Ferroamp AB (publ)

Hello and welcome to Föro Amps quarterly report for the second quarter. My name is Kent Jonsson, I'm the CEO. I also have William Ryan, CFO, who will help with questions. So I'll go through a pretty short presentation and then open up for questions at the end.

So let's get started here.

A little short about the company as usual. We have a vision of a world that is driven by 100% renewable energy. And there we believe that we will play an important role in the future. We work with optimizing the public network with phase balancing, optimizing production of solar energy via solar cells, optimizing charging of electric cars and optimizing storage of solar energy batteries and also being able to participate in the market for support services. We have a good patent, which is PowerShare, where you can also share between properties, so you optimize within a property and then you can also share energy between the properties.

We have

Three trends that affect us are solar cell construction, electrification of vehicles and transports, and there are challenges in the electricity network where support services are a help to balance the network. Our customers, we have a broad customer base in our modular system. We have historically been very exposed to villa owners in Sweden and the solar cell market. We have worked since this fall, very focused on broadening us, broadening us both to larger properties, to other products such as battery solutions and electric car charging solutions, and also out in Europe in other countries. But historically, we have been and are still exposed to villas owned by Sweden and solar cells. The solar cell market in Sweden for villas has gone down since last summer and has not stopped. We thought during the change of year that we would see a lightening during Q2 this year. It has not come. We also see now that the year will be weak in terms of sales in Sweden. There will be a certain recovery during the autumn, where the real recovery will probably drag forward towards the change of year as it looks now. This is driven by general factors such as the market situation, interest rates etc. But also specific things for our market, such as the electricity price, for example, which has been low and also that there has been uncertainty about the support for battery solutions. a no from the tax office in January. At the beginning of July, they got a yes to our solution. So our solution is from the beginning of July this year, approved to 50% green tax. And you can see that on the villa market, there has been a great interest in support services and we have sold well even during this period without 50% green deposit. So there has been a great customer interest on the villa market, even on the property market, because there is a great interest in participating in the support service market. The electric car charging, there we know that the electric car sales have gone slow. Less new electric cars means that There are fewer chargers installed. For private persons, AC chargers are mainly available. There is, however, an interest in DC-DC chargers, more in commercial solutions, and the interest is very large for DC-DC Vehicle-to-Grid, where you can use your car battery to run your house as a backup, but also to participate in the frequency support market. We are waiting for the car manufacturers to set guidelines for their cars regarding guarantees and connection and so on. But we have a solution ready for that, so here we are just waiting for the car manufacturers to say okay. We focus a lot on development, innovation and we want to continue to be at the forefront even from above. What we focus on in the year 2024 and the rest of this year is cooperation with ERA. It is a collaboration that we believe in a lot and there we will launch next year, Germany, Italy and England together with ERA. We also believe a lot in vehicle to grid, where we are ready with a technical solution. We are connected to all cars and have a positive result in both charging and discharging the batteries. So we are far ahead. I also mentioned earlier that the key to profitability for us is that we get the new version of our products out, where we have looked over the design and production, so that we will get a significantly lower production cost for the new version of our products. So this will be important to get out next year. Vi har också jobbat vidare med att vidareutveckla stödtjänster. Det är både då att komma ut i nya områden och så bygga större anläggningar. Här ser vi i slutet på den här perioden så handlar det mycket om stödtjänster. Det är det som har drivit marknaden hittills i år och kommer att fortsätta driva den också under hösten. As said, we have been in area 3 since the beginning of this year and now in June we are sending in for approval in area 4. We will also move on to areas 1 and 2 and also continue to develop the service that then works for larger and larger battery systems. This is what I was talking about. It caused a lot of anxiety, uncertainty, anxiety on the market when the tax office surprisingly went out in January and said that you were not allowed to use green tax if you participated in the support service market. Now you have looked at these questions, we have asked questions ourselves to till Skatteverket och nu fick vi ett okej i början av juli så att vår lösning ger rätt till skattereduktion på 50% och vi hade ju en bra försäljning av batterilösningar without this. We believe that this will boost the sales of battery solutions and also energy hubs and other parts of our system now after the summer when customers and installers are back from the semesters.

Some financial figures today.

We see that we have a certain recovery in Q2 compared to Q1, but if you compare with the previous quarter of Q2, it is a strong decline. Now, you who have been with me on some reports, you remember that a year ago I said that Q2 a year ago was unnaturally high. And it is, and it was, for various reasons. So it's a tough comparison, but the market is slow and our sales are low. And as you may remember, we have a sale against distributors. The distributors have stock left. So our sales to the distributors do not reflect the sales that happen to end customers on the market. So we see a great interest, a good sale of our products out to end customers. But thanks to the warehouses that the distributors have left, it is a smaller sale that we have that appears in our books. It is important to point out that there is a delay in our sales. We see that the distributor's warehouses will be emptied during the autumn. And with that, they will start ordering from us during the autumn. It varies. Some distributors are almost down on normalized levels, while others have a few more layers left. So it varies between our distributors. So the main part of the sales during this year has been batteries.

Only from our layers.

Bruttomarginalen är fortfarande inte tillfredsställande förstås. Det som gör att vi ligger lågt både Q1 och Q2, främsta förklaringen är att omsättningen är så låg så att de fasta kostnaderna typ lagerhållningskostnader etc. får ett stort genomslag på bruttomarginalen i procent. Så det är den stora förklaringen. Det är ingen ändring jämfört med tidigare kvartal, utan den stora ändringen är att de fasta kostnaderna slår igenom.

EBT, ja.

Minus 21 för kvartalet. Vi ser att det förbättras ändringen It has improved a little thanks to the cost savings. Last fall, we made a lot of adjustments. We set a plan to lower costs by 50 million this year compared to the previous year. And we follow that plan and so far this year, the first half of the year, we have lowered the costs by 22 million, so we follow our plan. We will then lower it by 50 million during the whole year compared to last year. The negative cash flow, if you remove the new emissions, is mainly linked to results and storage binding. If you look at the storage binding, it increases quite a lot. These are finished products we put in. And this increases because we thought that the sales would decrease a little bit in Q2. It has not done so, which means that the outflow has been limited and the inflow has only been placed above where it was. So we increase the stock market by over 40 million. But these finished products will be able to be converted to a positive cash flow when the supply takes them. We also see that the cash flow is somewhat better compared to three previous quarter, but it is still a strongly negative cash flow. Yes, the key words we usually show, what stands out and is worth looking at is the net turnover. It is low and we compare it to a tough last year. Yes, that is what is worth lifting from this picture. The focus now is on the next two years, or even 2026. Two areas, profitability and growth, we are looking at. We have done four of the five things we predicted a year ago. What remains is the new generation that we are finishing the development of. And it will be ready to be produced at the beginning of next year. And this is a product where the focus has been completely on making an overview of design and production, so that you can reduce production costs. And it is a big reduction in production costs that we have achieved there. And this is the key to getting up the brutto margin. It is also the key to getting a positive result for Faro Amp. So this is an important, important project. The growth. There we have signed a new large contract with Ära. And this allows us to launch on the German, Italian and English market next year. We also have conversations with several other large commercial partners and hope to be able to have more agreements in place here during the autumn. and also our investment in Holland. It is the base, I would say, or the start of our European launch. We do it gradually and together with partners. We will not do or have any need to make large investments in the local markets. Instead, we provide products to these markets that are adapted to them. So actually, this will not drive any significant need for additional personnel or investments, but this will be able to be an expansion that we can handle largely within the current cost framework. Vi håller också på att jobba med att få till dual source produktion så att vi då har dubbla produktionslinjer och det här gör vi då för att skapa en stabilitet framöver när marknaden växer så att vi då har möjligheten att snabbt rampa upp och stabilt då kunna leverera den volym som efterfrågas på marknaden framöver.

Så, jag tänkte stanna där och så öppnar jag upp för frågor.

Jag kan bara påminna igen om att ni kan ställa era frågor direkt här i möteschatten eller via mail till publicappforrump.se.

The first question we have here is, how do you assess that the cash flow will be developed?

Yes, it is strongly dependent on sales. If we, if we, if we take a look at sales, The sale of our own products will give a 100% cash flow effect. We have a large warehouse and it will be converted to liquidity when the sale starts. It is very dependent on the sale. Jag tror att den kommer att förbättras allt annat lika. Vi har tagit in produkter det här kvartalet, där huvuddelen har varit egna produkter. and a smaller part has been batteries. The batteries stay with us for a week, so we get them in and then we send them out to customers. So we are not on the same page about batteries. And there we see that the part that is self-produced products Den kommer att sjunka här nu under hösten. Den kommer att gå ner ganska betydande, en betydande nedgång i det inflödet av nya produkter.

Vilket då påverkar kassaflödet positivt.

The next question is, vehicle to grid has been talked about for over 10 years and it seems to be difficult to agree.

When do you think it will become reality on the broad front?

Yes, on the broad front, I think at the beginning of next year. As I said, technically it worked, the standards are out there. Vi följer de standarderna och får det att fungera bra med vår utrustning. Nu är det upp till biltillverkarna då att anpassa sig så att man då följer standarden och att man då öppnar upp kundgränssnitterna så att man då i menyerna på bilarna kan styra det från bilen. Det vi gör nu så styr vi allt från laddaren egentligen då. There are no technical obstacles to this. It's more of a question of how to look at guarantees for the batteries from the manufacturer's perspective. And I think you also think about business models. But technically there are no obstacles, so it can go very fast. Men jag skulle gissa att vi börjar se saker hända här nu under hösten och sen på bred front i början av nästa år.

Nästa fråga här, när räknar ni med att expandera stödtjänster till större system?

Vi jobbar på det kontinuerligt och vi har tester som är lovande under hösten absolut. Jag hoppas tidig i höst att vi kan ta steg upp till större system här.

Vi jobbar på det, det ser lovande ut. I have more questions now, but it looks like it's being written here. Yes. Next question. How do you think about future financing of new emissions?

We are of course looking at various financing alternatives. We are doing that now together with the board. We will see how it develops here now. But we are looking at the question absolutely and have nothing clear to come with right now. As I said earlier, the cash flow liquidity is strongly linked to the sale and there we have finished, paid goods, products that are on our warehouse. So that the sales get an extra big impact in such a scenario as we are in now.

Yes, now it doesn't seem to be... Oh, now there's another one who's writing. Kan du utveckla resonemanget kring vilka finansieringslösningar ni tittar på?

Jag kan nog inte utveckla det mer än att säga att vi tittar brett för över alla de alternativ som finns.

Den där kan kommentera. Vi tittar brett helt enkelt.

Ja, ska vi stänga ner det, William?

Bra, då får jag tacka för idag och så får jag önska er en fortsatt trevlig sommar och en trevlig helg när ni kommer så långt. Tack så mycket. Hej då.