Interim Report January - September 2022

ChromoGenics wins orders and starts deliveries to Denmark

Q3 2022

• In August 2022, 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 1,100 m² and has a value of around SEK 5.5 million. Deliveries commenced 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.
• A breakthrough in the in-house process development is creating the possibility of lowering direct material costs for ConverLight® Dynamic by around 40% by replacing purchased materials with 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, 2022, 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, CEO, will also take over as Acting Head of Sales. Linus Wetterlind is leaving the company at the end of September.
• In September 2022, Erik Elfström began as CFO & Head of Investor Relations for ChromoGenics, replacing Göran Atterling, who has been the interim CFO & Head of Investor Relations.
• Net sales for Q3 2022 amounted to SEK 3.5 (7.7) million, a decrease of SEK 4.2 million compared to the corresponding period in 2021. The company's net sales for the quarter were negatively impacted by a settlement linked to the Gullhaugs Torg 5 project of around SEK 1.6 million. Adjusted net sales for the third quarter amounted to around SEK 5.1 million compared to SEK 2.8 million in the second quarter.
• In Q2 2022, the company announced that, in conjunction with the completed deliveries for the Gullhaugs Torg 5 project, it is adjusting its cost levels by phasing out agency personnel. The impact on profit/loss was notable in the third quarter, and the full effect is expected in Q4 2022.
• The operating profit/loss for Q3 2022 amounted to SEK -12.8 (-6.3). The company’s operating profit was impacted negatively by costs related to the Gullhaugs Torg 5 project in Oslo. These costs are largely passed on to ChromoGenics’ suppliers, but they also negatively impact profit for the third quarter by around SEK 0.6 million.
• During the quarter, the company completed several redeliveries for previous projects, and in conjunction with this charged the expenses to the provision made for this purpose.
• In conjunction with its negotiations with the Swedish Energy Agency, the company made a different assessment regarding late payment interest for the loan and consequently dissolved a provision for interest payment of around SEK 2 million.
• For the period July–September 2022, profit/loss after tax amounted to SEK -11.4 (-7.3) million, which corresponds to earnings per share of SEK -0.67 (-1.03), basic, including warrants (TO4) from the unit issue in March 2022.
• Order intake for the third quarter 2022 amounted to SEK 5.7 (4.3) million. The order volume at the end of the third quarter amounts to around SEK 7.5 (24.8) million.
• Cash and cash equivalents amounted to SEK 8.5 (28.2) million on September 30, 2022.

EVENTS AFTER THE END OF THE PERIOD

• On October 5, 2022, the Swedish Energy Agency announced that it was granting ChromoGenics a deferment of its repayment obligation including amortization and interest until October 1, 2025. The decision is subject to a condition stating that an additional status update and reporting shall be done in August 2024, at which point the Agency has the right to reconsider the decision. The granted deferment is not specified by amount.
• On October 6, 2022, the Board of Directors decided on a preferential rights issue of around SEK 39.7 million, pending subsequent approval by the extraordinary general meeting of the company on November 8, 2022. To secure the company’s need for financing until the rights issue has been completed, the company has raised a bridge loan of SEK 7.0 million.

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.

During the summer, we took key steps forward in lowering our costs. We phased out agency personnel, which led to a reduction in personnel of 28%. Thanks to streamlining efforts, we have been able to maintain a production volume in August and September that was not much lower than previous levels. These and other savings lowered our cost levels by around SEK 1 million/month, which we will see an impact from in the fourth quarter.

During the quarter we also continued our work to lower our direct material costs. As previously reported, we can now produce in-house the plastic film coated with indium-tin-oxide (ITO) that is one of our most expensive input materials. We estimate that this will lower our direct material costs for ConverLight® Dynamic by around 40%. However, we have had one-off costs for raw materials during the quarter of around SEK 1.7 million for establishing and refining this process.

One of the highlights of the quarter was our attendance at the inauguration of the Gullhaugs Torg 5 property in Oslo. The developer Avantor and the general contractor Betonmast were clearly satisfied with the final result. The building is garnering considerable attention and has been nominated for a number of awards. The dynamic glass facade is what sets the building apart, both visually in terms of daylight and the view since 75% of the facade is glass and sustainably by achieving BREEAM Excellent environmental certification. This is a fantastic reference project for ChromoGenics that we are already benefiting from.

However, as previously reported, the project has suffered from elevated costs and delays. We are therefore making a provision in the third quarter that impacts our net sales by around SEK 1.6 million and net costs by around SEK 0.6 million. Adjusted net sales for Q3 2022 amounted to around SEK 5.1 million compared to SEK 2.8 million in the second quarter.

Efforts to improve production performance, increase efficiency and lower the costs of raw materials continue and contributed to an improvement in our gross margin. Adjusted for one-off effects, we are seeing an improvement in our gross margin during the quarter of around 40%.

During the second and third quarters, the company produced and delivered a total of around 2,000 m2 of replacement glass for a number of faulty deliveries in 2019 before ChromoGenics started in-house production. This has been an enormous undertaking for the company both operationally and financially. It is therefore particularly rewarding to see the final result of, for example, Gränby Centrum in Uppsala and the positive response from our customers and the general public. Fixing these projects has been necessary and an important step in building trust for ChromoGenics on the market. We do not intend to produce any replacement glass in the fourth quarter.

To secure the company’s financing, we negotiated during the quarter a deferment on our conditional loan from the Swedish Energy Agency and prepared for a preferential rights issue that will be conducted in the fourth quarter, pending approval from the extraordinary general meeting.

Global markets target support for energy efficiency improvements for windows and facades

Real estate represents around 40% of global energy consumption, and this consumption is increasing. In 2050, 20% of the real estate sector’s energy consumption is expected to come from air conditioning.

Both the EU and the USA have realized the importance of breaking this trend. The EU’s target is to increase the renovation rate of its real estate portfolio from 1% to 2%. However, more active measures and support will be necessary to reach this target. In August, as part of its Inflation Reduction Act, the USA introduced a 30% tax rebate on dynamic glass to accelerate energy efficiency efforts. This incentive is expected to have a substantial impact on the market for dynamic glass. N-Tech Research forecasts that the market will grow to around USD 6 billion in 2030, which entails an annual growth rate of around 50%.

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. One of our projects during the year entailed the renovation of windows in an office building built in the late 1960s. With new glass that has dynamic solar protection and good insulation, it was possible to lower energy consumption by 48%. It was possible to replace the windows without the tenants needing to move out, and we were able to further lower the environmental impact by reusing the good window frames and upgrading them with modern dynamic glass.

During the quarter we won new orders for both ConverLight® Dynamic and Static, which resulted in an order intake of SEK 5.7 million for the quarter.

The majority were related to orders for the school Prins Henrik Skole in Copenhagen. We have a direct presence on the market with our own resources in Sweden and Norway, and we collaborate with other companies in Europe.

Due to global uncertainty, rising material prices and higher interest rates and inflation, we are experiencing a slow-down in the market for projects within the construction and real estate industry, which naturally can postpone some projects that are interesting for us. Therefore, we are continuing to broaden our market initiatives outside of the Nordic region.

Despite an uncertain economy, we are seeing continued strong interest in taking measures to transition the real estate industry. Sharply rising electricity prices, a rising global focus on sustainability and hot summers are creating pressure for change and opportunities for us.

Fredrik Fränding, CEO
 

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 person, on November 4, 2022, at 8:30 AM, CET.

Contact:
Fredrik Fränding, CEO
Erik Elfström, CFO & Head of Investor relations
Phone: +46 (0) 18 430 0430
Email: info@chromogenics.com
ChromoGenics

CEO Fredrik Fränding present the interim report on our website on November 9 from 09:00 CET:
https://chromogenics.com/presentations/

Welcome to a Q&A chat with the CEO and CFO on Wednesday 9th of November between 16.30-17.30 via the company’s website: ChromoGenics

This report, together with previously published interim reports, can be found in its entirety on the company's website.
https://chromogenics.com/financial-reports/

About ChromoGenics
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.

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: certifiedadviser@penser.se, +46 (0)8 463 83 00.