How are energy investors positioned?
Impact Coatings publ AB reported its Q2 2025 earnings, revealing a significant decline in net sales compared to the previous year, alongside a substantial drop in its stock price. The company’s stock fell by 13.16% following the announcement, reflecting investor concerns over the financial results and future outlook. According to InvestingPro data, the company’s overall financial health score is currently rated as WEAK, with particularly concerning metrics in profitability and cash flow management.
Key Takeaways
- Q2 2025 net sales fell to SEK 6.5 million from SEK 31.7 million in Q2 2024.
- Coating services revenue increased to SEK 4.4 million from SEK 2.8 million.
- The stock price dropped by 13.16% after the earnings release.
- Operating profit declined significantly to -SEK 15.8 million.
Company Performance
Impact Coatings experienced a challenging quarter, with net sales declining sharply to SEK 6.5 million from SEK 31.7 million in the same period last year. Despite this, the company saw growth in its coating services revenue, which rose to SEK 4.4 million, indicating some resilience in specific sectors. The decline in sales and operating profit, which fell to -SEK 15.8 million, highlights the difficulties faced by the company in the current market environment.
Financial Highlights
- Revenue: SEK 6.5 million, down from SEK 31.7 million in Q2 2024.
- Coating Services Revenue: SEK 4.4 million, up from SEK 2.8 million.
- Operating Profit: -SEK 15.8 million, down from -SEK 3.8 million in Q2 2024.
- Cash Balance: SEK 30.8 million.
Market Reaction
Following the earnings announcement, Impact Coatings’ stock price fell by 13.16%, closing at SEK 3.8 per share. This decline places the stock closer to its 52-week low of SEK 2.8, indicating a negative investor sentiment. The market’s reaction reflects concerns over the company’s ability to reverse its declining sales trend and improve profitability. Year-to-date, the stock has declined 7.32%, while showing a more substantial drop of 45.4% over the past year. For comprehensive valuation insights and additional technical analysis, visit InvestingPro, which offers exclusive access to over 10 additional financial health indicators for Impact Coatings.
Outlook & Guidance
Looking ahead, Impact Coatings is optimistic about increasing its coating services volumes in Shanghai and capitalizing on positive market signals in hydrogen investments. The company is focusing on broadening its revenue base and is prepared for quick system deliveries. However, customer demand visibility remains challenging, which could impact future performance.
Executive Commentary
CEO Jonas Nilsson noted, "The hydrogen market is gradually shifting from pilots and innovation programs to commercially structured business models," highlighting the company’s strategic focus on this growing sector. CFO Lena Waber emphasized the importance of selling machines to improve working capital, reflecting the company’s operational priorities.
Risks and Challenges
- Declining sales and operating profit may impact future growth.
- Customer demand visibility remains uncertain.
- Macroeconomic pressures could affect market conditions.
- Supply chain disruptions may pose challenges to operations.
- Competition in the PVD coating market could impact market share.
Q&A
During the earnings call, analysts questioned the company’s visibility into customer demand and its strategy for improving working capital efficiency. Executives highlighted the potential of solid oxide applications for stationary power and reiterated their focus on cost control and sales growth.
Full transcript - Impact Coatings publ AB (IMPC) Q2 2025:
Moderator, Impact Coatings: Hi and welcome to Impact Coatings second quarter report 2025. With us to present we have CEO Jonas Nilsson and CFO Lena Waber. If you have any questions for the company you can use the form to the right And for callers, you raise your hand with star nine and unmute with star six. And with that, I give the word to you, Jonas.
Jonas Nilsson, CEO, Impact Coatings: Hi, everyone, and welcome to this presentation of the quarter two financial report. Here is the agenda. We will start with a brief company introduction, then highlights from Q2 and market update. Lena, who is beside me here, will go through the figures and we will make a summary at the end before the Q and A session. Impact Coatings is a global technology leader and full service provider of coating solutions using PVD technology.
PVD stands for physical vapor deposition, a clean process of applying thin layers of coatings to enhance surface properties and prolong lifespan and improve product performance. We build machines for PVD coating and we offer coating as a service. The company was founded in ’97 and has since then expanded in Europe, Asia and North America. Today, we manufacture machines in Sweden. We offer coating as a service from Sweden and Shanghai, and we have sales offices in U.
S, Korea, Germany, Sweden and China. We’re also prepared for a coating service center in US because with local presence in US, China, and Europe, we avoid to get affected by trade wars. PVD is a horizontal technology that can be applied in many market verticals. We have chosen market verticals within two focus areas: energy and hydrogen on the left and metallization solutions on the right. We focus on energy and hydrogen where we are striving for market leadership.
Another way to divide the market is in the following application areas: PEM electrolyzers, mainly metal coatings on titanium but also some catalytic coatings PEM fuel cells, mainly ceramic coatings on stainless steel. Solid oxide fuel cells and electrolyzers, SOFC, SOEC. Advanced coatings of stainless steel. Waveguide antennas, metallization of plastic to get it conductive and work as an antenna. Radoms, mainly radar transparent decorative coatings, that is decorative coatings that doesn’t interfere with the radar reflectors, mainly shiny metal coatings on plastic for LED light reflectors And finally, decorative, which can be both coatings on plastic and on metal.
Due to highlights and market updates, we start with net sales for the rolling twelve months, which amounted to SEK 90,000,000. It is a departure from the upward trend due to the lack of system deliveries in the first two quarters this year. Our long term growth ambition remains firm, and we are actively working to broaden the revenue base and increase the stability of the business over time. We will go into this in some detail during today’s presentation. Total Q2 net sales amounted to 6,500,000.0, down from SEK 31,700,000.0 last year.
This primarily due to the absence of coating system deliveries, a direct effect of slower customer decision making. It’s not a lack of interest. We continue to see active dialogues and strong customer interest, but we see that both a turbulent world and uncertain market conditions are affecting customers to postpone investments, awaiting policy clarity or internal approvals. As we enter 2025, we see positive signals in terms of policy clarifications and the hydrogen market moving towards industrialization. I will come back to this.
Protein Services reached SEK 4,400,000.0 compared to SEK 2,800,000.0 for the same period last year. Activity picked up toward the end of the quarter, particularly in China, and we now see increasing volumes. Starting in July, China is operating in two shifts. This is primarily due to significant order volumes driven by FTXT. FTXT is a Great Wall Motor company making fuel cell stacks, and since last year we have a collaboration.
In April, we received a letter of intent about continued volume supply of coating services through 2025. And now in the beginning of Q3, they have doubled their volume forecast for ’25 to volume corresponding to about 13,000,000 SEK for this year. Aftermarket reached 2,100,000.0. The financial result for the quarter reflects a challenging market environment where delays in customer investment decisions have impacted sales and cash flow. So the Q2 operating profit after financial items is minus $15,800,000 compared to minus $3,800,000 last year.
Cash at the end of the quarter was SEK 30,800,000.0. We do have a strong focus on increasing revenues, but we have also adapted to the market situation and implemented operational and financial actions for liquidity resilience. The ’25 has been challenging, but with that said, we do see some lights. As we have talked about before during these sessions, the sales cycles in our markets are long and you need to get what is called qualified to get real volume orders. The way to qualification goes through repeated sampling orders.
During the quarter, we received two of the largest sampling orders so far. This means that the customers are committed to continue evaluation and qualification and that the customers are prepared to pay a decent amount to do that. One of those customers are in the aviation industry. We also see that the North American market starts to pick up again and especially that our previous large American electrolyzer customer is coming back with volumes that will start to ramp up during Q3. We produced significant coating services volumes for this customer, especially in the 2023.
We also see a transit from sampling to industrialization not only by larger sampling orders, but also by discussing and signing coating services frame agreements such as the one that we announced on June 24 with the European PEM electrolyzer manufacturer. Since July, we are running two shifts in Shanghai. With the improvements we have factory with more machines and automation solutions, we expect the volumes in number of coated pieces to be significantly higher this year than last year. So although we had a slow start of 2025 due to uncertainties in the market, we expect the coating services volumes in Shanghai to be better this year than last year. That brings us to the next slide.
While some markets remain cautious, strategic developments in the important geographies point to a growing momentum that supports commercial readiness. Across our key markets, we see continued momentum in hydrogen investments, each driven by different strategic priorities. In The US, this summer’s big legislation package, resulted in much better conditions for hydrogen industry than many had anticipated and much better than the original proposal in the spring. The tax credits for hydrogen and fuel cell investment from Biden’s Inflation Reduction Act remained, but with new end dates. To be clear, the time windows were reduced, but the legislation now gives clear rules and customers a clear time window to act.
This time window may even push them to act now. Looking at China, although the next five year plan has not been decided, it seems clear that we will see a continued focus on hydrogen, shifting from consumption and mobility towards production and industrial use. This is positive for us as we are active not only in fuel cells, but also in PEM electrolyzers and emerging markets such as solid oxide fuel cells and electrolyzers. South Korea stands out with energy security as the main driver, creating a demand for reliable and proven technologies. The so called clean hydrogen energy portfolio standards is a South Korean state led program that promotes clean hydrogen power generation by requiring utility companies to source a share of electricity from hydrogen based technologies.
Through long term competitive tenders, companies can win contracts to build and operate facilities such as SOFC power plants, and the background is the fact that South Korea has very few friendly neighbors to buy power from. The EU shows strong support on paper, but policy implementations take more time than in other regions. Nevertheless, as mentioned earlier, we see hydrogen companies also in Europe increasing sampling activities and moving to industrialization, and we are well positioned to serve markets where investment decisions are moving forward. The broader trend remains clear. The hydrogen market is gradually shifting from pilots and innovation programs to commercially structured business models, a development that aligns well with our offering and strategic positioning.
Hydrogen is a carrier of energy like batteries. The energy still have to come from somewhere. By using technologies like electrolyzers and fuel cells, you create the flexibility that is needed to over time transit to a greener society or become more energy independent. And by using the same technology but with other fuels, you can also address other challenges. So you don’t have to be green to like hydrogen or to like hydrogen technology.
We are very encouraged to be involved in providing technology solution for the transition to a greener society, where energy comes from renewable sources. But with that said, we’re also working with non green energy applications that are purely commercially driven. In the near term market, we see several commercially driven non green applications, often energy related and often with alternative fuels, not pure hydrogen. Some examples: Powering data center with natural gas and SOFC during the time it takes before the location gets access to proper grid connection. Distributed energy supply by natural gas and high efficiency SOFC at multiple places in the grid instead of one central gas turbine with medium efficiency that requires a high capacity grid powering cruise ships in a silent and more power efficient way by use of ammonia and fuel cells no noise food truck by PEM fuel cell power generators to substitute diesel generators, city hopper airplanes powered by low weight hydrogen rather than kerosene to provide affordable, environmentally friendly short distance flights.
Methanol powered power banks for soldiers in the field that cannot carry a lot of heavy batteries. Not a green application, but maybe you can call this a camouflage green application. And don’t worry, there are also civilian uses for those power banks. So the conclusion is that there are two trends working to our benefit. After turbulent period, we see more political stability when it comes to hydrogen, and we also see more commercially driven applications that are more energy related.
While order timing remains uncertain in the hydrogen market, we’ve used this period to strengthen our operational and financial position. We have built systems to forecast and secured inventory readiness to shorten lead times when customer decisions materialize. In China, we have upgraded our production capacity with improved automation and quality control, which also includes a major update of our IC 2,000 coating system, which allows us to scale production in a cost efficient way. In response to higher volumes and forecasts, we have ramped up to double shift operations, but we did that after the quarter end. We maintain a strong focus on sales and market engagement to keep momentum.
And finally, our technical development continues to expand with progress in SOFC, SOEC, and Iridium Coatings, both through own development and several commercial partnerships. We are taking concrete actions to meet the current financial situation. During the quarter, we implemented and completed a cost reduction program expected to lower personnel costs in the parent company by 20%. The full effect will materialize gradually. The actions affected 10 roles, including consultants and a temporary freeze on salary adjustments.
These were necessary but carefully considered actions. In China, we secured favorable local loans to support operations. This strengthens financial independence and reduces the need for capital contributions from the parent company. Last quarter, we also transitioned to a more generic stock of precious metals, improving capital efficiency and reducing cost and risk exposure. And the generic stock means that we do not have inventory that is locked to certain customers, so we don’t have customer specific inventory.
All these measures strengthen our financial resilience. And at the same time, we remain humble to the current situation and we are ready to take further steps if necessary. Now it’s time for Lina to take us through the numbers before we end with a short summary and Q and A session.
Lena Waber, CFO, Impact Coatings: Thank you. I
Jonas Nilsson, CEO, Impact Coatings: will
Lena Waber, CFO, Impact Coatings: go through most of the rows in the income statement, and we start with the quarterly figures. As Jonas mentioned, net sales were 6,500,000.0 SEK, a decrease compared to 31,700,000.0 in q two last year when we had one coating system included in sales. Sales from coating services increased to 4,400,000.0 compared to 2,800,000.0 in q two twenty four. And aftermarket sales decreased to 2,100,000.0 compared to 3,200,000.0 last year. And the decrease in after sales was in China as well as in Sweden.
Looking at capitalized work for own accounts, decreased compared to the previous year and was 1,000,000 compared to 5,700,000 last year, where we had ongoing work on machines for our own use. Change in work in progress was 6,800,000 in q two compared to minus 12.9 q two last year when we had sales of a coating system. So total revenue was 14,700,000.0 SEK compared to twenty four point seven q two last year. Going down to gross margin, it was 48 percent for the quarter, which was lower than the 75 in Q2, which was mainly due to lower net sales this year. And instead, we had higher change of work in progress, but which is without margin.
Going to other external costs, they were minus 5,700,000.0 compared to minus 6,000,000 q two last year. And, the increase we have had in rental costs was compensated mainly by lower other costs such as consultant fees, lawyers, and conference costs. Personal costs were minus 15,300,000.0 compared to minus 15,000,000 last year. This includes a larger average number of full time equivalents, 60 FTEs versus 58 for q two twenty four, but where the number of FTE at the end of the quarter was now 57 compared to 60 last year. We have some further decrease in July and August from the cost reduction program, which was implemented in Q2 as well.
There was an increase in depreciations, minus 1,900,000 compared to minus 1.4 in Q2 last year due to the investments in own coating systems last year. In total, the quarter adds up to a net loss of minus 15,800,000.0 compared to minus 3.8 in q two twenty four. Going to the cumulative figures for the ’25, total net sales were 16,000,000 SEK compared to 35,700,000.0 first half twenty four. And again, mainly due to the machine sales of 25,700,000.0 last year, while we have no coating system sales this year so far. Coating services sales more than doubled to 10,000,000 compared to 4,400,000.0 the first half last year.
Aftermarket sales increased as well to 6,000,000 compared to 5,600,000.0 in last year and with the increase in China. The total revenue was 34,400,000.0 compared to ’24. Net sales were lower than last year, but with a change in work in progress of plus 14.9 compared to minus ten point one ’24. If we move down to gross margin, it was 50% for the first half year compared to sixty seven first half twenty four, mainly due to lower sales so far this year. And the change of work in progress, which is rather high this year, is without gross margin.
Other external costs were minus 11,600,000.0 compared to 11/2024. And as mentioned, that the increase in rental costs is compensated by lower other external costs, for example, consulting, lawyers, and conference costs. Personnel costs were minus 31,200,000.0 compared to minus 28 point 0.8 the first half twenty four. The difference is mainly from the first quarter, and there have now been a shift, as I mentioned. So at the end of q two, the number of full time equivalents was 57 compared to 60.
But some of our initiated cost saving measures in q two haven’t yet had full impact during q two twenty five. Depreciation were minus 3,700,000 compared to minus 3,100,000.0, and this was due to the investments in own coating machines last year. Currency exposure resulted in a foreign exchange loss of 800,000.0 compared to a 1.5 exchange gain first half twenty four. Interest income was close to zero compared to 800,000.0 last year in income. And in total, this adds up to a net loss of minus 30,000,000 for the ’25 compared to minus nineteen point seven first half twenty twenty four.
We move to the balance sheet starting with fixed assets. Intangible assets have increased in capitalized development costs 2,700,000.0, which is mainly development in next generation coating sources. As for tangible fixed assets, we have some investments for installations and other fixed assets, in total 1,400,000.0. And part of the decreased value of tangible assets are due to currency effects, a weaker Chinese yuan. We have 16,300,000.0 defined as long term accounts receivables.
Looking at inventory, total inventory has decreased by 11,000,000 from year end, where raw materials decreased 23,000,000 from 94.5 at year end to 71.1 by the end of q two. And this is mainly due to some noble metal inventories have been sold. Work in progress increased by 12,000,000 to 20,200,000 compared to 7.7 at the year end. Short term receivables have decreased by almost 28,000,000, mainly due to received customer payments. Outgoing cash balance was 30,800,000.0 compared to 32.5 at year end, and we will come back to cash flow on the next page.
In the row long term liabilities, we see the long term part of the raised loans at our subsidiary in China, and it’s 1,800,000.0. Prepayment from customers have decreased, which is partly from returns to customers, some netting with receivables, and also some currency effects. Short term liabilities decreased in accounts payables, and this was mainly in the first quarter. And then short term liabilities have increased in q two due to the raised loans at our subsidiary in China. So the short term part of the loan is 18,700,000.0.
Moving to the cash flow, we can at the bottom conclude that we end the quarter with a cash balance of 30,800,000.0. But if we look at the different rows from above, the cash flow was, of course, negatively affected by the operating result for the ’25, minus 30,100,000 in operating loss after depreciation. There was a positive cash flow effect from the decreased working capital of 8,300,000.0, mainly driven by customer payments, decrease in inventory, but then we have decreased short term liabilities. So cash flow from operations was minus 19,200,000.0 compared to minus 25,800,000.0 in Q2 twenty twenty four. Investments have been kept at a low level during the ’25, 400,000.0 one intangible assets, and then we have had capitalized development costs of 2,700,000.0.
So in total, 4,100,000.0 compared to 8,200,000.0 last year. Cash flow from financing activities was plus 20,500,000.0 and reflects the loans raised by our subsidiary in China. In total, this resulted in a negative cash flow of minus 2,800,000.0 for the 2025 compared to minus 34,000,000 same period ’24, and a closing balance of 30,800,000.0 compared to 85.7 last year and 32.5 at the year end. This was financial update, which means that we now move on to the summary and outlook.
Jonas Nilsson, CEO, Impact Coatings: So summary and outlook. Start with hydrogen market. We continue to see delayed investment decisions, especially in system sales, but our long term confidence in the market is unchanged. We see geographical momentum in several key markets. The industrial interest is increasing and the fundamentals for growth remain strong.
Broadening from traditional view, several commercial applications not primarily driven by being green in the sales pipe. Positive market signals and strong pipeline. Two examples are the two large sampling orders we received in the end of the quarter. Systems in inventory. With prepared systems in stock, we are well positioned to deliver on short notice once customer decisions are made.
And with systems in stock, we mean that we have systems of all sizes ready for final configuration for short term delivery. Strategic tech development key development areas are progressing well with promising test results and ongoing partnerships. Continued focus. We do have a continued strong focus on driving sales, which is the main path to profitability while maintaining cost control. So with that, we move to q and a.
Moderator, Impact Coatings: Thanks for that presentation. And I’m just going to repeat the instructions for the callers. If you want to raise your hand, it’s star nine. And if you want to unmute, it’s star six. And with that, I give the word over to our first caller with the number ending in 8674.
Alvin Barnaby, Analyst, ABG: Good morning. This is Alvin Barnaby calling in from ABG standing in for Laura Matadi today. So my first question is that given the global economic uncertainty and caution among your customers, how is your visibility on customer demand changed? And do you expect any system deliveries in the upcoming quarters?
Jonas Nilsson, CEO, Impact Coatings: In general, we do not give any forecast. But what I can say is that we still do have a strong sales pipeline. Pipeline. Typically, we do not lose orders, but we see that there is a delay. So customers tend to delay investment decisions.
So in in our sales pipeline, we don’t see that many close lost, but we see some closing dates that that are moving. So so we are we are still very confident in the market, but it’s a slower market.
Alvin Barnaby, Analyst, ABG: Yeah, I see. So if I may follow-up. In the report, you mentioned the development of solid oxide applications where your coatings have shown good performance. Could you outline some of the commercial relevance of this, I. E, the industrial applications of the solid oxide applications?
Jonas Nilsson, CEO, Impact Coatings: Yeah. If you look at vehicles and transportation, then you typically use PEM fuel cells, because PEM fuel cells has the advantage that you can turn it off and turn it on very easily. For more stationary power, it’s not that important that you can turn it off and turn it on. You can still ramp the power on solid oxide. The benefit with solid oxide is that you have higher efficiency.
And if you look at, for example, small power plants to balance the grid, so instead of having a large gas driven power plant at one place, you can place small solid oxide power plants in the grid where they are needed, and you can power those power plants either by hydrogen if you want to be green, or you can power it by by natural gas if you want to have have as low cost as possible in the beginning. But, I mean, in in the end, there will be hydrogen so you can power those power plants with hydrogen that is coming from green energy.
Alvin Barnaby, Analyst, ABG: Right. Great. Thank you. And a final question, if I may. So what initiatives will you take to further reduce working capital and increase the financial sustainability in H2?
Are you committing to any other measures to secure long term liquidity in the coming quarters? Perhaps a bit more in-depth on the liquidity resilience measures in general.
Lena Waber, CFO, Impact Coatings: We’re looking into efficiencies and improvements in general. And, of course, the the the best way of of improving working capital is to sell machines, so we decrease the work in progress. Alright.
Alvin Barnaby, Analyst, ABG: That was all for me. Thank you.
Moderator, Impact Coatings: Thanks. Then we’ll move over to some written questions here. First question: How is the work with small tech going?
Jonas Nilsson, CEO, Impact Coatings: Yes. We we do have a partnership with Small Tech. We have previously announced that, and it’s within the area of iridium oxide. And iridium oxide, that that is a strategic area for us. Small take, they have very interesting nanowire technology that can be combined with our technology of making dense thin layers of iridium oxide.
And and if we look at quarter two specifically, in quarter two, our main focus have been on improving those dense layers, I. E, improving our core technology that can be combined with the small text technology.
Moderator, Impact Coatings: Thanks. Next year, how many staffing levels are required shifts in the coating center in China?
Jonas Nilsson, CEO, Impact Coatings: So we are currently running two shifts in China. A shift in China is typically 10. So we run two ten hour shifts six days a week. So during those twenty hours, we produce fuel cell plates. The remaining four hours is used to change so called targets in the machine.
So you put in like it looks like an ice hockey puck made of metal, and that is the metal that that is vaporized and put on a plate. So we have four hours to to do that. So twenty hours production, four hours changing targets, and then twenty hours of production at six days a week. So it’s not really twenty four seven, but almost.
Moderator, Impact Coatings: Thanks. There’s talk about machine lease to Waveland, but there is no system sales revenues reported in the q one or q two. Why not?
Lena Waber, CFO, Impact Coatings: The the lease to Waveland is reported as coating services and has been since the start. So that’s why you don’t see any coating system sales. Is that a quick answer to the question?
Moderator, Impact Coatings: Yes. Thanks.
Lena Waber, CFO, Impact Coatings: You can see in the footnote, on the first page, the remaining value.
Moderator, Impact Coatings: Thanks. How many systems do you have in inventory for sale, sales value, and do you expect to ship in q three or q four?
Jonas Nilsson, CEO, Impact Coatings: We have six systems in different stages of of readiness. So there there is always a configuration before delivery to the customer. So we don’t keep systems that are sort of 100% ready, but we keep systems in different stages of readiness. And the important message is that we are prepared to deliver. So regardless of the type of system, we are prepared to deliver so we can keep very short delivery times.
Moderator, Impact Coatings: Thanks. Now over to the last question here. What is the approximate value of the so called big sample order?
Jonas Nilsson, CEO, Impact Coatings: A big sample order is approximately half a million SEK. And SEK 5,000,000, this is a substantial commitment by the customer. You don’t just spend SEK 5,000,000 if you’re not seriously interested in putting our coatings in production.
Moderator, Impact Coatings: Thanks, and thank you for the presentation. I’ll give the word over to you again for some closing remarks.
Jonas Nilsson, CEO, Impact Coatings: So thank you for attending this presentation of the quarterly report, and I hope that we will see you again next quarter. Thank you.
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