· Net revenue amounted to SEK 22 560 thousand (2 612)
· Total income amounted to SEK 17 452 thousand (2 648)
· Operating profit amounted to SEK -4 185 thousand (-13 527)
· Operating profit after financial items amounted to SEK -4 191 thousand (-13 527)
· Cash flow amounted to SEK -12 413 thousand (-11 698)
· Equity-to-assets ratio amounted to 130% (284)
· Order backlog at period end amounted to EUR 2 084 thousand
FINANCIAL RESULTS JANUARY-JUNE 2019
· Net revenue amounted to SEK 25 507 thousand (9 055)
· Total income amounted to SEK 23 903 thousand (9 788)
· Operating profit amounted to SEK -14 505 thousand (-19 628)
· Operating profit after financial items amounted to SEK -14 514 thousand (-19 647)
· Cash flow amounted to SEK -21 098 thousand (-15 464)
· Equity-to-assets ratio amounted to 130% (284)
SIGNIFICANT EVENTS SECOND QUARTER 2019
· Delivery of coating system to Henan Yuqing Power Co., Ltd.
· Delivery of coating system to a Swiss watch manufacturer
· Annual General Meeting held on May 15th
SIGNIFICANT EVENTS AFTER THE PERIOD
· Shipment of coating system to Beijing Shouhang Resources Saving Co., Ltd.
The second quarter of 2019 shows that Impact Coatings is on the right path. As CEO, it is gratifying to see that the past year’s focused strategy and increased operational efficiency are beginning to bear fruit. We see that the FC (fuel cell) segment and D/M/R (decorative, metallization and reflective coatings) are both contributing to system and services revenues.
Net revenue for the second quarter was higher than for the whole year 2018. System sales continue to vary from quarter to quarter but compared to previous years the trend is positive. We also see a continued improvement in coating services revenues, and after-market sales help to stabilize further the business.
Since last summer, we are using our system for fuel cell coatings in our coating services business. Both coating services and development projects for customers show that our technical solutions in the segment are at the forefront. We also see that electrification in transportation is moving quickly, driving the development of both batteries and fuel cells. In April, we delivered our first coating system to a fuel cell customer. The machine was installed in China’s Henan province and the customer, Henan Yuqing Power Co., Ltd., is now integrating our Ceramic MAXPHASE™ coating into the production of bipolar fuel cell plates for the rail industry.
Three of five system orders since mid-2018 have come from existing systems customers, all within the D/M/R segment. One of the existing customers is the Swiss watch manufacturer that in April received its second coating system from Impact Coatings. We continue to nurture existing customer relationships while intensifying and broadening market development within the D/M/R segment, with the clear goal to increase system sales.
As CEO, I am proud to receive customers’ positive feedback about Impact Coatings’ professionalism in connection with the first half-year's system deliveries. Now during August, an additional coating system is on its way to China, to Beijing Shouhang Resources Saving Co., Ltd., and the installation team is making its final trip preparations.
We have today a strong pipeline of potential customers, confirming our view that we have an attractive offering of coating systems and services, as well as the right customer focus.
The 2019 annual general meeting of shareholders was held in Linköping on May 15. It was for me the first chance to meet many of Impact Coatings’ engaged shareholders. The board of directors and I are thankful for the owners’ trust and look forward to driving the company’s development forward.
Second quarter 2019
Net revenue for the second quarter 2019 amounted to SEK 22 560 thousand (2 612) and includes revenue recognition from the delivery of two coating systems. Total income amounted to SEK 17 452 thousand (2 648). From 2019 forward, revenue for coating machines is normally recognized upon delivery to the customer.
Operating expenses amounted to SEK -21 636 thousand (-16 175). The increase is driven by raw materials for the coating systems delivered, as well as higher personnel costs and depreciation, which reflect investments that Impact Coatings has made to develop as an industrial company. Financial items amounted to SEK -6 thousand (1). Operating profit after financial items amounted to SEK -4 191 thousand (-13 527).
In 2018, we announced that a coating system had been reclassified from earnings to inventory at a value of SEK 7 956 thousand following invalidated orders from China Hydrogen Energy and Huaqing Power Technology. This value included manufacturing costs (materials and labor), but did not include any gain nor cost for customer-specific modifications for Henan Yuqing Power Co., Ltd.
During the second quarter of 2019, we reported revenue of SEK 12 320 thousand for the delivery to Henan Yuqing Power Co., Ltd. The profit on the project was lower than the expected profit from ordinary sales of coating systems, mainly because the machine's inventory value of SEK 7 956 thousand included capitalized costs for own account from 2016 and 2017.
Net revenue for the first half of 2019 amounted to SEK 25 507 thousand (9 055). Total income amounted to SEK 23 903 thousand (9 788).
Operating expenses amounted to SEK -38 408 thousand (-29 417). The increase is driven by raw materials for the coating systems delivered, as well as higher personnel costs and depreciation. Financial items amounted to SEK -9 thousand (-19). Operating profit after financial items amounted to SEK -14 514 thousand (-9 647).
A provision for deferred tax assets has, in line with previous financial reporting, not been recognized.
Financial position and liquidity
Cash and liquid assets at period-end amounted to SEK 25 571 thousand (49 922). Interest-bearing debt at period-end amounted to SEK 0 (0). Equity-to-assets ratio amounted to 130% (284).
Cash flow from operations during January-June amounted to SEK -20 926 thousand (-15 394). Cash flow from investments amounted to SEK -172 thousand (0). Cash flow from financing activities amounted to SEK 0 thousand (-70). Total cash flow for the period was SEK -21 098 thousand (-15 464).
Cash flow in the third quarter is expected to be higher than in the second quarter. The final payments from Henan Yuqing Power Co., Ltd and from the Swiss watch manufacturer are scheduled for after period-end and will therefore be reported during the third quarter.
Impact Coatings has received an Irrevocable Letter of Credit corresponding to 40% of the order value from the listed company Beijing Shouhang Resources Saving Co., Ltd., whose release is expected to have a positive effect on cash flow during the third quarter.
The financial status and liquidity position are good, as the company has the liquidity needed to continue operations according to plan.
The value of the order backlog for coating machines was at the end of the period EUR 2 084 thousand. The order backlog for coating machines excludes recurring activities from after-market sales and coating services but includes agreed rental income for coating machines.
EVENTS DURING THE SECOND QUARTER
Two coating systems were delivered and installed at customer sites during the second quarter. In both cases the orders were communicated in September 2018, with planned deliveries during the first half of 2019.
One INLINECOATER™FC system, dedicated to coating fuel cell plates, was delivered to Henan Yuqing Power Co., Ltd. (China). The customer, who paid 80% of the order value in advance in connection with order placement, will initially use the system for fuel cells for the rail transport industry. The system type was launched in 2018 and Impact Coatings has been using it since last year in the production of fuel cell coatings. The Henan Yuqing deal represents the first system delivery to a customer for fuel cell applications.
A second system delivery was made to a well-known Swiss watch manufacturer, who had ordered an INLINECOATER™D for decorative coatings. The customer with this delivery is integrating a second system from Impact Coatings into its production of watch components, with the first system delivered in 2017.
In April, as every year since 2014, Impact Coatings exhibited at the world's largest industrial fair, Hannover Messe. The group exhibit H2+FC during the Hannover Messe is the most important annual meeting point for the European fuel cell industry, a good opportunity to position Impact Coatings, and this year to introduce the company's partly new organization. The company also participated in the hydrogen and fuel cell conference f-cell + HFC in Vancouver, Canada, at the end of May.
The annual general meeting of shareholders (AGM) was held in Linköping on May 15. The AGM re-elected the Board of Directors: Mark Shay, Tanja Vainio, Lars-Gunnar Skötte, Jan-Eric Sundgren, and Christian Sahlén. Mark Shay was elected Chairman of the Board. The Board of Directors and the CEO Torbjörn Sandberg were granted release from liability. The former CEO Henrik Ljungcrantz was not granted release from liability.
EVENTS AFTER PERIOD END
In early August, a coating system was shipped to Beijing Shouhang Resources Saving Co., Ltd. (China). The order was communicated via a press release on February 4, 2019.
AUDIT AND ACCOUNTING POLICIES
This interim report has not been subject to auditor review.
UPCOMING FINANCIAL EVENTS
Interim report for the third quarter 2019 October 25, 2019
Year-end report 2019 February 14, 2020
For more information contact:
Torbjörn Sandberg, CEO
Tel: +46 (0)768-43 43 76
Marie Dhayer Teikmans, CFO
Tel: +46 (0)70-812 71 96
This information was delivered, via the contact persons named above, for publication on August 16, 2019, at 8:00 a.m. CEST.