Earnings call transcript: Impact Coatings Q3 2025 sees sharp revenue decline

Impact Coatings reported its third-quarter 2025 financial results, revealing a significant decline in net sales and an increased operating loss compared to the same period last year. The company’s stock fell sharply by 46.79% following the announcement, bringing its year-to-date decline to 21.46%. Despite challenges, the firm highlighted growth in its coating services and strategic shifts towards solid oxide fuel cell (SOFC) technology. According to InvestingPro data, the company maintains impressive gross profit margins of nearly 60%, though it’s currently rated as having a WEAK overall financial health score.

Key Takeaways

• Impact Coatings’ Q3 2025 net sales decreased to SEK 13.7 million from SEK 31.7 million in Q3 2024.
• The company reported an operating loss of SEK 12.1 million, widening from a SEK 6.5 million loss in the previous year.
• Coating services sales increased by 80%, reaching SEK 20.6 million.
• Impact Coatings’ stock price dropped by 46.79% in pre-market trading.

Company Performance

Impact Coatings experienced a challenging third quarter in 2025, with net sales halving from the previous year. The operating loss also nearly doubled, reflecting operational difficulties and market shifts. However, the company achieved significant growth in its coating services segment, which saw an 80% increase in sales. The strategic focus on SOFC technology for data centers and energy markets is seen as a potential growth area amidst declining demand in other sectors.

Financial Highlights

• Q3 2025 Net Sales: SEK 13.7 million (down from SEK 31.7 million in Q3 2024)
• Q3 2025 Operating Loss: SEK 12.1 million (compared to SEK 6.5 million loss in Q3 2024)
• Year-to-Date Net Sales: SEK 29.7 million (down from SEK 67.5 million in 2024)
• Coating Services Sales: SEK 20.6 million (up 80%)

Market Reaction

Following the earnings announcement, Impact Coatings’ stock price plummeted by 46.79%, reflecting investor concerns over the company’s declining sales and increased losses. The stock’s sharp decline indicates a negative market sentiment, exacerbated by the company’s performance falling short of expectations. With a current market capitalization of just $14.85 million, InvestingPro analysis suggests the stock is currently undervalued despite its challenges. The company maintains a healthy current ratio of 1.96, indicating sufficient liquidity to meet short-term obligations.

Outlook & Guidance

Impact Coatings is focusing on achieving positive EBITDA at 2024 sales levels, though analysts tracked by InvestingPro forecast a 30% revenue decline for the current year. The company is optimistic about commercial progress in SOFC applications and is implementing cost reduction strategies to enhance operational efficiency. A proposed rights issue aims to secure approximately SEK 87 million to support growth initiatives. Get access to the comprehensive Pro Research Report for Impact Coatings and 1,400+ other stocks to make more informed investment decisions.

Executive Commentary

CEO Jonas Nilsson highlighted the strategic pivot towards higher-potential applications, stating, "We are leveraging our valuable development work by shifting efforts to higher potential applications where there is growth, there is capital, and where customers are making money." He emphasized the company’s role in providing critical coatings that support customer economics, regardless of fuel type.

Risks and Challenges

• Declining demand in the green hydrogen market for passenger vehicles.
• Increased operating losses impacting financial stability.
• Potential delays in customer investments affecting revenue.
• The necessity to secure additional funding through a rights issue.
• Dependence on successful implementation of cost reduction programs.

Q&A

During the earnings call, analysts inquired about the temporary nature of customer investment delays and the company’s increasing sales funnel. Management reassured stakeholders of minimal customer losses and emphasized continued focus on coating services in China and North America. The potential for revenue from SOFC applications was also discussed as a near-term opportunity.

Full transcript - Impact Coatings publ AB (IMPC) Q3 2025:

Moderator: Warm welcome to Impact Coatings’ presentation for the third quarter of 2025. With us today is CEO Jonas Nilsson and CFO Lena Åberg. After the presentation, the company holds a Q&A. If you have a question, please press 9 to raise your hand and 6 to unmute. Jonas, the audience is yours.

Jonas Nilsson, CEO, Impact Coatings: Hi everyone, welcome to this presentation of the third quarter 2025 financial report. Today, I’m at the Hydrogen Technology World Expo in Hamburg in Germany to meet customers, so I hope that my internet connection will work all through this presentation. As you have probably seen, we announced today a rights issue in a press release. There are regulations governing how we can communicate about such a transaction, so we will not go into further details about it during this webcast. Instead, I would like to refer you to our website for more information. However, I will start by talking a bit more about the company in general today. Here is the agenda for today’s webcast. First, some words about the company and our market segments. Q3 highlights, our CFO, Lena Åberg, will do the financial update, summary and outlook, and a Q&A session at the end.

Impact Coatings is an advanced materials science company specialized in PVD. We address materials science challenges found among other areas in the energy sector. We deliver complete solutions, including proprietary and non-proprietary coatings, equipment, coating services, and coating expertise. We target a number of growth markets. I will come back to this on the next slides. We have operations in Linköping and Shanghai, and sales offices in Korea, Germany, and the U.S. In Linköping, we manufacture machines and provide coating as a service for customers. In Shanghai, we operate volume production with coating as a service. In recent years, China has been a major market for us. Including deliveries from Sweden, it has accounted for 70% to 80% of our revenues in the recent years. PVD is a horizontal technology that can be used across many industrial segments.

We have chosen market verticals where our machines are well suited and where advanced functional multi-layer coatings are required, areas where we can apply our expertise. I will give a few examples. Energy. Here we work with components for electrolysers and fuel cells, flat components that require advanced coatings, ceramic materials, and precious metals. Automotive. Many of you drive cars with emblems or other design elements produced using machines that we have delivered. Electronics. For example, radar antennas, waveguide antennas are actually made of plastic coated with metal. We enable adhesion, solderability, and antenna performance. Luxury goods. Here we provide scratch-resistant decorative finishes for eyewear and watches, for example. What these market verticals have in common is that we see a strong product market fit. At the bottom, you see examples of industrial projects where Impact Coatings has been involved over time.

In the energy sector, we primarily deliver solutions for coating for fuel cells and electrolyser components. Our solutions help global customers meet needs for energy resilience and energy supply, whether they are using hydrogen extracted from fossil fuels like natural gas, from ammonia, or pure hydrogen made using a variety of methods. An electrolyser uses electricity to separate water into hydrogen and oxygen, and a fuel cell does the opposite, converting hydrogen and oxygen into electricity and water. The reactions that make electrolysers and fuel cells work depend on flat components. You see that on the left, where robust but very thin coatings are critical because they protect against corrosion and decrease electrical resistance. Our customers require these coatings to make their systems last for many years and drive economy for their customers.

Our secret sauce is a machine design that is optimal for coating these types of components, along with expertise and experience that we use to help our customers develop the right coatings for their specific commercial needs. Our solutions are used for stationary power. Here we are talking about natural gas-driven solid oxide fuel cell systems used to power AI data centers, microgrids, or households. More on this shortly. Mobility. Heavy-duty transport powered by fuel cells. Customers and volume production are primarily in China. Outside China, we also have customers in aviation, where fuel cell systems are promising because they are lightweight compared to batteries. Electrolysers. Electrolysers that produce hydrogen for storage and transport, enabling energy to be used where and when it’s needed, rather than wasted or sold into the grid below production cost. We have world-leading customers and ongoing volume production in this application.

Here we also see new opportunities in innovative solutions using iridium oxide. Our unique combination of coating materials and coating machines is mission-critical to our customers for system performance, lifetime, and economy. Next slide, please. The commercial weakness of green hydrogen for mobility applications, especially passenger vehicles, has negatively affected Impact Coatings and also our global peer companies. You can see the pain in stock prices for many companies from 2021 forward, including ours. We are adapting to the market and pivoting our strategy to where the opportunities are greatest, where there is growth, capital, and return on investment for customers. Fortunately, our hydrogen-related work has great relevance and value in adjacent and emerging applications. In our Q1 2025 webcast, we mentioned SOFC, which has been a low-level R&D effort for several years.

In early 2025, we started seeing increasing customer interest and a clear product market fit and the need to broaden our offering beyond PEM. Today, the major players in the SOFC market, our potential high-volume customers, have made a big move forward. I’m talking about companies like Bloom Energy in the U.S., Ceres Power in the U.K., Doosan in Korea, and Delta Electronics in Taiwan. These companies describe a rapidly expanding market driven by two key trends. First, the massive growth of AI data centers, and second, the global push for energy independence in a world where importing energy from other countries is risky and also expensive. These companies, they do not talk about the green transition in the traditional sense. They talk about commercially driven projects, real business opportunities, but with technology that is still a step forward toward a greener future.

Most commercial SOFC systems today run on natural gas, but they are hydrogen-ready, and so are we. To our coatings, the fuel source doesn’t matter much since hydrogen is sort of the active ingredient for power generation, whether it’s pumped in as pure hydrogen or extracted from natural gas like methane. If you look at natural gas, it has four very useful hydrogen atoms and one carbon atom. To go back to the market, to give an example, Bloom Energy recently partnered with Oracle to deploy SOFC systems at selected Oracle Cloud Infrastructure data centers in the U.S. The goal is to power growing AI workloads with reliable, low-emission electricity that can be quickly deployed and easily scaled. There is a challenge in powering a data center because it often takes three to four years to connect it to the high-capacity power grid.

The SOFC technology allows Oracle to deploy on-site power solutions that can run on natural gas or pure hydrogen, providing scalable energy with a smaller environmental footprint. We are not involved in this project, but it’s a good illustration of where we are aiming. Another aspect of the SOFC market, very relevant to us, is that each system requires more coated plates than a PEM fuel cell system. Higher volumes will drive higher revenues, whether we are selling coating as a service or selling machines. If we continue to look at product market fit, it is a perfect match. SOFC components are flat panels, flat plates, and we are excellent with 2D objects. We also have solutions for 3D objects. SOFC needs advanced multi-layer coatings applied on both sides with different coatings on each side. The more advanced the customer’s coating needs, the more they need Impact Coatings.

The plates are also exactly the right size for our small IC500 and our large IC2000 machines, so we do not need to spend money on new machine development. It is a dynamic growing market which suits our business model since our delivery model supports customers from prototype to services to in-house machines as the volumes grow. What problem are we actually solving for our customers? A typical SOFC power plant is roughly the size of a 40-foot container. The core of the system are the SOFC stacks, but the system also includes reformers, heat exchangers, afterburners, compressors, cooling systems, power electronics, and more. The lifetime of the stack depends heavily on the quality of its coatings, and the stack itself wears out faster than the rest of the system, so it becomes a replaceable component, a bit like the brake pads in a car.

By using high-quality advanced coatings, we help extend the lifetime and improve the performance of the entire stack. That’s why coating quality isn’t just important. It’s critical to the economics of SOFC technology. In terms of commercial progress, we already have strong relationships with several leading players in this space, and we are well advanced in paid testing and evaluation with one major customer. We expect to provide more concrete news about progress and commercial orders in the months and years ahead. As in previous quarterly presentations, we start with net sales for the rolling 12 months, which amounted to SEK 72 million. It is a departure from the upward trend, and this is due to the lack of system deliveries in the last three quarters.

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. The delays in machine sales are mainly due to external factors like uncertain market conditions, which are causing customers to postpone investments, awaiting policy clarity or internal approvals. One data point to support this statement is to look at the development of the business excluding machine sales. That is, looking at only coating services and aftermarket that we have on the next slide. Here is a graph showing rolling 12 months net sales excluding machine sales. With an order backlog at the end of the quarter of more than SEK 10 million, we see that we are on a stable level with the rest of the business excluding machine sales.

Capital equipment sales are more sensitive to market uncertainties than services, and we clearly see that in the graph here if we compare it with the previous slide. Total Q3 net sales amounted to SEK 13.7 million. It’s down from SEK 31.7 million last year. This is 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 causing customers to postpone investments. If we exclude systems, net sales grew compared to 2024, primarily driven by higher activity in coating services. Net sales for coating services reached SEK 10.6 million compared to SEK 6.6 million for the same period last year.

China continues to run at a high pace with 24 hours a day, six days a week production. The China operation surpassed the 2024 annual volume record already in September this year. Looking at North America and Europe, we have the strongest order intake for coating services since Q2 2023. This is mainly, but not only, driven by our large American customer. Order backlog for coating services at period end exceeded SEK 10 million. Aftermarket reached SEK 3 million. The financial results for the quarter reflect a challenging market environment where delays in customer investment decisions have impacted both sales and cash flow. The Q3 operating profit after financial items was minus SEK 12.1 million compared to minus SEK 6.5 million last year. Cash at the end of the quarter was SEK 12.9 million.

We have today announced our intention to carry out a rights issue of shares of approximately SEK 87 million, and due to regulations governing how we can communicate about such transactions, we will avoid going into further details during this webcast. However, I do refer you to the press release and our website. We have, and still are taking, cost reduction actions to address the current financial challenges and lower the company’s break-even point. Over the past quarters, we have implemented cost reduction programs. We have secured favorable loans, local loans in China to support operations, and transitioned to a more generic inventory of precious metals, which increases operating efficiency and also reduces capital employed. We have improved capital efficiency and reduced both cost and risk exposure, especially, as I said, by improved noble metal handling.

During the third quarter, we initiated further across-the-board cost savings, focused on costs for personnel, other expenses, and also COGS. In the total cost reduction programs, it has affected 19 employees and contractors, which has brought down the monthly run rate by over SEK 12 million compared to 2024. This includes both costs for personnel and other costs. However, especially with personnel, there are delays until the full effect of this materializes. With regards to COGS, it is our intention to substantially reduce material costs by local sourcing in China, combined with design changes in our machines that allow usage of lower-cost components. In 2024... We seem to have some problem with connecting Jonas. Are you here, Jonas? I receive no sound. Jonas, if you can please... We lost you there for like 30 seconds. Could you please go through this page again, please? Sorry, sorry.

Yeah, as I said, I’m at a trade fair in Germany, so maybe my internet was unstable. Shall I take the whole slide again?

Moderator: Jonas, I suggested you start in 2024. That’s where we lost you.

Jonas Nilsson, CEO, Impact Coatings: Hello, are you still there?

Moderator: Yes.

Jonas Nilsson, CEO, Impact Coatings: Where did you lose me? Did you hear that we focus on increasing sales and maintaining the cost in 2024?

Moderator: Yes, you could start by the 2024 part.

Jonas Nilsson, CEO, Impact Coatings: Yeah, so in 2024, we focused on increasing the sales, keeping the cost level, and when we started 2024, we had an almost empty order book, but anyway, we ended at SEK 110 million or close to SEK 110 million net sales. We were successful in our mission to increase sales, but as you have seen, it was not enough to reach profitability. Based on the savings that we have already realized, we estimate that we would reach positive EBITDA at the same sales level and same mix of sales as we had in 2024. With expected additional cost reductions, especially in COGS, we would expect positive EBIT with the same sales mix as in 2024. Are you still with me?

Moderator: Yes, we hear you.

Jonas Nilsson, CEO, Impact Coatings: While cost cutting and operational efficiency measures have been necessary and effective, we are also taking the next logical step to further strengthen the company’s financial position and prepare for future growth. That’s why we are now initiating a capital increase. With that, I leave it to Lena.

Lena Åberg, CFO, Impact Coatings: Thank you. We start with the income statement, and all the amounts are in SEK million, and let’s start with the quarterly figures. As mentioned previously, net sales for the quarter were SEK 13.7 million, a decrease compared to SEK 31.7 million in Q3 last year, which then included coating system sales of SEK 21.5 million. However, sales from Coating Services have recovered substantially and were SEK 10.6 million for this quarter compared to SEK 6.6 million Q3 2024, with the main increase in China. Aftermarket Sales were SEK 3.1 million compared to SEK 3.6 million in Q3 2024, and the decrease was in China. Capitalized work for own accounts decreased compared to the previous year and was SEK 0.4 million compared to SEK 5.7 million last year, where we had a lot of capitalized work on machines for our own use.

Change in work in progress was SEK 0.2 million in Q3 compared to SEK 14.6 million in Q3 last year, when we had sales of a coating system in the quarter. Sorry, did I say minus SEK 14.6 million? It should be that. Total revenue was SEK 16.1 million compared to SEK 23.0 million Q3 last year. Gross margin was 56% for the quarter, which was lower than the 69% in Q3 2024. Other external costs were SEK 5.6 million compared to SEK 6.5 million last year, and the increase in rental costs was compensated by lower costs for, for example, consumables, lawyers’ fees, marketing costs, and lower travel costs. Looking at personnel costs, they were SEK 12.7 million compared to SEK 14.2 million last year Q3, and we now start to see effect from the implemented cost reductions.

Looking at FTEs for the end of the quarter, it’s now 54 compared to 63 in Q3 last year, and this number includes both the cost-saving layoffs and an increase in China. As mentioned earlier, we continue with further actions in efficiency and cost reductions that will have effect during the coming quarters. There was an increase in depreciations, SEK 2.2 million compared to SEK 1.6 million Q3 last year, and this is due to the investments in own coating systems last year. We have an interest expense of SEK 0.2 million in Q3 due to the loans in our subsidiary in China compared to the interest income of SEK 0.2 million in Q3 2024, and in total, the quarter adds up to a net loss of SEK 12.1 million compared to SEK 6.5 million in Q3 2024.

Looking at the cumulative figures for the period January to September, total net sales were SEK 29.7 million compared to SEK 67.5 million in the same period in 2024, and again, the decrease was due to the coating system sales in the last year, which amounted to SEK 47.2 million. Coating services sales increased by more than 80% to SEK 20.6 million compared to SEK 11.2 million in the same period in 2024, and the increase is rather equally spread between the parent company and the subsidiary in China. Aftermarket sales were SEK 9.1 million compared to SEK 9.2 million. The total revenue was SEK 50.5 million compared to SEK 55.2 million last year in the same period.

Net sales, as you can see, were much lower this year, as mentioned previously, but with a change in work in progress of plus SEK 15.1 million compared to minus SEK 24.6 million last year. If we move down to gross margin, it was 52% for the period January to September compared to 68% in the same period in 2024, and this is mainly due to lower sales and the change of work in progress, which is rather high, is without gross margin. Other external costs were minus SEK 17.2 million compared to minus SEK 18.0 million in the same period in 2024, and the increase in rental costs, as mentioned, is compensated by lower other costs, for example, in consulting lawyers’ fees, travel costs, and conference costs. Looking at personnel costs, they were minus SEK 43.8 million compared to minus SEK 43.0 million last year.

The negative difference is from the first quarter of this year, and as mentioned, from Q3, we are clearly lower in cost this year. At the end of Q3, the number of FTEs was 54 compared to 63 by the end of Q3 last year, and depreciations were minus SEK 5.9 million compared to minus SEK 4.7 million, and again, it’s the investments in own coating machines last year, which have increased the depreciations. Currency exposure for January to September resulted in a foreign exchange loss this year, minus SEK 1.3 million compared to a SEK 1.3 million exchange gain in the same period last year. Interest expenses were minus SEK 0.2 million compared to an interest income of SEK 1.0 million last year, and this is due to the new loans in China.

In total, this adds up to a net loss of minus SEK 42.1 million for the period January to end of September 2025, compared to minus SEK 26.2 million in the same period in 2024. If we move to the balance sheet, starting with fixed assets, we have increased intangible assets in capitalized development costs, SEK 3.1 million. As for tangible fixed assets, we have some investments for upgrade of a machine, which we lease out to customers. We have installations and some other fixed assets. In total, SEK 3.7 million. We have SEK 9.1 million defined as long-term accounts receivables, and there’s a decrease from the SEK 16.3 million at the year-end of 2024, which is a movement to short-term receivables. Total inventory decreased by SEK 24 million from year-end.

Raw materials decreased SEK 38 million from the SEK 94.5 million at year-end to SEK 56.2 million by the end of Q3, and that’s mainly that some noble metal inventories have been sold. Work in progress increased, on the other hand, by SEK 14 million to SEK 21.7 million compared to SEK 7.7 million at the year-end. Receivables have decreased by approximately SEK 30 million, mainly due to received customer payments. An outgoing cash balance was SEK 12.9 million compared to SEK 32.5 million at year-end, and we will come back to cash flow on the next page. In the long-term liabilities, we see the long-term part of the raised loans at our subsidiary in China, SEK 1.5 million. Prepayment from customers has decreased, which is mainly from repayments to customers and some nettings with receivables.

Short-term liabilities decreased in accounts payables, but short-term liabilities have then increased in Q2 due to the loans raised at our subsidiary in China. Looking at the cash flow statement, the cash flow was, of course, negatively affected by the operating result for January to end of September, which was minus SEK 41.9 million in operating loss after depreciation. There was a minus SEK 1.3 million in negative cash flow effect from the increase in working capital, and short-term liabilities decreased approximately SEK 56 million, mainly driven by repayments of customer prepayments. We had a decrease in receivables and had a positive cash flow effect from about SEK 30 million. The decrease in inventory also had a positive effect on working capital. In total, cash flow from operations was minus SEK 36.0 million compared to minus SEK 39.4 million from the same period last year.

As we have mentioned before, investments have been kept at a low level in 2025, SEK 3.7 million in tangible assets, and then we have had capitalized development costs for SEK 3.1 million. Cash flow from financing activities was plus SEK 23.2 million and reflects loans raised by our subsidiary in China. In total, this resulted in a negative cash flow of -19.6 million SEK for the period January to September compared to -54.6 million SEK in the same period in 2023, and a closing balance of 12.9 million SEK of cash compared to 65.1 million SEK at the end of the same period last year. This was the financial update, which means that we now move on to the summary and outlook.

Jonas Nilsson, CEO, Impact Coatings: Yes, summary and outlook. 2023 has been a challenging year with customer investment delays, slowing coating system orders and deliveries. We see this as a temporary dip, also apparent in other industries, and we fully expect system sales to resume. At the same time, growth in coating services revenue during Q3 and a SEK 10.5 million order backlog show that our solutions are relevant and in demand. Many coating services customers, they are future machine customers, and the growing demand for volumes and additional coating applications is strengthening our sales pipeline and our conviction in the value of our expertise. We have to recognize that green hydrogen for mobility, especially passenger vehicles, which was hyped several years ago, has been a painful disappointment in the market.

We are leveraging our valuable development work by shifting efforts to higher potential applications where there is growth, there is capital, and where customers are making money. One such application is SOFC power generation for data centers, where our work for several years has quite suddenly become commercially relevant. Whether customers use natural gas or pure hydrogen as a fuel, we provide mission-critical coatings that make customer economics work. We expect to update you with the commercial progress in this area during the coming months and years. Cost cutting has been painful but necessary, and we have had to let go of many of our valued colleagues this year. Along with efforts in working capital management and in reducing COGS, we are on a path to significantly reducing our break-even point for profit and cash flow. Our work here continues.

To secure liquidity that gets us through what we see as a temporary slow period and gives us fuel for growth, we are today proposing a rights issue of approximately SEK 87 million. I will personally join my colleagues in management and the board in investing our own money in the next phase of Impact Coatings development, and we hope both existing and new shareholders will join us in this. I meet several customers every week, either traveling as today or when they visit us in Linköping or in Teams meetings. As I said in the beginning, I’m speaking to you from a fuel cell industry exhibition here in Hamburg, and here I meet customers, I meet partners, and actually even competitors.

I am encouraged by the many positive signals we received about our coating solutions, and I can assure you that the sales team and I are working hard to convert these positive signals into sales. Finally, we invite investors to a webcast on November 24 at 9:00 A.M. and to a visit to our Linköping headquarters and coating service center on November 25 at 2:00 P.M. We will send out separate press releases with the details, but already now you can pencil this in. Welcome to these events, and thank you for your attention today. Let’s go for Q&A.

Moderator: Yes, thank you both for this presentation. Please dial 9 to raise your hand and 6 to unmute for being part of the questions. We have Lena Åberg from ABG. Please, you have the word.

Hi, Lara here from ABG. A couple of questions from my end. My first question is on system sales. Could you maybe give a bit more color on the specific feedback you’re receiving from these customers that you mentioned that are postponing their investments? Building on your conviction that this is related mostly to market uncertainty and not a lack of demand, what would you say are the key indicators that are giving you this confidence?

Jonas Nilsson, CEO, Impact Coatings: The key indicator for that is that we are increasing our sales funnel. We have more in our sales funnel now than what we had in the beginning of the year. That means that customers are postponing their investment decisions. It’s not that they go for competing technology. They are still active, but it takes a longer time to close the business.

Okay, great.

You had several questions. Maybe I didn’t answer all of them.

No, that was quite clear. We can maybe follow up on this. You wrote that you’ve only lost two customers during 2025. What would you say is the primary reason for these losses, and what steps are you taking to address maybe those competitive gaps or whatever the reason is?

Yeah, if we look at those two specific cases, one was in decorative coatings, and our expertise is flat plates, primarily sort of 2D-ish objects. That’s where we have a perfect product-market fit. In some areas of the decorative market, you find those objects, and there we have a perfect fit on the decorative market. Other decorative objects, they are more 3D-ish, and this was the case with that customer. For the other deal that we lost, we lost it to a Chinese competitor. They had a lower price. We are taking actions in lowering our COGS, and there are two reasons for lowering COGS. One reason is obvious: to create more profit, to create more gross profit, and the other is if you reduce COGS, then you can also have a more competitive offering to customers who are more in the sort of low-end segment.

We don’t have that competition in sort of the premium segment, but there was a customer that was, I wouldn’t say the low end, but maybe low to mid-range.

Very clear. Thank you. If we talk a little bit about Coating Services, it’s great to see the momentum. Could you maybe elaborate on the drivers in the regions of China and North America, and a bit on the growth from these key customers like FTXT Energy Technology Co. Ltd and the North American electrolysis clients? Are you seeing a wide expansion of customer base in these regions, or is it primarily from these two driving growth?

Yeah, if we start with the U.S. and North America, there we see that we had a period where it was very much uncertainty in the market, and especially about the subsidies for hydrogen. That is much more clear now, and that clarity sort of across the board in North America, we see an increased momentum in that market now when we have better clarity. If we look at China, it’s mainly driven by FTXT, but not only driven by FTXT. We also see new customer interest, and we also see that our push-pull strategy, it works. It works not only with FTXT. FTXT is the company that we have sort of shown in press releases, and we mentioned by name, but we also have others where we work in exactly the same way. We go to the customer’s customer to get our coatings qualified at the customer’s customer.

The big benefit with this is that you can be both the primary supplier and the second source. Sometimes we deliver machines to the primary supplier of plates, and then we are the second source by our coating services to the same end customer. This has been a driver for sales in China. I would say it’s both on existing customers and new customer contracts.

Thank you for that. In your report, you write about the new strategic shift into new application areas. You wrote about SOFC’s data center powers, and you mentioned that as a fast-growing and exciting new market. What would you say is the realistic timeline for generating revenues from this application area? You said you would give some updates on this soon, but can you say anything you already know?

Yeah, we started development work several years ago, but then it was sort of on a low level because we see many similarities between SOFC and PEM. It’s flat objects, it’s high-performance coatings, it’s advanced coatings. In our Q1 webcast, we started talking about SOFC. What has happened since then during this half year is that we see a lot bigger market interest, and we see especially those four players, as I talked about: Bloom Energy in the U.S., Ceres Power in the UK, Doosan in Korea, and Delta Electronics in Taiwan. They are making big investments, and they are making big investments in factories, big factories. We are in contact with several of them, and they share their volume expectations with us, but unfortunately, I cannot disclose any volume forecasts from those customers.

Great, thank you. My final one is a little on your costs. You mentioned this in your presentation, you had lower costs in the quarter, and you mentioned that more cost savings are coming. Could you maybe help us think of how we should think about the cost base going into 2026, and maybe talk a little bit more about the operating costs?

Yeah, we have a lower run rate with a bit more than SEK 2 million. The easy way of looking at it is that with the development we have done, with the deliveries we did in 2024, and what we learned in 2024, and the fact that we had customers that helped us to make our machines battle-proven, we now have an organization with lower costs, less people, but an organization that can still do the same deliveries as we did in 2024. If we would do that in 2026, sort of run 2026 on the sales side as 2024, we would become profitable.

Okay, great. Thank you for that answer. That was all from my end. Thank you very much.

Moderator: Thank you, Lara, for these questions. We have a couple of more questions. What do you think about fuel cells for automotive applications? You have a main owner in this area.

Jonas Nilsson, CEO, Impact Coatings: Yeah, as I said previously, fuel cells for mobility, it is still a market. We are running PEM fuel cell plates in our coating service center in Shanghai. We surpassed the 24 volumes already in September, so we see a growth in that. If you go back a couple of years, the hype was not about trucks and heavy vehicles. The hype was very much about passenger cars, and we haven’t seen that coming. Electrical cars, they are quite good. With the development we have seen in electrical passenger cars, it’s likely that the hydrogen passenger cars will not be big. However, for heavy-duty vehicles, for specialized vehicles, for transports, yes, we do see a market, and we still see a market in mobility, but it’s not that hyped market that some people saw a couple of years ago.

That’s the reason why we have to find new market verticals, and we want to find those market verticals that are commercially driven, not driven by government subsidies. If you look at the SOFC market, it’s a commercial market. It’s commercially driven. It’s real projects. It’s happening now. It’s a good market for us. Of course, we will continue with the business we are currently doing on the PEM fuel cell market.

Moderator: Thank you. One last question for today. It’s about competition. How does Impact Coatings stand in the competition landscape, you say?

Jonas Nilsson, CEO, Impact Coatings: We very seldom lose orders to competitors. We are very, in the market segments we are active, we are often regarded as the market leader, like PEM fuel cells in China, for example.

Moderator: Thank you. That was my last question. Thank you both for doing this presentation, and we look forward to meeting you again the 24th of November.

Jonas Nilsson, CEO, Impact Coatings: Thank you, and thank you for listening.

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