Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PowerCell Sweden AB (PCELF, Financial) reported a 6% growth in net sales for Q2 and 17% growth over the rolling 12 months.
- The company achieved record sales for both the quarter and the rolling 12 months.
- Launch of the new Marine System 225, which has a 12.5% improved power rating, was well received and is expected to drive future sales.
- A government loan was converted into a grant, generating positive income and securing working capital.
- The company has a strong industrial partnership with Bosch, enhancing its product stability and supply chain.
Negative Points
- Gross margin for Q2 was lower at 17%, affected by an SEK8 million inventory revaluation.
- Cash flow for Q2 was negative at SEK50.6 million, indicating volatility in customer payments and high activity in EU-funded projects.
- Transitioning from short-term project sales to long-term OEM-driven sales has led to delays in order finalizations.
- Operating expenses remain high, with OpEx in relation to net sales at 62% for the rolling 12 months.
- The company faces challenges in maintaining positive growth momentum in the top line due to the nature of the market and longer sales cycles.
Q & A Highlights
Q: Is the sales mix negatively impacting the gross margin due to project completion timing?
A: Yes, some projects are long-term, and we account for potential risks and currency effects in our revenue recognition process. This conservative approach can impact the sales mix and gross margin.
Q: Can you provide an update on your current order backlog or pipeline for the second half of the year?
A: We do not provide forecasts, but historically, we see a stronger second half. We are not concerned as this pattern is consistent. We are seeing more OEM activity and shorter lead times, which should support our second-half performance.
Q: How is the partnership with Vantastec Group progressing?
A: The development is on track, and we do not foresee significant delays. The full value chain needs to be in place, but we are confident in meeting our delivery commitments.
Q: Can you provide an update on the partnership with Havyard Group?
A: The collaboration has resulted in significant deliveries, including a 3.2 MW project. It has generated over 18 MW of power in total, although marine industry partnerships can be project-driven and not continuous.
Q: What is the status of the ZeroAvia partnership and the potential establishment of an assembly facility in the UK?
A: ZeroAvia is performing well, and they have relocated manufacturing to the US. We are evaluating whether to establish final assembly in the UK or move to the US. We will update when more information is available.
Q: Do you have the capacity to take more orders from new customers?
A: Yes, we have a scalable industrial footprint and can accommodate more volume. We can easily scale up production in Gothenburg and have local sourcing options with Bosch.
Q: How big of a risk is a potential Republican win in the US for green energy investments?
A: We are not overly concerned. The industry itself is heavily investing in the energy transition, and this trend is likely to continue regardless of political changes. States like California are driving initiatives independently.
Q: Do you have visibility on future Bosch royalties, and could the growth get steeper?
A: We expect growth in China to accelerate, which will increase demand for Bosch. We have seen a positive trajectory in royalties, which is encouraging for future growth.
Q: What is your cash position, and will you need to raise cash or seek long-term credit?
A: We have a good cash position and a loan agreement with Nordea. We may consider raising cash in the future for strategic initiatives, but our current position supports ongoing business growth.
Q: Will you enter the data center market to replace diesel backup generators?
A: Yes, we have launched the Hyflex unit with Hitachi, which is a diesel generator replacement. We are working with OEMs to target the power generation market and integrate solutions like methanol reformers to accelerate market entry.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
