FINANCIAL RESULTS SECOND QUARTER 2022

• Net sales amounted to SEK 4,379 thousand (14,308)
• Total revenue amounted to SEK 10,934 thousand (11,586)
• Operating profit amounted to SEK -13,307 thousand (-11,216)
• Operating profit after financial items amounted to SEK -13,312 thousand (-11,219)
• Cash flow amounted to SEK -17,209 thousand (-16,099)
• Liquidity ratio amounted to 457% (650)
• Order backlog for coating systems at period end amounted to EUR 1,899 thousand (1,456), which at period end corresponds to SEK 20,278 thousand (14,740)

FINANCIAL RESULTS JANUARY-JUNE 2022

• Net sales amounted to SEK 9,739 thousand (24,513)
• Total revenue amounted to SEK 20,399 thousand (16,941)
• Operating profit amounted to SEK -23,022 thousand (-22,694)
• Operating profit after financial items amounted to SEK -23,028 thousand (-22,697)
• Cash flow amounted to SEK -23,804 thousand (106,882)

SIGNIFICANT EVENTS SECOND QUARTER 2022

• No significant events (1) have occurred during the period

SIGNIFICANT EVENTS AFTER THE PERIOD

• Coating system order for fuel cells from Boyuan (China), order value in the EUR
  1.2-1.4 million range

(1) Significant events refer to events that comprise insider information and shall be made public via press release.

CEO’S COMMENTARY

During the second quarter, we presented a revised strategy with a strong focus on scalable solutions and service offerings. The strategy addresses customers’ challenges and need for flexibility in the rapidly growing hydrogen segment, and for the company will lead to a more sustainable growth trajectory with recurring revenues.

We have in parallel experienced a continued high level of activity in the business both in Sweden and in our global regions. In Linköping, two internal coating systems were commissioned during the quarter, one of which is our next generation system for hydrogen applications designed to meet the industry’s need for larger production volumes. One coating system has been under construction, and planning and procurement for three additional machine builds have started. No system was delivered during the quarter, which was according to the schedule of outstanding orders.

Revenue from Coating Services was lower than in the preceding quarter due to two key customers experiencing supply chain disruptions, independent of each other but at roughly the same time. Normal production in Coating Services has resumed for both customers during the third quarter.

The resulting lower production level during the second quarter facilitated planned rebuilding and automation of a production line for the coating of fuel cell plates. The automation will yield a higher future production capacity and allows us to demonstrate a complete system solution on our premises, which will be an important part of our sales process.

Through Coating Services, prospective customers are afforded the possibility of testing and verifying our coating technology. A natural next step is to verify that the quality holds constant with increasing volumes. Automation satisfies both of these demands since we can achieve a higher throughput while reducing the risk of human error. This enhances our ability to include automation and quality control in system sales.

During the quarter, we have also delivered several test coatings for electrolysis, which is the primary method of producing hydrogen from water. Metal flow plates are used in both fuel cells and electrolysis, and the Impact Coatings coating technology developed for fuel cells is cost-effective even for many electrolysis plates. The number of companies planning to produce electrolyzers is increasing globally. Many of these companies are relatively new, unlike in the fuel cell industry, which is also in an early stage but industrializing at an ever-faster pace as large established companies get involved and scale up. Revenues from electrolysis are expected to increase in the future from a very low level today, initially within Coating Services.

The subsiding pandemic in Europe has made possible many visits of potential customers to Linköping. Our own outbound travels to the industry have started up again, with personal visits regarding sales, technology development, partnering, and to catch up on system maintenance at customers we haven’t been able to visit in a long time. I have, during the quarter, visited several existing and potential customers in Europe and North America. Meanwhile, our team in China has put in a heroic effort to hire personnel and prepare the Chinese subsidiary’s premises despite a total COVID lockdown in Shanghai during April-May. The premises in Shanghai will be the headquarters for Impact Coatings (China) and will host our new Coating Service Center in China.

With insights about customers’ flexibility and scalability needs, we have during the past year started a repositioning of the business and our offerings. We described the updated strategy during a webcast at the end of May. That presentation and the accompanying press release are available on our website, which has itself received a notable facelift. Please take a look!

With a decade of coating experience in fuel cells, we are expanding our Coating Services business in Sweden and replicating it to other countries, starting with China. Customers that prefer to outsource coating as a service can trust Impact Coatings’ expertise and presence during the development phase and later in production.

We continue to deliver coating systems, but even here we now offer greater flexibility, both regarding financing and operations. One example is Managed Services, in which personnel from Impact Coatings work on-site at the customer and manage the operation of the coating system until the customer has built up sufficient coating competence.

The first example of Managed Services in practice is connected to the system order from Boyuan received in July. Boyuan is a Chinese producer of metal plates for fuel cells. Part of the order is that we will initially operate the coating production at the customer site. Personnel from our Chinese subsidiary will operate the system.

Beyond the flexible delivery model, we are expanding our service offering coupled to coating systems including maintenance, support and spare parts, training packages, and system upgrades. These service offerings will contribute to stronger customer relationships and increase sales in all the company’s business areas, now referred to as Hydrogen Solutions, Metallization Solutions, and Tailored Solutions.

Impact Coatings has a unique position in a world that is repositioning itself through fast-growing green industry. Our business focus on relevance and executing on the possibilities we see through our strategy continues, backed by stable financing and a knowledgeable team working closely with our customers.

Torbjörn Sandberg, CEO

The full report is attached, and can be retrieved on the company’s website at www.impactcoatings.com/finansiella-rapporter-arkiv/.

Impact Coatings has received an order for an INLINECOATER™FC system for delivery to the Chinese fuel cell metal plate manufacturer Shangdong Boyuan New Energy Technology Development Co., Ltd. (“Boyuan”). The system order is placed through the trading company Liaocheng Golden Bridge Import And Export Co., Ltd. Boyuan is specialized in the precise forming technology of fuel cell metal plates. The total order value is in the EUR 1.2-1.4 million range, and includes Managed Services for four months. Managed Services means that Impact Coatings for a period operates the coating system at the customer’s premises. Final delivery is planned for the fourth quarter of 2022.

Impact Coatings has installed an industrial robot with auxiliary automation equipment at the company’s Coating Service Center. The coating technology and services provider has a decade of experience supplying PVD coatings for fuel cell plates. An INLINECOATER™FC system dedicated to the application was installed in 2018. Adding an industrial robot to the production line allows more efficient system utilization and increased production capacity.

“For us, the automated production line means more than just an increased production flow. It relieves our personnel of repetitive tasks and reduces risk of human error. We are also able to continue development of our robotic interface and automation solutions. For our Coating Services customers, the automation solution means we can run production processes at maximum capacity and increase throughput to match the market’s increasing volume needs,” said Carina Höglund, VP Coating Services.
 
Impact Coating has chosen a smart, sensor-controlled automation setup, which does not require a physical safety cage. If you step inside the clearly marked area the sensors automatically halt the production process. The result is a very compact layout, which matches the small footprint of the INLINECOATER system. These compact production cells, measuring approximately 7×3 meters, are now also available as part of the Impact Coatings Systems Solutions offer.

The new automation solution is part of Impact Coatings’ growth strategy. Later this year, the company plans to start up a second automated Coating Service Center in Shanghai, China.

“Impact Coatings is accelerating its efforts to become a service company in coating technology based on PVD. Through this initiative, we will establish Impact Coatings’ market-leading expertise in fast-growing key markets globally and thereby strengthen the conditions for achieving sustainable and profitable growth. I confidently look forward to creating clear customer value and in turn also long-term shareholder value through these initiatives,” said Torbjörn Sandberg, CEO of Impact Coatings.

Background to the redefined business model

Impact Coatings has historically focused on machine sales, which occur irregularly, have long sales cycles, and require staffing levels that fluctuate widely over time. This has led to the company’s dependence on winning several machine delivery contracts each year.

Impact Coatings has in parallel responded to a strong increase in demand for Coating Services, a business that achieved an increase in sales of over 60 percent during 2021. The strong demand is driven by, among other dynamics, the global green energy transition and increasingly stringent regulatory requirements in the automotive industry. Impact Coatings has observed that many of its current and potential customers are hesitant to make investment decisions regarding coating equipment and instead prefer buying coating services, including the company’s unique in-house expertise, in order to try different technologies and gain a competitive advantage.

The scope of the new service offering and its effect on Impact Coatings’ financial profile

Impact Coatings’ service offering will initially focus on rapidly scaling up Coating Services and developing a broader aftermarket business. In the long term, the service offering will be further developed as customers’ needs evolve.

By broadening the service offering, the company aims to build closer customer relationships, achieve more efficient resource utilization, and better serve fast-growing markets. The model also improves the conditions for generating recurring revenue. In parallel, scalability will improve, enabling Impact Coatings to add capacity at attractive marginal cost of investment. The increased recurring revenues, more efficient resource utilization, and increased scalability are expected to compensate for the initial increase in CAPEX arising from the scale-up in the service offering.

Roll-out and ambition

Service revenues amounted to approximately 27 percent of total revenue in 2021 and are expected to reach 50 percent over the long term, based on the updated strategy. Coating Services will be established in China in 2022 and is planned to be established in South Korea, the United States and Germany in 2023-24. This will take place in parallel with the broadening of the service offering.

Presentation of the updated strategy

Impact Coatings’ CEO Torbjörn Sandberg will hold a presentation of the updated strategy today at 10:00 a.m. CEST. The presentation will be held in English and will conclude with a Q&A session.

Link to webcast: https://fronto.vancastvideo.com/event/G8LdOPH5/2772/?lang=2297

To ask questions participants must participate via the conference call, where they can also listen to the presentation.

Telephone number for calling participants:

Sweden: +46850558357
United Kingdom: +443333009272
Conference ID: EV00135154

The presentation will be held in English and will conclude with a Q&A session.

Link to webcast: https://fronto.vancastvideo.com/event/G8LdOPH5/2772/?lang=2297

To ask questions participants must participate via the conference call, where they can also listen to the presentation.

Telephone number for calling participants:

Sweden: +46850558357
United Kingdom: +443333009272
Conference ID: EV00135154

The presentation given by CEO Torbjörn Sandberg at the AGM can be found on the company website www.impactcoatings.com.

Among other items, the AGM decided:

To approve the income statement and balance sheet for 2021, as proposed by the Board of Directors.

To allocate the annual result according to the Board’s proposal.

That the Board of Directors and CEO Torbjörn Sandberg were granted release from liability.

To elect Mark Shay, Christian Sahlén, Sukhwan Yun, Göran Malm and Per Wassén to the Board of Directors, and to re-elect Mark Shay as Chairman of the Board.

That remuneration of SEK 180,000 shall be paid to the Board’s ordinary members and remuneration of SEK 300,000 shall be paid to the Chairman of the Board, with no additional remuneration for committee work.

That Öhrlings PricewaterhouseCoopers AB (”PwC”), with lead auditor Johan Palmgren, is elected company auditor.

That the procedure for constituting the next Nomination Committee was approved.

That the Board of Directors is granted a mandate to decide on the issuance of shares and/or options and/or convertible securities.

That the Board of Directors is granted a mandate to make minor corrections to decisions taken at the annual general meeting as related to registration with the Swedish Companies Registra-tion Office and Euroclear Sweden AB.

FINANCIAL RESULTS FIRST QUARTER 2022

• Net sales amounted to SEK 5,360 thousand (10,205)
• Total revenue amounted to SEK 9,464 thousand (5,355)
• Operating profit amounted to SEK -9,715 thousand (-11,478)
• Operating profit after financial items amounted to SEK -9,716 thousand (-11,479)
• Cash flow amounted to SEK -6,595 thousand (122,980)
• Liquidity ratio amounted to 630% (673)
• Order backlog for coating systems at period end amounted to EUR 1,899 thousand (1,685)

SIGNIFICANT EVENTS FIRST QUARTER 2022

• No significant events (1) have occurred during the period

SIGNIFICANT EVENTS AFTER THE PERIOD

• No significant events (1) have occurred after the end of the period

(1) Significant events refer to events that comprise insider information and shall be made public via press release.

CEO’s COMMENTARY

Activity levels have remained high across several dimensions during the first quarter this year – machine construction, an increasingly rapid development of Coating Services, and significant progress regarding the company’s organization and structure. Now that our organization is more oriented toward the different geographic markets, I’ll comment on the quarter’s progress in line with that structure.

In Linköping, we have been working in various phases of constructing three different coating systems during the first quarter. They will initially be used internally, both for coating production and for developing the company’s coating solutions. It relates, among others, to a larger next generation system for hydrogen applications and a production system for the Coating Service Center that is planned to open in China later this year.

In early March, a production line for coating fuel cell plates was moved to a new production hall. The move went smoothly with minimal disruption to operations. As evidence, Coating Services delivered yet another record quarter with sales of more than SEK 4 million. As I have mentioned previously, the new production hall will also be used as a demo center for customers, which has already begun. Planned automation of the same production line is expected during the current quarter.

A couple of sales discussions that were mentioned in the 2021 year-end report have materialized into system orders during the quarter. These encompass two orders from European customers: one order for radome applications and one system for decorative coatings. Both deliveries are, in coordination with the customers, planned for delivery in early 2023.

The European market is our most varied regarding both system sales and Coating Services. Here we find the greatest number of our customers, with many connected to the European automotive industry, including our primary segments hydrogen/ fuel cells and automotive safety. The company also has significant sales activity within specialized application areas, both historically and currently.

Stefan Dreger, new President EMEA, Hydrogen Solutions since January 1, has the task of increasing Impact Coating’s growth in the fuel cell and electrolysis area in the EMEA region. After lagging Asian and North American suppliers by a few years in terms of commercial products in the market, several European players have now started or are in the starting phase of commercial production.

Looking eastward, we must first observe that through Russia’s invation of Ukraine, we find ourselves in a tragic chapter of history. We sympathize with those suffering and it feels odd to discuss how we as a company might be affected. Above all, we hope for a quick end to the fighting and that democractic values ultimately prevail.

We have no direct company activities in Eastern Europe, but it is plausible that component shortages in the automotive industry are made worse by the war, which could also affect new projects and investments. Material and component shortages can potentially affect our lead times for building and delivering coating systems. We are monitoring the situation carefully, and are continually analyzing how our business and our stakeholders could be affected.

At the same time, the conflict demonstrates further our need for a rapid shift to a more sustainable energy system. One consequence is that already now, preparations are being made to receive hydrogen in European harbors in conjunction with construction projects to enable increased import of liquid natural gas (LNG).

During the last week of March, our subsidiary company Impact Coatings (China) Co., Ltd. was registered with the corporate registry in Shanghai, China, as a next step in our strategic growth journey. The head of Impact Coatings’ China business will be Yaowen Wang, with many years of experience in the hydrogen industry and Sales Director for Impact Coatings in China since the beginning of 2019. During his time in the country, Yaowen has built a strong network among the leading players in the hydrogen sector. Since he joined Impact Coatings with sales responsibility, we have seen a steady increase in interest and demand for our fuel cell coating solutions.

China is, paradoxically, an enormous country with a large and growing coal dependency while the introduction of renewable technology is moving faster than anywhere. Impact Coatings has delivered coating solutions in smaller volumes to China previously, among others the first coating systems for fuel cells in 2019. We now move further ahead with distributing our market-leading expertise in coating technology for hydrogen applications, and at the same time support the ambition of quickly spreading the use of hydrogen-based energy on the Chinese market.

We are planning to open a Coating Service Center in Shanghai during the second half of 2022. We see this as an optimal time for us to increase our presence in China and offer a broader and better services portfolio to a growing customer base. The establishment of our own operations reduces risks associated with delivering to the growing hydrogen market in China and supports our customers through local presence, facilitating sample and test phases through volume production. In parallel, we are evaluating opening additional Coating Service Centers in other geogaphic regions, in line with the expansion strategy the company initiated during 2021.

We are present with an office in South Korea since the end of 2020, as part of the Joint Development Agreement with Hyundai for hydrogen applications. South Korea aims to build a society that uses hydrogen as its primary energy carrier. I recommend reading the report about hydrogen in South Korea and Impact Coatings’ activities there that our representatives in Seoul wrote for the company’s 2021 annual report. It was published last week and is available on the company’s homepage (in Swedish).

As earlier reported, Robert Mamazza is President, North America, based in the USA since spring 2021. The North American market is different from others, and the region is not as advanced in its energy shift as many Asian and European countries. Nevertheless, there are large companies active in hydrogen production and fuel cells with enormous research funding targeting the development of electrolysis for large-scale and cost-effective production of green hydrogen. I see North America as a market with the same high potential for Impact Coatings’ solutions and our expertise as in the rest of the world.

Starting with the strategic shift initiated during 2021, we are becoming increasingly global, building strength and delivery capabilities in the individual markets, with continued focus on our strategic business areas hydrogen/fuel cells and automotive safety. Our sales team professionals in Sweden, Germany, Italy, South Korea, China and USA are working at a high tempo and very close to the team in Linköping to continue growing the company during this exicting time for hydrogen and the automotive industry.

Torbjörn Sandberg, CEO 

The full report is attached, and can be retrieved on the company’s website at www.impactcoatings.com/finansiella-rapporter-arkiv/.

Impact Coatings’ Annual Report for 2021 (in Swedish) is attached, and is available for download from the company’s website at www.impactcoatings.com/finansiella-rapporter-arkiv/.

Impact Coatings, experts in clean PVD coating solutions, announces the opening of a subsidiary in China with headquarters in Shanghai. The objective of the opening is to distribute Impact Coatings’ market-leading expertise in PVD coatings for hydrogen solutions and to improve the availability of Coating Services solutions to Chinese customers in the hydrogen value chain.

China, the largest renewable energy market globally, has repeatedly demonstrated its commitment to a carbon-neutral society built on hydrogen energy. Numerous global giants in the automotive and energy sectors have recently announced their entry into the Chinese fuel cell and hydrogen market. This as China is accelerating to meet new ambitious sustainability targets to cut pollution and carbon emissions.

As a market leader in sustainable coating solutions for bipolar plates, Impact Coatings has already built a strong foundation in the Chinese fuel cell market in terms of branding and sales, and is now expanding its presence and offering.

“Based on expected growth due to local market demand and global trends, we see this expansion as a natural next step in our growth journey. We are familiar with the customer needs and the customer benefits from offering coating services in our Swedish Coating Service Center and are now ready to expand our offering to new strategic growth markets such as China,” said Torbjörn Sandberg, CEO of Impact Coatings.

“This is the optimal time for us to expand our presence in China and provide a broader and better service to a growing customer base. Our goal is to reduce risks for our customers and support the growing hydrogen market from sampling and test phases to volume production, to accelerate the transition towards a carbon-neutral future,” said Yaowen Wang, President, China at Impact Coatings.

Yaowen Wang joined Impact Coatings in early 2019 as Sales Director, China, and now steps into his new role as President, China of the newly formed subsidiary. He has an M. Sc. degree in Environmental Engineering and Technology from Ghent University (Belgium), and more than seven years of experience in the hydrogen energy industry with various roles in engineering, business development, and sales.

FINANCIAL RESULTS FULL YEAR 2021

• Net sales amounted to SEK 57,198 thousand (39,515)
• Change of work in progress amounted to SEK -5,357 thousand (14,175) 
• Total revenue amounted to SEK 54,549 thousand (54,355)
• Operating profit amounted to SEK -32,083 thousand (-22,970)
• Operating profit after financial items amounted to SEK -32,092 thousand (-22,975)
• Cash flow amounted to SEK 79,835 thousand (-29,153)
• Liquidity ratio amounted to 1,124% (343)
• Order backlog for coating systems at period end amounted to EUR 0 thousand (1,645)
• No dividend is proposed

FINANCIAL RESULTS FOURTH QUARTER 2021

• Net sales amounted to SEK 28,642 thousand (20,044)
• Change of work in progress amounted to SEK -5,347 thousand (8,929) 
• Total revenue amounted to SEK 25,055 thousand (29,078)
• Operating profit amounted to SEK -187 thousand (-5,243)
• Operating profit after financial items amounted to SEK -188 thousand (-5,246)
• Cash flow amounted to SEK -8,602 thousand (-6,553)

SIGNIFICANT EVENTS FOURTH QUARTER 2021

• No significant events1) occurred during the period

SIGNIFICANT EVENTS AFTER THE PERIOD

• No significant events1) have occurred after the end of the period

1) Significant events refer to events that comprise insider information and shall be made public via press release.

CEO’s COMMENTARY

2021 marked the highest-ever levels of annual sales and total revenues for Impact Coatings. Both system sales and Coating Services contributed strongly. We delivered according to plan all coating systems on order during the fourth quarter of the year and Coating Services generated sharply higher sales over the full year. The operating result reflects the offensive strategic initiatives that the company started in 2021.

As we enter 2022, we see a continued strong order inflow for Coating Services, while irregularity in new system orders has resulted in a momentarily empty order book. One explanation is component shortages in the automotive industry affecting forecasting and delaying new projects. Several system sales discussions are in progress, and we are during this period using production resources for assembly of coating systems for internal use to help the company expand in multiple dimensions.

Impact Coatings has established a clear strategic direction to meet the real market needs in the hydrogen and fuel cell sector. It involves an increased focus on our services offering and capitalizing on the company’s globally unique expertise within coating technology. In parallel, we are developing the next generation, larger coating system for fuel cell plates and are preparing for the production of a greater number of systems for our own Coating Services facilities and for customers around the world.

The transition away from combustion engines is driving the development of the fuel cell industry. The value chain is forming, where new players and long-time automotive industrial companies will find their roles and evaluate various technical solutions. Despite aggressive volume forecasts, many companies are therefore waiting to initiate capital investments and are focusing to a great degree on buying services. Impact Coatings’ ability to deliver both Coating Services and production technology for high-volume manufacturing – while at the same time being a development partner that makes a difference for fuel cell system performance – makes the company a unique and influential supplier. The services market also gives the company an opportunity to ally itself with strategic customers already during their development stage.

We see the demand for Coating Services both in the consistently increasing order inflow and in our ongoing discussions with customers about their future needs. The fourth quarter was another strong quarter for Coating Services, although with somewhat lower sequential sales vs. the third quarter, largely due to production delays among certain customers. Sales for Coating Services over the full year amounted to SEK 11,386 thousand, an increase of 61% vs. 2020. To meet the market demand for Coating Services, we will increase the capacity both in Linköping and through geographic expansion, where the implementation of a first coating center in China has started with estimated commissioning in the second half of 2022.

In Linköping, coating operations for fuel cell plates are moving to new premises and will become automated. The new production hall, which will also serve as a demo center for potential customers, is expected to be completed during the first quarter of 2022. Here, we also assemble the first unit of our next generation coating system – a machine type that can be used both in our own facilities and delivered to customers for high-volume production.

During the fourth quarter, we completed the final delivery and invoicing of three coating systems. Symbio received the first production machine for fuel cell coatings in Europe. We also delivered two coating systems for metallization of radomes for automotive radar applications, to HELLA MINTH in China and to the HELLA Group’s subsidiary in Slovenia, which received its second Impact Coatings system in less than a year.

We continue to develop system technology and coating processes for hydrogen fuel cells as well as for automotive safety. Much of the development is driven independently, but an increasing part is also conducted in cooperation with strategic partners and customers.

Impact Coatings’ Seoul office has been up and running for just over a year now. The joint development with Hyundai continues, with daily interaction between our technical expert on-site and Hyundai’s R&D department. The INLINECOATER R&D system that we delivered to Hyundai during spring 2021 is invaluable for ongoing development activities within both fuel cells and electrolysis. Being on location in Korea with both technical expertise and sales personnel makes possible our establishment in Hyundai’s value chain and gives rise to productive relationships there and with other customers in the region.

We are also building a team and a professional structure for growth. At the start of the new year, our German colleague Stefan Dreger started as President EMEA, Hydrogen Solutions. Stefan comes to us most recently from the automotive giant Robert Bosch GmbH, where he worked as Senior Sales Manager in the hydrogen solutions business area. Since November 2021, Bengt Rosengren has been our new VP Operations, with 30 years of industrial experience from a range of companies including Ericsson. Stefan and Bengt will be important for Impact Coatings’ development, and I extend to them both a warm welcome.

Impact Coatings turns 25 during 2022. Although we remain a young company with our best years ahead of us, we have established a unique position in industry as a PVD coatings specialist offering materials, processes and production technology tailored to our customers’ needs. Our expertise in growing application areas, such as hydrogen fuel cells, electrolysis, and automotive safety, will drive innovation and the transformation to a safe and sustainable society during 2022 and for many years to come.

Torbjörn Sandberg, CEO 

The full report is attached, and can be retrieved on the company’s website at www.impactcoatings.com/finansiella-rapporter-arkiv/.