NILAR YEAR-END REPORT 2021

REVISED STRATEGY FOCUSED ON CORE BUSINESS FOR PROFITABLE GROWTH

October – December 2021 in summary

• Net sales, MSEK -0.1 (5.7).
• Production MWh 3.5 (2.8).
• Delivered energy storage 48 (94), average size per energy storage 5 (16) kWh.
• Gross profit¹ MSEK -237.7 (-78.1). 
• BITDA MSEK -110,6 (-83.9).
• Operating profit (EBIT) MSEK -269.5 (-101.8).
• Profit for the period MSEK -251.5 (-113.2).
• Earnings per share before/after dilution SEK -5.53.

January – December 2021 in summary

• Net sales, MSEK 17.8 (25.2).
• Production MWh 14.1 (8.3).
• Delivered energy storage 537 (442), average size per energy storage 8 (12) kWh.
• Gross profit MSEK -479.5 (-199.2).
• EBITDA MSEK -382,1 (-223.4).
• Operating profit (EBIT) MSEK -596.4 (-284.0).
• Profit for the period MSEK -600.5 (-342.9).
• Earnings per share before/after dilution SEK -18.54.

Significant events during the fourth quarter

• Erik Oldmark was appointed as the new CEO at the board meeting on 11 October.
• The company issued two redundancy notices affecting a total of 110 people in Gävle and Täby. The background is a need to temporarily slow down operations.
• Nilar decided to reduce the pace of investment, which affects the expansion of the company's second production facility in Paldiski, Estonia.
• Refocused strategi concluded in an impairment of -137,5 MSEK related to older capitalized development

Significant events after the balance sheet date

• Negotiations following the two redundancy notices issued in the fourth quarter have been completed, resulting in 48 people leaving the company due to scarcity of work.
• The Nomination Committee has proposed Gunnar Wieslander as the new chairman of the board of Nilar and the company has convened an extraordinary general meeting on 3 March 2022. Three members of the board declined reelection.

CEO's comments

In 2021 Nilar met with unprecedented challenges. Nilar’s strategy of rapidly scaling up production capacity was severely hampered by significant Covid-related supply-chain problems for both Nilar and Nilar’s system integration partners, leading to a significant curtailment of sales. In addition, we encountered certain productrelated quality problems as well as increases in raw material prices.

Shortly after I took on the role as CEO of Nilar in October 2021, I encouraged the decision to revise our strategy: a roadmap, which prioritizes attaining profitability over short term volume growth. To adjust our cost base, we decided to temporarily reduce production in Gävle, and to put the ongoing construction of our new production unit in Paldiski, Estonia, on hold for now. This also meant a significant reduction of our workforce. The result for Q4 is, however, still affected by our previous production ramp-up plan. It is also affected by write-downs of intangible assets due to our revised strategy, as previously communicated in a separate press release.

As a consequence of revising Nilar’s strategy, the full impact of cost reduction measures taken in 2021 is expected in the results of Q2, 2022. However, our sales uptake will be slower than planned in the previous strategy. And – as previously announced – Nilar will need additional external capital during 2022.

Market comments

During the last months, Europe has experienced the effects of the transition from fossil-based to renewable power generation on our energy system and infrastructure. Intermittent power sources such as solar and wind generate highly variable amounts of energy – leading to volatile and increasing energy prices. At the same time, our energy consumption patterns are changing fast with the booming market for plugin electrical vehicles among other things. With this comes increased stress on our already strained power grids, causing problems with reliability and stability.

Following the proposed amendment of EU renewable energy targets, we expect to see massive investments in the coming years by utility companies and infrastructure investors in solar and wind, doubling today’s capacity¹ within a decade. This creates an increased demand for stationary energy storage solutions to handle the challenges of upholding stability in the grid, with an expected 9-fold increase in installed capacity, exceeding 100 GWh by 2030².

In the last 12 months we have also seen a steep price increase of lithium raw materials following high demand, compared to nickel which has increased by some 30%. For China, the biggest batteryproducing country in the world, the lithium price is now five times higher than just a year ago³. Credit Suisse estimates there will be a global lithium supply deficit of 248,000 tons by 2025⁴, whilst the total global production is estimated to 1,5 million tons⁵.

With our pioneering battery technologies, Nilar is in an excellent position to thrive in this market. Building on our unique strengths we continue to innovate and improve our products and our offering. Our ambitions are high and together with selected partners, we aim to be a leader in optimised solutions for customers seeking highperforming, cost-efficient, safe and sustainable energy storage.

Revised business strategy for Nilar’s sustainable growth

We have developed a revised business strategy for Nilar’s sustainable growth and a realistic road to profitability. We are now putting the plan into action.

• In addition to our existing business in the residential market segment, we will increase our focus on growth in larger energy storage installations on the European market. The main target customer applications are found in the commercial & industrial (C&I) and utility segments, with solutions such as backup, frequency regulation, peak shaving, microgrid and off-grid. This is where we see the best fit with our unique technology, which competitively differentiates itself on performance, safety, and sustainability.
• We will concentrate on building long-term partnerships with selected key system integrators targeting our focused market segments. We are now streamlining the value chain – cutting out unnecessary distribution actors – and work with our partners to create sharply optimised energy storage solutions based on customer needs.
• We will concentrate on building long-term partnerships with selected key system integrators targeting our focused market segments. We are now streamlining the value chain – cutting out unnecessary distribution actors – and work with our partners to create sharply optimised energy storage solutions based on customer needs.
• Achieving growth in larger installations demands a shift from standard ESS system products to solution-based projects, where our partners will deliver complete solutions built on our technology. Our focus will be exclusively on further developing and delivering battery technology; we will provide our know-how to create smart and safe solutions based on our products. With the launch of batteries with reoxygenating functionality⁶, our partners have the opportunity to develop a recurring business for life cycle management of our battery solutions.
• We are increasing the sales price of our products to reflect the customer value we deliver with our next generation reoxygenating-ready battery packs, and to adequately account for cost of raw materials.

Roadmap and milestones for 2022-2023

Following our plan, our production volumes will remain moderate during the first half of 2022. With the launch of our first battery pack with reoxygenating functionality, we are ready to approach the market with a very competitive offering for energy storage installations up to multiple MWh capacity. We focus our production in Gävle during 2022, with a planned ramp-up in volume starting in Q3 2022, reaching approximately 20 MWh production capacity during 2023. During 2022 and 2023 we will focus on achieving the following milestones:

• Sign strategic agreements with key integrators for joint solution development towards our main target customer segments.
• Delivery of batteries, including the new reoxygenating functionality, together with performance and quality improvements on our existing battery design.
• Pull forward development of our next generation battery and control systems, to be launched in 2024, to optimize and align our technology with our revised strategy.
• Set out a roadmap for reaching a production volume capacity of 150-200 MWh by 2025, including the production unit in Paldiski, Estonia.

With our revised strategy and roadmap in place, all Nilar departments are now fully focused on delivering each of the set milestones.

The energy storage industry is still in an immature phase, and it is with great confidence and optimism I look forward to the coming years. The momentum in the market is strong and we have a unique opportunity to play a vital and differentiated role in enabling the sustainable energy system of the future.

Erik Oldmark, CEO Nilar
Täby February 28 2022

Sources:
1 European Commission, https://ec.europa.eu/info/news/commission-presents-renewable-energy-directive-revision-2021-jul-14_en
2 Wood Mackenzie, Global Energy Storage Outlook H2 2021
3 Nikkei Asia, https://asia.nikkei.com/Spotlight/Market-Spotlight/Battery-costs-rise-as-lithium-demand-outstrips-supply
4 Forbes, https://www.forbes.com/sites/timtreadgold/2021/07/02/lithium-price-tipped-to-rise-after-warning-of-perpetual-deficit/?sh=739912434ab7
5 S&P Global, https://www.spglobal.com/en/research-insights/articles/lithium-supply-is-set-to-triple-by-2025-will-it-be-enough
6 With our unique and patented Nilar reoxygenating technology, Nilar battery packs can be restored at least three times before they reach their final end-of-life, to get recycled.

For further information, please contact: 
Erik Oldmark, CEO
E-mail erik.oldmark@nilar.com 
Mobile +46 70 432 4444

About Nilar:
Nilar is a Swedish-based developer and manufacturer of batteries for stationary energy storage systems. Energy storage systems can be used to bridge imbalances between energy production and demand in order to, for example, improve the utilization of intermittent electricity production from renewable energy sources, such as solar energy and wind power, as well as to strengthen the increasingly strained power grids. Nilar's battery technology is based on nickel-metal hydride (NiMH) electrochemistry with a water-based electrolyte, which results in a strong environmental, safety, and longevity profile. The Company is headquartered in Täby and the energy-efficient production facility is, since 2012, located in Gävle, where the Company's research and development also takes place.

The Nilar share is listed at Nasdaq First North Premier Growth Market, ticker NILAR. FNCA Sweden is Certified Adviser +46 8 528 00 399. For more information go to www.nilar.com.

This information is information that Nilar International AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 2022-02-28 08:00 CET.