PowerCell Sweden AB (publ)

Good morning and a warm welcome to the quarter two report from Powercell this time live from Gothenburg and today we are here Richard and Tobin and it is my pleasure to have Tobin this time and also one more time we announced earlier this month that Tobin will move on from Powercell which is a good career for Tobin which I'm happy for but I will have the pleasure of having your company one more time Moving into the quarter then. It is an interesting quarter to report on because we claim that this is a very good market activity, but on a softer market. And this notion of softer market needs to be explained because why we say that? We are reporting 6% growth quarter two and 17% growth rolling 12 months. But it also is a record quarter when it comes to sales. and also rolling 12 months. That's the best sales we're having in Parasol. And to be able to report that on what we call a softer market needs some explanation. And the term softer market is related to the fact that we are transitioning away from the short-term project sales to a more long-term OEM-driven market sales. And that is something that we have explained in quarter one, and that will be kind of the theme throughout this presentation as well. So it is an interesting quarter. We feel that we have a very strong positioning that we will elaborate on during this presentation. Part of that strong positioning is the launch of the new marine system 225, which is an evolution of the existing Paracel Marine offering. Once again, the product that has positioned Paracel in a very strong way in the marine market. Looking at market share, we were number one in marine in quarter one. We also received an order from Boas Energy early in Q2 on a smaller installation, the Marine System 100. We also had a government loan converted into a grant, generating a positive income, not top line, Torbjörn will explain more, and then also a loan to secure working capital for Powercell, because we are now expanding into more OEM-driven sales. We are operating on a very interesting market where we have strong underlying market trends, shifting gears then to OEM business and commercially driven customers. We also see now that marine and power generation is now driving demand in this market. A bit more on the marine system 2025. We reported in quarter one that innovation and continuous development of our offering is extremely important in a technology shift. And the market launching in Q2 was well received. The product will be ready for customer delivery in Q1 2025. And as we said, this is an evolution of the existing product, but with a 12.5% improved power rating, which is highly valuable, but also more knowledge going into this product based on all the experience we have from different segments that constantly improve the core technology and the customer value. We also have more supply value from Bosch, which we think is a very important part of our industrial stability. And more sub-components from the Bosch hydrogen portfolio, which is strengthening the power cell offering. We are also happy to report that we yesterday received or today received the first order on range system 2025. It is a breakthrough order to a leading European OEM manufacturer. four units to be delivered within first half of 2025. And this is also a very good indication that the market is acknowledging our innovation and product offering, but also that the marine industry is now accelerating this transition. Some more input from the market, because we are quite often talking about this transition and energy transition as something of the future. This is a testament from one of our customers who have been operating our technology in their gen set that has been touring around the world, giving power to the Xtreme E, Formula Xtreme E tour. This was an event in Scotland previously, a couple of weeks ago, where they generated 11 megawatt hours of power, which is the equivalent of 1,000 UK homes for a day. 80% of that event received its power from green hydrogen being reformed to or transformed to energy through our fuel cells. So these components have been touring around the world. It's been to the west coast of USA, it's been in the Middle East, it's now in Scotland and Sardinia, experiencing different weathers, climates, etc. Really being tested in application and actual use. And this is a very important proof point because this is now happening and we are now seeing more and more acceleration of the market where green hydrogen is available but also where our customers are using different scales of hydrogen to accelerate this transition. So quite interesting startup of this year 2024 and the strong position that we have built up with PowerCell is something that we're taking with us going forward this year and also of course next year. Deep diving into the numbers I now hand over to Tobin and we will come back to the strategic side of the presentation.

Thank you Richard and as you already have mentioned net sales are up six percent in second quarter and it's also then up with 70 17% in rolling 12 months and this is then what we call a softer market and I think related to that is really that we have during this period of time with a bit softer market strengthening our position and also delivered on a growth which is a good sign for us in this sense The product mix within the quarter is with higher part of project sales in this quarter and also year to date. But it's also good to highlight that the royalty from Bosch is increasing on the rolling 12 months from almost 17 million up to 23 million. And we do not have the full visibility on where and how that arrives but it's a good trend going forward and of course that's recognized as net sales and revenue for us but it also then comes down to 100% of gross margin supporting our gross margin going forward. Regarding gross margin development, profit was 11 million and with that the gross margin of about 17%. I should really emphasize that this lower gross margin in the second quarter is highly affected by inventory re-evaluation of about 8 million SEC that appeared in second quarter, but taking that out of account and then sort of equalizing between the first quarter and the second quarter we would have a more balanced situation that more underlines sort of the overall trend and the underlying gross margins And then we are at the year-to-date gross margin of 30% and eroding 12 months of almost 38%, which is sort of... So it's not the shift in second quarter to something really else, but rather a situation where we have a temporary effect from this re-evaluation. And then, of course, underlying, there is a product mix change between quarters, and this time it's a lot on the project sense.

The gross margin has been a focus area for PowerCell for the last three years. And we are very strong in protecting the gross margin because this is the foundation for future growth and especially to be able to leverage growth. Because as a fast growing company in a technology shift, you need to be able to leverage top line growth to make sure that your EBIT is improving over time.