Equity Research Svenska Aerogel, Q2 2024: Low revenues, but important orders in place

Svenska Aerogel Holding AB’s (“Svenska Aerogel” or the “Company”) sales in Q2 2024 were lower than our expectations. Although sales fell below expectations, Svenska Aerogel received two important pilot orders and lowered the total debt during Q2.

Weak sales below expectations

In Q2 2024, Svenska Aerogel reported sales just above SEK 0.5 million, significantly lower than our projected SEK 1.6 million. The conversion of a previous loan into a grant resulted in increased profitability at the EBITDA, EBIT, and net profit levels. EBITDA came in at minus SEK 4.2 million compared to our estimate of minus SEK 7.5 million, while EBIT was minus SEK 7.5 million against our estimate of minus SEK 9.5 million.

The Company has received two significant pilot orders in the past quarter. The first order, in collaboration with long-time Asian partner Rayoung, involved the delivery of 1.4 tons of Quartzene®. Of this, 1.2 tons is designated for a customer project in the construction and real estate sector, while the remaining 0.2 tons is allocated to a project in the process industry. The second order is for 360 kg of Quartzene® from a European insulation materials manufacturer. The Company anticipates that this pilot order could lead to the more permanent adoption of Quartzene® in the customer’s applications.

In our previous research update, we highlighted a savings program that has now been implemented during Q2. This program is anticipated to achieve full impact in the second half of 2024. Operating cash flow for Q2 2024 was minus SEK 4.3 million. During the quarter, the Company amortized SEK 7.9 million in debt, reducing the total debt to approximately SEK 13.7 million by the end of the period, which is a positive considering that sales have not yet accelerated. As of June 30, 2024, the Company’s cash reserves stood at approximately SEK 17.5 million. We anticipate that the Company may require additional capital injections within the next 12 months.

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