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Interim Report January – June 2022
ChromoGenics increases order intake and focus on reducing costs
ChromoGenics continues its positive development with a strong focus on customers and quality, higher order intake, and measures to lower costs and improve efficiency.
During Q2 2022, ChromoGenics delivered the last glass for the Gullhaugs Torg project in Oslo. The control system will be installed as the building is completed. Calibration of control systems and the final inspection of the project remain and are expected to be completed in Q3 2022.
During the quarter, ChromoGenics received a number of new orders, primarily for ConverLight® Dynamic but also for ConverLight® Static, to, for example,
Kvarteret Kransen 2, an office property in Uppsala, for ConverLight® Static. The order, which is valued of SEK 1.4 million, will be delivered in 2022. The office property will be upgraded with modern glass in existing windows, which improves the indoor climate and reduces energy use.
First order to Germany. The delivery includes ConverLight® Dynamic for an office property and is valued of SEK 0.3 million. The transaction is occurring in close cooperation with partners from the German glass industry. ChromoGenics is thus taking the next step in its strategy to focus on delivery of dynamic film and related control systems. The company's partners are responsible for glass deliveries, IGU manufacturing, fitting in frames and installation in the property.
Another order for ConverLight® Dynamic to Norway. The customer, the municipality building in Nannestad, north of Oslo, is pursuing a renovation and extension project to improve the standard of the office environment. The order is valued of SEK 1.1 million.
The company received a new order for ConverLight® Dynamic glass and control system for a nursing home in Jönköping, Willhelmsrogården, for a total value of around SEK 0.7 million for delivery in the fall.
Yet another order for ConverLight® Dynamic glass and control system was received for a municipal assisted living facility, Katedern 12 in Gamleby valued of SEK 1.1 million, with delivery around the start of the new year. The project will be delivered in cooperation with LEIAB, a Swedish manufacturer of quality windows for the Scandinavian market. For the property owner Västervik Bostad, the measure entails better energy efficiency, lower operating expenses and improved comfort for the tenant. For the residents, it is also particularly good that the difference between shadows and light is toned down.
Since ChromoGenics is completing its deliveries for the project at Gullhaugs Torg in Oslo, the company is adapting its costs by releasing hired staff. At the same time, the company has made advancements in its productivity and efficiency in the past few quarters, which has further reduced the need for hired staff. The change entered into force after the vacation period with savings of around SEK 2.5 million (SEK 6.0 million in full-year effect).
After having resolved the CFO-role the past few years on a consultancy basis, ChromoGenics has now completed its recruitment of a permanent CFO. Erik Elfström will take on the role of CFO & Head of Investor Relations on September 1, 2022.
After having declined re-election, Claes-Göran Granqvist will leave the Board of Directors of ChromoGenics AB after nineteen years, the company that he himself helped found. The Annual General Meeting in May appointed Fredrik Andersson, Market Area Director for Systemair, as a new Board member. Systemair contributes to improving the indoor climate through energy-efficient and sustainable products that reduce carbon emissions.
Some customers who received glass deliveries before ChromoGenics started its in-house production would like their glass to be replaced. A number of projects were manufactured during the quarter. Provisions were made for the costs for these redeliveries, but liquidity was impacted negatively during the quarter.
In Q2 2022, ChromoGenics’ net sales amounted to SEK 2.8 (1.7) million, an increase of SEK 1.1 million compared to the corresponding quarter in 2021.
The operating loss for Q2 2022 amounted to SEK -14.8 (-28.8) million. The loss in the previous year was impacted negatively by a provision for redeliveries of SEK 17.2 million. Excluding redeliveries, earnings were negatively impacted by around SEK 3.2 million, attributable to increased costs for raw materials and transports.
For the period April–June 2022, profit after tax amounted to SEK -15.6 (-29.8) million, which corresponds to earnings per share of SEK -0.91 (-4.21), basic, including warrants (TO4) from the unit issue in March 2022.
Order intake for Q2 2022 amounted to SEK 7.6 (0.5) million. The order volume for Q2 2022 amounts to around SEK 7.8 (28.5) million.
Cash and cash equivalents amounted to SEK 22.9 (48.5) million on June 30, 2022.
EARNINGS PERFORMANCE IN SUMMARY
EVENTS AFTER THE END OF THE PERIOD
In August, ChromoGenics received a final order from Aluflam for dynamic glass for the school Prins Henrik Skole in Copenhagen. In total, the order is for around 1,000 m2 and has a value of around SEK 5 million. Deliveries will commence in Q3 2022, and the majority of the order is expected to be delivered in 2022. The transaction is occurring in close cooperation with Aluflam, a Danish quality supplier of glass and facade solutions. ChromoGenics is thus entering the Danish market and following its strategy to focus on delivery of dynamic film and related control systems. Aluflam is responsible for glass deliveries, IGU manufacturing and installation in the property.
Breakthrough in own process development creates the opportunity to reduce the direct material costs for ConverLight® Dynamic by approx. 40% by replacing purchased material with own, internal production.
ChromoGenics is using plastic film coated with indium-tin-oxide (ITO) as an input material in its manufacturing process.
On July 26, 2022, ChromoGenics announced that it had received new orders for ConverLight® Static of around SEK 1.1 million for Humlegården's property Stora Blå in Solna and Vasakronan in Uppsala with delivery in the fall. The projects are being delivered in cooperation with Bollan AB.
On August 9, the company announced changes to its management team. Victor Hägglund was named COO and will take an overarching responsibility for purchasing, production and supply chain. Fredrik Fränding, currently the CEO, will therefore take over as Acting Head of Sales. Linus Wetterlind is leaving the company at the end of September.
Comments from the CEO
ChromoGenics is a proptech company that contributes to more sunlight and well-being indoors, higher energy efficiency, and a decreased impact of the real estate industry on the climate.
We are seeing positive effects from our work with measures to create greater value. During the quarter, we have seen improved order intake and taken important steps to lower our costs. The period was impacted by increased contact with customers to strengthen order intake, efforts to reduce production costs, and the manufacturing of glass for faulty delivered projects.
Increased focus on growth after achieved milestones
Over the past year, the company has achieved a number of milestones. In June 2021, the company announced that we could deliver a tested and quality assured product from our own factories. Focus then shifted to redirect all available funds to rapidly scaling up production and delivering more than SEK 30 million in booked orders. The company also achieved this milestone in a very challenging global market that was impacted by COVID-19, global logistics and delivery disruptions, and sharply rising material costs.
We have delivered the glass for our large project in Oslo, and as the building takes shape the control system will be installed. However, the project has been impacted by increased costs and delays. We expect to be able to transfer the project in the third quarter. We also successfully delivered a number of smaller projects during the first six months of 2022.
The company is now fully focused on growing our business and delivering quality products at a good gross margin. The efforts in the second quarter to improve the production outcome, raise efficiency and lower raw material costs are expected to improve the gross margin in future quarters.
Cost focus continues
ChromoGenics is using plastic film coated with indium-tin-oxide (ITO) as an input material in its manufacturing process. Since the company restarted production last year, deliveries of ITO-coated plastic film have been burdened by recurring delivery and quality problems as well as significant costs.
Therefore, the company worked for some time to establish and assure its own production of ITO in our sputtering factory. This work was concluded in the second quarter, and after the end of the quarter, the first production batches were manufactured with good results. We estimate that, by producing ITO in-house, we will lower our direct material costs for ConverLight® Dynamic by around 40%. In-house production will also reduce both transport costs and production disruptions. Eliminating air transport from the USA will also further improve ChromoGenics’ already excellent environmental classification.
Given that the project at Gullhaugs Torg in Oslo, Norway, is closing, we have also adapted our costs by releasing hired staff, which means a reduction in staff of 28%. We also made advancements in efficiency in the past few quarters, which has further reduced the need for hired staff.
To accelerate the work with cost reductions and efficiency improvements, the company made a number of changes to its organization. Victor Hägglund has been named COO and will take an overarching responsibility for purchasing, production and the supply chain with the goal of driving and quantifying cost reductions and efficiency improvements. Erik Elfström has been recruited to the role of CFO and will start in September.
During the quarter, production focused on manufacturing replacement glass for a number of faulty deliveries from 2019 before ChromoGenics started its in-house production. This manufacturing has had a limited impact on earnings during the quarter but had a negative impact on our cash and cash flow.
Profit for the period and cash flow were also negatively impacted by the significant cost increases for materials and transports. For example, prices on insulating glazing units increased by around 50% the past year. We are seeing good possibilities for transferring these costs to customers for new orders, but the possibilities for transferring cost increases have been limited for faulty delivered projects and delivery agreements that have already been entered into.
Improved order intake
During the quarter, we won a number of new orders for both ConverLight® Dynamic and Static, which resulted in improved order intake compared to the past few quarters. Despite general market uncertainty, particularly in the real estate sector, we are still seeing strong interest in our products. Our focus continues to be on increasing the conversion rate of interest and business opportunities to booked orders. We are also building our sales network in collaboration with competent partners.
An important order for us is the order of around SEK 5 million from Aluflam for the school Prins Henrik Skole in Copenhagen. This order enables us to take yet another step in our strategic direction: focusing our operations on the development and manufacture of dynamic film and related control systems. Since our partner Aluflam is responsible for the glass deliveries, this lowers ChromoGenics’ net sales, but we are lowering our costs, streamlining the business and raising our gross margin.
During the quarter, we also delivered a smaller project to Germany. This is our first delivery to this large and growing market for dynamic glass. Even in this case, our partners in Germany are responsible for the glass deliveries and the installation. An important step for our future growth and scalability.
We are seeing good growth in business opportunities in not only Sweden and Norway, but also Denmark, Finland, Germany and Switzerland. Renovations and energy efficiency improvements of office properties from the ‘70s and ‘80s, but also even the ‘90s, present attractive opportunities for our products. We are also seeing considerable interest from schools and special residences, where the indoor environment is of crucial importance for study results and well-being.
Despite an uncertain economy, we are continuing to see strong interest in taking measures to reset the real estate industry, particularly through energy efficiency improvements. Upgrading windows and glass facades with modern technology is a cost-efficient way to achieve energy efficiency, a reduced impact on the climate and, not least, an improved indoor environment.
Fredrik Fränding, CEO
CEO Fredrik Fränding present the interim report on our website on August 25 from 09:00 CET: ChromoGenics
Welcome to a Q&A chat with the CEO and CFO, Monday 29 August at 17.00-18.00 via the link: ChromoGenics
This report, together with previously published interim reports, can be found in its entirety on the company's website.
This information constitutes such information that ChromoGenics AB is obligated to disclose in accordance with the EU Market Abuse Regulation. The information was submitted by the above-mentioned contact persons for publication on August 25, 2022, at 08:30 CET.
ChromoGenics is a PropTech company that produces dynamic glass for real estate. One company product, ConverLight® Dynamic, controls indoor comfort by optimising daylighting, good views and blocking solar heat, and thereby contributing to reducing costs for cooling. ConverLight® Dynamic is based on a patented solution where electrochromic coatings are sputtered onto plastic film and then laminated between glass layers. The plastic film is easy to transport which means long distance shipping of bulky glass can be avoided. ChromoGenics also offers ConverLight® Static, a static glass version, and a façade glazing solution, ConverLight® Energy. ChromoGenics has supplied glazing technology to a large number of major real estate companies. Its shares were listed on the Nasdaq First North Growth Market in 2017.
ChromoGenics emerged from world-leading research at the Ångström Laboratory at Uppsala University. The company’s production site in Uppsala has been partly financed via conditional loans from the Swedish Energy Agency. ChromoGenics shares (CHRO) are listed on the Nasdaq First North Growth Market with Erik Penser Bank as Certified Adviser: email@example.com, +46 (0)8 463 83 00.