Interim Report for the Period January 1 – June 30, 2024

The HeatPower 300 systems delivered to NEO GROUP in Lithuania have now been installed, and commissioning is underway. This milestone signifies that Climeon has established a complete procurement, production, and delivery chain for the HeatPower 300 product platform. Additionally, Climeon announced a partnership with Grandbow Technology, a leading sales and service provider in the Chinese shipyard market, during the quarter. This collaboration enhances Climeon's sales efforts in the Chinese shipyard market, one of the largest in the world, which has seen a growing number of inquiries. Furthermore, the subscription period for the options issued in the last quarter of 2023 concluded in June, resulting in the company raising approximately SEK 23 million before issuance costs.

APRIL - JUNE

• Order intake amounted to SEK 0.4 million (12.8).
• Net sales amounted to SEK 0.8 million (0.6) and were primarily attributable to commissioning and aftermarket revenues.
• Operating profit/loss amounted to SEK -24.8 million (-23.0).
• Profit/loss after financial items amounted to SEK -27.1 million (-25.0)
• Earnings per share, before and after dilution, amounted to SEK -0.12 (-0.11)
• Cash flow from operating activities after changes in working capital amounted to SEK -10.9 million (-22.0).

IMPORTANT EVENTS DURING THE PERIOD

• Climeon announced a partnership with Grandbow Technology, a leading sales and service provider in the shipyard sector in China. During the quarter, Climeon also entered into similar agreements with sales partners in Greece and South Korea.
• In June, Climeon disclosed the outcome of the subscription period for the subscription options issued during the company's rights issue in the fourth quarter of 2023. A total of 41,950,343 options were exercised to subscribe for B-shares, corresponding to a subscription rate of approximately 73.5 percent. Climeon thereby raised approximately SEK 23 million before issuance costs.
• The conditional loan of over SEK 10 million previously received from the Swedish Energy Agency was converted into a grant during the quarter, making Climeon free from long-term debt.
• The EU-funded project CHEK Horizon 2020 was completed, where Climeon, together with shipowners and other representatives from the marine industry, participated in developing future ship designs for more energy-efficient vessels.
• At the Annual General Meeting on May 15, the shareholders re-elected board members Thomas Öström, Liselotte Duthu Törnblom, and Håkan Osvald, and elected Joakim Thölin and Sebastian Ehrnrooth as new ordinary members. Håkan Osvald was re-elected as Chairman of the Board.

JANUARY - JUNE

• Order intake amounted to SEK 0.8 million (13.0)
• Net sales amounted to SEK 14.1 million (1.1)
• Order backlog amounted to SEK 40.7 million (80.5)
• Operating profit amounted to SEK -48.5 million (-46.0), including non-recurring items of SEK -1.7 million.
• Profit/loss after financial items amounted to SEK -48.7 million (-62.0)
• Earnings per share, before and after dilution, amounted to SEK -0.22 (-0.28)
• Cash flow from operating activities after changes in working capital amounted to SEK -39.3 million (-46.1) and total cash and cash equivalents amounted to SEK 42.0 million (77.5). In addition, restricted cash amounted to 11.6 million SEK for guarantees related to future customer deliveries in 2024. Thus, total cash and cash equivalents, including restricted funds, amounted to 53.6 million SEK.

POST CLOSING EVENTS

• The first of a total of six HeatPower 300 systems ordered by HD Hyundai Heavy Industries on behalf of the shipping company Maersk underwent acceptance test at Climeon's facility in Kista.

• In July, Climeon announced that the company´s CFO, Carl Arnesson, will leave the company at the end of the year and be replaced by Carl Frykfeldt in an interim role. Furthermore, Fredrik Nimander has been appointed as new COO, Chief Operating Officer, and member of the management team with immediate effect.

A WORD FROM OUR CEO:
THE ENTIRE SUPPLY CHAIN FOR HEATPOWER 300 IS IN PLACE
During the quarter, two HeatPower 300 systems have been installed at NEO Group's facility in Lithuania, with commissioning currently underway. This means we now have a complete and well-established supply chain for HeatPower 300 in place.

Our marine customer projects, including both new builds and installations on existing vessels, are progressing as planned. In early July, representatives from Maersk, Hyundai, and the classification society ABS attended Factory Acceptance Tests (FAT) at our Kista facility for the first system to be delivered to the shipyard. These tests are conducted to ensure the product meets the customer's performance, specifications, and documentation requirements, as well as compliance with the classification standards for marine operations.

Throughout the spring, it has become increasingly evident how well Climeon's products align with current market trends. There is growing discussion and imminent implementation of energy efficiency requirements and carbon taxes, both locally and globally. This trend is significantly driving demand for our products across all markets. We are continuously receiving numerous inquiries from all our market segments, including marine newbuild projects, marine retrofit projects, and European projects in industry, geothermal, and land-based engines. Over the spring, we have engaged with many potential customers and are actively negotiating concrete projects within these segments.

To me, it is evident that it is only a matter of time before the market gains momentum, allowing us to secure more customer orders at a higher frequency. Based on my experience, there is always a lag in both the marine and industrial markets before sufficient references are established and customers complete all necessary analyses ahead of an investment decision. When I speak with leaders from other companies that have undergone journeys similar to Climeon's, particularly in the marine environmental technology sector, they share the same perspective. It takes time for shipowners and shipyards to thoroughly evaluate new technologies and suppliers before they are ready to place larger volume orders.

Paralleling our efforts to finalize more customer orders, we are preparing to execute them as cost-effectively as possible. With a well-established supply chain, we are on track to deliver all ten systems ordered so far to our customers this year. Simultaneously, we have scrutinized our product and supplier chain to reduce our cost per unit. We are also analyzing various opportunities to further enhance product efficiency. Over time, this means we will be able to offer customers an even lower cost per produced kilowatt, while also preparing to face future competition and achieve desired margins.

We are continuously managing our cash flow. During the quarter, we identified and implemented measures to reduce costs and improve our operational cash flow. Some of these measures have already taken effect this quarter, while others will show results in the coming fall and next year. To enhance cash flow in the short and long term, we are actively pursuing several options, including securing new orders, optimizing working capital, and reviewing the value of other assets.
Since 2014, Climeon has held a conditional loan from the Swedish Energy Agency. The loan has been extended annually until this quarter when it was converted into a grant, leaving Climeon free from long-term debt. Additionally, during the quarter, we completed the exercise of warrants issued during the rights issue in the fourth quarter of 2023. This warrants exercise provided Climeon approximately 23 million SEK before issuance costs, funds that will be used for our continued commercialization efforts and to deliver ongoing and future customer projects.

Over three years of dedicated work, in collaboration with our suppliers, we have developed a completely new and more market-adapted product. The HeatPower 300 has been launched in the global marine market as well as in selected land-based segments for industry, geothermal applications, and land-based engines in Europe. We have secured some significant reference orders with well-established customers and ensured the entire supplier, production, and delivery chain. This achievement enables us to take on more customer projects and scale up our production capabilities. It feels fantastic.

As we move forward, we continue our journey with enthusiasm. A warm thank you to everyone involved for your efforts and the support you have shown. Wishing you all a wonderful summer ahead!

Lena Sundquist, CEO, Climeon

For full report, please see attached file below.