FINANCIAL RESULTS FOURTH QUARTER 2023
FINANCIAL RESULTS FULL YEAR 2023
SIGNIFICANT EVENTS FOURTH QUARTER 2023 [4]
SIGNIFICANT EVENTS AFTER THE PERIOD [4]
[1] Metals for electrolysis are invoiced in a cost-neutral manner and do not affect operating profit.[2] Q4 operating profit after financial items includes one-time effects amounting to SEK 4.0 million.[3] Includes severance pay for the departing CEO of SEK 3.0 million.[4] Significant events refer to events that comprise insider information and shall be made public via press release.
CEO’s COMMENTARYRecord sales for full year 2023 – continued focus on profitable growth
With great enthusiasm and pride, we wrap up the fourth quarter with a new sales record for the full year 2023. The entire team has worked hard and we have reached several important milestones during the year. At the same time, we appreciate that much work remains as we look ahead toward achieving profitable growth.
The company’s future direction is clear: we aim to strengthen our position as a market-leading player in electrolysis coatings for green hydrogen while continuing to leverage the strength in our PVD coating technology’s wide range of applications, for example in automotive applications.
Continued strong growth during the fourth quarterThe fourth quarter concluded a successful year for Impact Coatings. Net sales for the full year amounted to SEK 98 million (32). Excluding metals for electrolysis, net sales amounted to SEK 89 million (31). A key success factor behind the past year’s development has been our combination of Coating Services and continuity in system sales. By listening to our customers, we have adapted our offerings to the market’s needs, with Coating Services a clear example of this.
Net sales for the fourth quarter amounted to SEK 38 million (17), excluding metals for electrolysis. The quarter was strongly influenced by successful delivery of two coating systems at the end of the year. One system was our first delivery of an INLINECOATER™ IC2000 and was delivered to a fuel cell customer in China. The second delivery was to a European customer in metallization for vehicle safety functions.
Coating Services continued to develop well despite a lower than expected growth rate at our Coating Service Center in Linköping during the quarter, mainly caused by delayed orders in coatings for electrolysis. However, we still expect planned volumes and look forward to resuming full production capacity. As in the previous quarter, the hydrogen segment drove sales within Coating Services, where coatings for both electrolysis and fuel cells contributed to the positive development. We are also increasing our strong presence on the Asian market through our Coating Service Center in Shanghai. Being closer to customers means that we can more proactively and efficiently develop as part of the active fuel cell market in China.
The aftermarket continues to be a prioritized business area and we are investigating several development opportunities, including related to networked systems, and with the potential for increased recurring revenues. The work is still in the development stage, and we look forward reporting our progress in the future.
We report operating profit after financial items of SEK 0.6 million for the fourth quarter due to strong sales, but also due to one-time effects amounting to SEK 4.0 million, including capitalization of development costs for the new Premium FC coating for fuel cells in heavy vehicles launched in the third quarter.
Sales developmentWe enter 2024 with a weak order backlog but a strong sales pipeline in terms of numbers of new leads and active customer discussions. Having just returned from visits to our priority growth markets, I am both inspired and convinced by the development potential we have ahead of us. During these visits, we could confirm the increasing potential we see in the hydrogen market. Together with our regional sales managers in Europe, Asia, and North America, we visited both existing and potential customers. We could further confirm that our offering of both Coating Services and machine sales is appealing to our potential customers. Another observation regarding the Chinese market is that there is significant potential for additional sales to existing customers.
In the broader Asian market, the Joint Development Agreement with Hyundai has not been extended for 2024 since we aim to move towards a more commercial relationship with a focus on delivery rather than development.
Temporary swings in coatings for electrolysis continue to be reflected in the order backlog. Our offering within Coating Services is specifically designed to enable customers to adapt to changing conditions. Our business model, through which we can deliver Coating Services, coating systems, or combinations of these based on the customer’s needs, allows us to offer flexibility and reliability even in a volatile market.
New customers in our entry stage businessRecognizing our relatively long sales cycles, we view each new customer as an important step towards long-term success and we welcomed several new customers during the fourth quarter. In one such example, the agreement we signed at the end of the year with Waveland, a Chinese start-up in waveguide antennas, is fully in line with our focused application area metallization. Metallization of plastic and its applications in vehicle safety is an area where we see great potential to continue developing the business. In addition to several orders for tests and test series in electrolysis and fuel cells, I would also like to highlight a smaller order in Coating Services with an exciting player developing fuel cells for aircraft. Our experience and expertise in electrolysis coatings enable further strides in high-performance fuel cell coatings to help meet the requirements of hydrogen-powered aircraft.
Standardization for increased customer valueThe past year has been characterized by investments to position Impact Coatings in the hydrogen coating market, international expansion and development of our Coating Service Centers. We can conclude that we have successfully executed on the plan to further enable efficiency and expansion of the business.
In parallel, we also continue to work with the development of our technology solutions and what we call the industrialization of the business. The team effort we made to deliver the system orders we had in the order backlog towards year-end sets the conditions for us to take the next step towards a more standardized production of systems. We have laid the foundation for the tactical change to produce machines against qualified market forecasts rather than reacting to incoming orders. Through standardization and volume purchasing, we see a significant opportunity to lower the costs of input materials, while at the same time we will be able to meet the demand from customers for faster deliveries of our systems and thereby shorten the lead times from around one year to a few months.
OutlookI assumed the role of CEO on October 1 and am reporting here my first quarter leading the company. I am proud of our employees’ drive and achievements during the past year. Thanks to a smooth transition from my predecessor Torbjörn Sandberg Kanon, we have been able to continue at full speed and take several important steps in getting closer to our customers, strengthening the sales focus in the organization, and streamlining operations.
With the organizational changes implemented during the fourth quarter, we have now filled important roles and adopted a new group management that reflects our operational activities, providing long-term stability in the company and a clear orientation towards increased focus on sales and product development.
We have several milestones to look forward to in the coming year. High on the agenda is clearly the move and development of our Coating Service Center and headquarters in Linköping, as well as putting our third planned Coating Service Center in New York into operation. We also strive to further strengthen the organization and look forward to starting the shift from reactive to proactive production of our systems, which will enable faster and more efficient deliveries – and in the long run, increased value for our customers.
I would like to extend my thanks to all employees, partners, customers and shareholders who have been part of Impact Coatings’ development in 2023. Together, we continue to strengthen the company’s position as a market leader in electrolysis coatings and as a long-term strategic partner for our customers.
Jonas Nilsson, CEO
The full report is attached, and can be retrieved on the company’s website at www.impactcoatings.com/finansiella-rapporter-arkiv/.
Impact Coatings publishes its 2023 Year-end Report on Friday, February 16 at 08:00 a.m. (CET). In reference to this, the company invites investors, analysts and the media to a webcast on the same day at 10:00 a.m. (CET). Impact Coatings’ CEO Jonas Nilsson together with CFO Bengt Vernerson will present and comment on the Year-end Report, and answer questions. The presentation will be held in English.
What: Presentation of Impact Coatings’ Year-end Report 2023 via webcastTime: Friday February 16, 2024, at 10:00 a.m. (CET)Link to webcast: https://www.finwire.tv/webcast/impact-coatings/year-end-report-2023/ The webcast in its entirety will afterwards be available on the company’s website www.impactcoatings.com.
Impact Coatings announces that the company has successfully completed deliveries of two coating systems during December 2023. One is a radome coating system for a European customer. The second is the company’s first delivery of an INLINECOATER IC2000, a coating system to be used for coating fuel cell plates in China. The company expects to report fourth quarter 2023 revenues of approximately SEK 29 million for the deliveries described above.
The radome system order was received at the end of the first quarter 2023 and was reported in the interim report for the first quarter. The delivery of the INLINECOATER IC2000 system is to SEKSUN Technology (Suzhou) Co., Ltd., an order that was announced via press release on June 7, 2023. The coating system to SEKSUN constitutes a significant part of the overall order delivery, to be followed in 2024 by an upgrade that will provide additional coating capabilities for the customer. With these deliveries, all system orders in the reported order backlog as of the end of the third quarter 2023 have now been delivered or partially delivered.
Impact Coatings announces that the activity level at its Coating Service Center Sweden during the fourth quarter so far has not met the expectation of a continued high level of activity as communicated in the third quarter 2023 interim report. The lower activity is mainly linked to delayed orders in electrolysis, where the company has a primary customer. Although planned volumes are still expected, delays in the receipt of orders imply that Impact Coatings expects to have insufficient time to produce and invoice at the same level as in the second and third quarters of 2023. As described in the third quarter 2023 interim report, the production of electrolysis stacks is in a ramp-up phase during which order timing and size can vary.
As a result of the lower activity, the Coating Service Center Sweden has transitioned to single-shift production but is prepared to ramp up again when needed. In parallel, the company is working on moving from tests and sample series to volume production for a wider customer base within electrolysis and other application areas.
As planned, the company intends to publish its report for the fourth quarter and full year 2023 on February 16, 2024.
Impact Coatings (China) Co., Ltd. and Waveland Technology Co., Ltd. have signed a lease agreement for a production line dedicated to the coating of plastic waveguide antennas using Impact Coatings’ silver-based coating process. The lease agreement includes establishing and operating a coating production line at Impact Coatings’ Coating Service Center in Shanghai for Waveland’s antenna production. The initial leasing period is five years, with the option to extend for 12 months at a time following the initial period. Pre-payment for the production line setup amounts to CNY 700,000 (approximately SEK 1,050,000) and the annual leasing fee, excluding volume-based Coating Services fees, amounts to CNY 1,6 million (approximately SEK 2,4 million).
To establish the production line, Impact Coatings will transfer a coating system from the Swedish Coating Service Center to the Shanghai Coating Service Center. The cost of preparing and transferring the system is covered by the non-refundable pre-payment by the customer. The full production line is planned to be operational during Q1 2024. “The agreement is significant for Impact Coatings as it marks the first substantial customer order for a metallization solution for waveguide antennas in our strategic business area for autonomous safety. In our view, the automotive antenna coatings application area has significant long-term commercial potential,” said Jonas Nilsson, CEO of Impact Coatings. Waveland Technology is a Shanghai-based designer and manufacturer of plastic waveguide antennas for Advanced Driver Assistance Systems (ADAS) and autonomous driving and safety. The company was founded in 2023 by automotive industry professionals. “Waveland is pioneering plastic waveguide antennas in Asia. We are proud to supply coating technology for Waveland’s innovative solutions, and to become a long-term partner,” said Yaowen Wang, Regional President, Impact Coatings China. “As a new tech company dedicated to waveguide antenna design, we believe this product is the future for all radar solutions, not only in the automotive industry. With Impact Coatings as our strategic level supplier, we believe this cooperation will help us win more business in the next few years and help us keep our production at a very high-tech level,” said Dean Xu, CEO of Waveland Technology.
Impact Coatings announces changes to its management team that reflect the company’s transformation into a group, with parent company in Sweden and operating subsidiaries in China and the USA. The company’s new group management team consists of Jonas Nilsson (CEO), Bengt Vernerson (interim CFO), Carina Höglund (COO), Kristian Hillgren (CTO), Yaowen Wang (Regional President China) and Robert Mamazza (Regional President North America). The changes are effective immediately.
“I am pleased to present a new, sharpened and stable group management team for Impact Coatings. We are reducing the size of the team while including the managers of our operating businesses and the regional heads of our primary growth markets. Filling the COO and CTO roles, which have had interim personnel and a vacancy, respectively, with highly motivated and experienced permanent employees provides long-term stability for the company,” said Jonas Nilsson, CEO of Impact Coatings. Carina Höglund transitions from VP Coating Services to Chief Operating Officer (COO). Carina holds a PhD in Thin Film Physics from Linköping University. Before joining Impact Coatings in 2019, she was responsible for coating development and the building of a production unit for the European Spallation Source ERIC (ESS). Since 2021, Carina Höglund has led the company’s Coating Services business area, which has more than doubled its revenue under her leadership. Kristian Hillgren joins the group management team as Chief Technology Officer (CTO). Kristian holds a PhD in Materials Chemistry from Uppsala University and was first employed as a technical specialist at Impact Coatings in 2010. Since the end of 2020, he has been based in Seoul, South Korea, as Regional President Korea responsible for the joint development work in hydrogen solutions with Hyundai. Kristian will initially divide his time between Sweden and South Korea. Yaowen Wang (Regional President China) and Robert Mamazza (Regional President North America), also join the group management team. Yaowen Wang has managed Impact Coatings’ subsidiary in China since 2022 and during 2023 launched the new Coating Service Center in Shanghai, which is now fully operational. Yaowen has a Master’s degree in Environmental Engineering from Ghent University, Belgium, and many years of experience in the hydrogen industry in various roles in technology development, business development and sales. He joined Impact Coatings in 2019. Robert Mamazza is the head of the newly formed subsidiary in the USA, where preparations for a Coating Service Center are underway, with planned commissioning in the first half of 2024. Robert holds a PhD in Electrical Engineering from the University of South Florida and has over 20 years of industrial experience in the thin film coatings field. He joined Impact Coatings in 2021.
As resolved by the AGM, the nomination committee of Impact Coatings shall comprise three members representing the company’s largest shareholders in terms of votes, together with the Chairman of the Board as an adjunct member.
If any of the three largest shareholders decides not to exercise the right to appoint a representative on the nomination committee, the right is passed on to the next largest shareholder.
The nomination committee consists of: Kai Tavakka, Chairman, appointed by Accendo Capital SICAV RAIF Syafiq Johari, appointed by Hyundai Motor Company Hans Österberg, private investor Mark Shay, Chairman of the Board, adjunct member
The AGM will be held in Linköping on May 22, 2024. The proposals of the nominating committee will be published in the invitation to the AGM and will be made available on the company website, www.impactcoatings.com.
Shareholders who wish to submit proposals to the nomination committee may do so via e-mail to investors@impactcoatings.com no later than February 1, 2024.
FINANCIAL RESULTS THIRD QUARTER 2023
FINANCIAL RESULTS JANUARY-SEPTEMBER 2023
SIGNIFICANT EVENTS THIRD QUARTER 2023 [4]
[1] Metals for electrolysis are invoiced in a cost-neutral manner and do not affect operating profit. [2] Currency exchange rate at period end.[3] Includes a provision for severance pay for the departing CEO of SEK 2,960 thousand. [4] Significant events refer to events that comprise insider information and shall be made public via press release.
CEO’s COMMENTARYContinued growth, first impressions as new CEO
I am honored and excited to have been appointed CEO of Impact Coatings, a role that I assumed on October 1. This interim report summarizes the company’s performance for the period July 1-September 30, thus prior to my arrival. However, I will provide my first impressions of the business as CEO and reflect on the strategic priorities I see ahead.
Third quarter net sales growth and commercial progress in line with our strategyThe third quarter of 2023 demonstrated continued growth in net sales and execution on the strategic plan communicated in conjunction with the March 2023 rights issue. Net sales amounted to SEK 10,819 thousand (4,207) during Q3 2023 and SEK 50,763 thousand (13,945) for the year to-date period, excluding metals for electrolysis. On a rolling 12-month basis, net sales at the end of Q3 2023 amounted to SEK 68,081 thousand, excluding metals for electrolysis.
Coating Services sales were roughly flat compared to Q2 2023, with robust sales activity compensating for the seasonally slower summer holiday period during the third quarter. Electrolysis coatings for green hydrogen remained the main sales driver. No coating systems were delivered during the third quarter, in line with previous communications.
At the end of the third quarter, the order backlog for coating systems was SEK 36,478 thousand while the order backlog for Coating Services was SEK 750 thousand, which is a snapshot at the end of the period. Although there was no order backlog for electrolysis at period end, a part of customer pre-payments for raw materials are intended for future Coating Services for electrolysis. We cannot, however, guarantee the timing or volume of future Coating Services orders. Electrolyzer stack manufacturing is in a ramp-up phase and coating orders vary in timing and size. We expect the activity level in Coating Services to remain high during Q4 2023 and into 2024.
In conjunction with hydrogen trade shows in Germany and South Korea, and at the official inauguration of our Coating Service Center in China, we launched a new premium coating for fuel cell plates in heavy duty applications during September. In parallel with our focus on electrolysis, the premium FC coating is an important step in strengthening our offering in the fuel cell segment. Heavy duty applications are driving the demand for long lifetime fuel cells, which require more durable bipolar plates. Today, China is the main market for fuel cells globally. Our Shanghai facility is therefore offering the premium FC coating initially while we provide samples and qualify the coating with customers in other regions.
Coating Services – our growth engineAt the end of September, Regional President Yaowen Wang hosted the inauguration of the Coating Service Center in Shanghai together with customers, local officials and team members, and visitors from our Swedish headquarters. The facility in Shanghai is the cornerstone of expanding our Coating Services offering and will help meet the growing demand for fuel cells in the Chinese market.
The Shanghai facility launched operations during late spring 2023 and activity has been high throughout the third quarter. Production volumes have increased while we have in parallel performed customer qualifications of the new premium FC coating for heavy duty applications. The premium coating strengthens our offering for the growing fuel cell vehicle industry in the region. The sales pipeline in China is strong and growing, comprising regional stack producers as well as global automotive and industrial OEM’s.
The advanced, efficient facility in Shanghai will serve as a template for the planned North American Coating Service Center. The Shanghai facility also offers lessons and best practices for the new headquarters in Linköping to be opened during 2024. Having Coating Service Centers in three distinct global regions will over time yield meaningful synergies in terms of sales and service levels to global customers, cost and quality management, and production processes.
The Coating Service Center in North America will bring us closer to current and potential customers, accelerate delivery times, and increase market awareness. The facility will be located in Upstate New York. Proximity to customers, inbound/outbound logistics, and access to employees with coating and vacuum equipment experience are key considerations in our facility search. With Regional President Robert Mamazza leading the efforts, we aim to have the facility operational during the first half of 2024.
At our Capital Markets Update held on September 18, Yaowen Wang and Robert Mamazza described the company’s market assessments and commercial progress in China and North America, respectively. China is a commercially active market for fuel cells – still in its early stages but with a viable industry ecosystem and functioning supply chains. North America is emerging quickly, with electrolysis (more so than fuel cells) driving demand initially. We expect strong commercial and regulatory drivers in the hydrogen segment to stimulate activity in these regions during the coming years. Impact Coatings is well-positioned to capitalize on the resulting growth in the market’s pursuit of robust coatings.
First impressions and a look aheadAfter just three weeks as Impact Coatings CEO, I am deeply impressed with the expertise and drive of our team members; with the rigorous demands and technological leadership of our customers; and with the size of the commercial opportunities before us.
Looking ahead, I see several areas where I hope to make a lasting difference together with my new colleagues.
We can do more for our customers after they have purchased and installed INLINECOATER™ systems, driving increased after-market sales. This is an area that has received increased attention in recent years, but looking at the average revenue generated per system over its useful life, there is more we can do. As with all our activities, we will start by listening to our customers and adapt our offering to help them do more for longer with our market-leading PVD coating systems.
To facilitate sales growth and increase margins, I look forward to working with the team to reduce machine delivery lead times, so that we produce coating systems according to qualified market forecasts more so than reacting to incoming orders. We will work closely with our suppliers and other partners to accelerate production while reducing our bill of materials and labor costs.
In the organization, we have world-class coating experts that help our customers develop tailored coating solutions that solve emergent problems in, for example, water electrolysis or waveguide antenna production. We can work more closely with these customers at an early stage in their product development, then stay with them through commercial growth and long-term support to deliver value during an entire product life cycle. By working closely with our customers, we can help them translate their business and technical requirements into coating solutions that help create competitive advantages in the marketplace. We can also extend our technical expertise into a larger qualified sales team that drives more revenue, with deep technical expertise relevant for our most promising application areas.
These are only a few early thoughts after a busy but energizing first three weeks at the helm. In the next several weeks, I will continue my one-on-one conversations with the team and will be meeting customers visiting Linköping while also traveling abroad to see customers and prospects.
I look forward to further elaborate on the company, our progress, and priorities in the coming quarters. Once again, I am very happy to be here and thankful to be entrusted to lead the company in the next step of its journey.
Impact Coatings announces that Jonas Nilsson has assumed the role of CEO of Impact Coatings today, October 1, 2023.
Jonas Nilsson was named as incoming CEO in a press release on June 16, 2023. Jonas has a relevant background in the technology and engineering industry, with experience that includes previous CEO positions and board assignments in growing technology companies, and has been active in the semiconductor, automotive and coatings industries. He comes most recently from LiU Invest, where he was Investment Manager. As of September 30, 2023, Jonas owned 250,000 Impact Coatings shares privately and via a privately held company.
“The Board is pleased to welcome Jonas as CEO of Impact Coatings. The change of CEO opens an exciting new chapter for the company as it enters the next phase of its commercial development, with a focus on further industrializing and internationalizing Impact Coatings. Jonas has a deep understanding of the industry, extensive experience, and strong leadership abilities – all of which will help strengthen our market position and drive the company forward,” said Mark Shay, Chairman of the Board at Impact Coatings.
Impact Coatings AB (publ) (“Impact Coatings”) hosted a Capital Markets Update in Stockholm today. The event was live-streamed and can also be viewed afterwards. Leading representatives for the company gave their views on the development during the year to-date and presented upcoming actions and initiatives. Incoming CEO Jonas Nilsson, who will assume the CEO position from October 1, introduced himself at the event.
The update followed the completion of a rights issue in March 2023, and provided insights into the potential the company has identified within the green hydrogen market, which is entering a ramp-up phase and is expected to grow sharply during the coming decade. The development of green hydrogen presents an exciting growth opportunity in which Impact Coatings’ market-leading coating services are well-suited to meet the market’s increasing volume needs and demanding technical requirements.
During the Capital Markets Update, Torbjörn Sandberg Kanon (departing CEO), together with Yaowen Wang (Regional President China), Robert Mamazza (Regional President North America), and Jonas Nilsson (incoming CEO), explained the company’s strategic priorities and growth ambitions related to hydrogen solutions. They elaborated on how the company’s coating technology aligns with the increasing demands of fuel cells and electrolysis, which comprise the company’s most significant business opportunity.
The company described its Coating Service Centers in China (launched mid-2023) and the US (to be established 2024), which serve two exciting growth markets driven by technological advancement and government incentives. The presenters discussed the company’s different business and delivery models, where Coating Service Centers serve as the main growth engine to meet customers’ production needs in all development stages, supporting the scale-up of the hydrogen industry in a controlled manner throughout each production phase.
Finally, the Impact Coatings team described the journey ahead toward becoming the leading Coating Services provider in its prioritized markets. Take part of the full Capital Markets Update here.
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