PowerCell Sweden : Interim Report Q3 2023

Interim report third quarter 2023

Yet another quarter with the strongest gross margin in the industry

Significant events during the third quarter

• 
  PowerCell applies for listing on Nasdaq Stockholm.
• 
  Follow-uporder from H2FLY for hydrogen-electric powered aircraft.

Significant events after the end of the reporting period

• 
  No significant events after the end of the period.

Key performance indicators

*As from 1 January 2023, PowerCell presents certain indirect costs related to the production as Costs of goods and services sold. Previously, these costs were presented as Selling and administrative expenses. The change impacts the gross margin negatively with 2.0 percentage points for third quarter and 4.5 percentage points in the period January – September 2023. The operating income is not affected. The change is made prospectively as from 1 January 2023 which means that the comparative periods has not been adjusted. Please refer to page 16, note 2 “Accounting policy” for further details.

Interim report third quarter 2023

The CEO’s comments

Improved operating income and ramping up for serial deliveries

In the third quarter, we achieved organic growth of 26 percent and operating income amounted to SEK -6.5m,(-24.5). Even though this is a loss, the operating leverage gives a strong year- over-year improvement. With our proven industrial offer for hydrogen electric solutions, we grow at a higher pace than the underlying market development. The preparations for serial deliveries are running according to plan and with Bosch as our contract manufacturer we have an asset-light business with operational leverage. PowerCell is well positioned to accelerate growth in the market for sustainable, zero emission solutions.

Interim report third quarter 2023

Cash flow

Operating cash flow was SEK -51.9m(-11.0) and total cash flow was

SEK -59.7m(-22.2), impacted negatively by changes in working capital, but is caused by activities in growing net sales.

Cash flow from investing activities is effected from PowerCell entering into a new phase of product development. In the quarter, SEK 4.1m is therefore capitalized as intangible assets.

Financial position

PowerCell’s financial position and liquidity are satisfactory. Cash and cash equivalents amounted to SEK 134.5m on 30 September 2023.

Interim report third quarter 2023

Financial performance January to September

Net sales

Sales year to date increased by 28% to SEK 182.8m (142.9) compared to the same period last year. Most customer segments showed strong growth with the majority of the sales generated by the Aviation and Marine segments. The business mix continued to improve with more commercial customers as well as products and services with a higher value add. Royalty fees of SEK 15.6m (4.4) from Robert Bosch GmbH are reported as net sales in the period.

Gross profit and operating income/loss

Gross profit increased by 39% to SEK 77.0m (55.2), with a gross margin of 42.1% (38.6). The gross margin was positively impacted by the change in product mix with increased royalty fees from Robert Bosch GmbH and increasing engineering service sales.

In 2023, PowerCell have changed the presentation of certain indirect material and labor costs, such as warehouse personnel, transportation and warranty costs, etc. For the first nine months, the change means SEK 8.3m in Costs of goods sold instead of in Selling and administrative costs. This affects the gross margin with about 4.5 percentage points and a comparable gross margin versus last year would be 46.6% (38.6).

Operating expenses amounted to SEK 156.3m (134.2), which reflects a planned scale up to prepare the organization for continued growth. The increase is less than the increase in net sales, giving an operating leverage. Other operating costs amounted to -16.0m(-14.6) and relates fully to operating exchange losses.

Other operating income amounts to SEK 30.9m (15.9) and includes operating exchange gains SEK 11.7m (12.0) and R&D grants SEK 18.9m (3.5). Majority of R&D grants in 2023 come from EU and relates to projects within aviation and heavy-duty truck industry. Costs related to the EU granted projects are to be found in OPEX as R&D costs. In addition to EU granted projects and development expenditures that are capitalized, Powercell has R&D activities and expenditures focusing on future technical solutions.

With the strong market interest of the company’s products and several new customer agreements entered, PowerCell has entered into a new phase of product development. In the second and third quarter, SEK 9.7m was capitalized as development expenditures related to the development of the new PS200 system.

The operating income in the nine-month period was SEK -64.4m(-77.7).

Interim report third quarter 2023

Net income and financial items

Net financial items amounted to SEK 11.4m (15.9) and mainly related to revaluation effects in bank accounts denominated in foreign currency, primarily EUR. Net income in the nine-month period was SEK -53.0m(-61.7).

Cash flow

Operating cash flow was SEK -47.0m(-82.8) and total cash flow was SEK -71.3m(-110.1), impacted by the operational result, decrease in working capital, with increases in inventory and positive effect from liabilities.

Cash flow from investing activities is effected from PowerCell entering into a new phase of product development. In the second and third quarter, SEK 9.7m is therefore capitalized and viewed as an intangible asset.

Interim report third quarter 2023

Other information

Employees

On 30 September 2023, the Group had 151 (105) employees measured as full-time equivalents, FTE.

The share

The share is listed on Nasdaq First North Growth Market under the ticker PCELL. On 30 September 2023 the total number of outstanding shares were 52,142,434. PowerCell holds no treasury shares.

Ten largest owners per 30 September 2023

Source: Modular Finance AB. Compiled and processed data from various sources, including Euroclear, Morningstar and the Swedish Financial Supervisory Authority (Finansinspektionen).

Risks and uncertainties

Through its operations PowerCell is exposed to risks and uncertainties. For extensive information of the most significant operational and financial risks, please see pages 52-53 and pages 62-64 in the Annual Report for 2022. The conflict in Ukraine has created great uncertainty about the development of the world economy. PowerCell has a very limited business and exposure to Russia and Ukraine and is not directly affected of the conflict. However, the indirect consequences can be extensive and lead to disruptions in the supply chain and increased costs. PowerCell follows the continued development of the conflict carefully. The current macro environment, with high inflation and increasing interest rates impacts PowerCell, both through suppliers and customers. PowerCell can mitigate through pricing and productivity measures.

Parent company

The main part of the Group´s activity is carried out in the parent company PowerCell Sweden AB. Out of 151 employees, 147 are employed by the parent company. The parent company’s revenue amounted to SEK 69.9m (55.6) in the third quarter. Operating profit/loss for the quarter amounted to SEK -10.1m(-24.0)

Interim report third quarter 2023

Assurance of the Board of Directors

The Board of Directors and the CEO warrant that this interim report for Powercell Sweden AB (publ), 556759- 8353 provides a true and fair picture of the parent company’s and the Group’s operations, financial position and results, and describes the significant risks and uncertainties of the parent company and the companies included in the Group.

Interim report third quarter 2023

Auditor´s report

Powercell Sweden AB (publ), 556759-8353

Introduction

We have reviewed the condensed interim financial information (interim report) of PowerCell Sweden AB as of 30 September 2023 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Gothenburg, 19 October 2023 Öhrlings PricewaterhouseCoopers AB

Fredrik Göransson

Authorized Public Accountant

Interim report third quarter 2023

Condensed income statement – Group

Profit (loss) for the period and total comprehensive income are, in their entirety, attributable to shareholders of the Parent Company.