer focus will continue to contribute to long-term relationships and a growing pipeline of new customers, which form the foundation of our path to profitable growth.
Jonas Nilsson, CEO
Presentation
Impact Coatings invites investors, analysts and the media to a presentation of this Interim Report on Friday, August 22 at 10:00 am (CEST). CEO Jonas Nilsson and CFO Lena Åberg will comment on the Interim Report and take questions. The presentation will be held via webcast in English.
For more information contact:
Jonas Nilsson, CEO
+46 70 731 09 04
Lena Åberg, CFO
+46 76 506 55 31
E-mail: investors@impactcoatings.com
About Impact Coatings
Impact Coatings (www.impactcoatings.com) is a global technology leader and full-service provider of coating solutions using PVD technology. The company focuses on hydrogen and metallization applications, both part of important growth markets.
PVD stands for physical vapor deposition - clean processes of applying thin layers of coatings to design surface properties, prolong lifespan, and improve product performance. The company's offer consists of efficient, modular, and flexible PVD systems, and coating services, underpinned by several decades of coating experience and expertise.
The company was founded in 1997 and has since expanded in Europe, Asia and North America. Current production facilities are located in Linköping, Sweden, and in Shanghai, China.
The Impact Coatings share is listed on Nasdaq First North Growth Market (Nasdaq Nordic). The company's Certified Adviser is Redeye AB.
