1Q2023 Review
Nanofilm Technologies International’s revenue for 1Q2023 was S$33 million, a 40% decrease year-on-year. The first quarter is typically cyclical in line with the slower 3C production cycle, and was further impacted by China’s soft recovery since its re-opening.
Besides remaining a key nanotechnology solutions provider to its customers, Nanofilm continues to exercise prudence in cost management and lean operations to prepare for production scaling. Cost management initiatives include automation to reduce labour, lower hiring in non-critical areas, and restructuring production direct- and indirect- labour for higher efficiency.
The Advanced Materials Business Unit (AMBU) had a slower quarter which is consistent with previous first quarters due to the 3C production cycle. However, its comparative performance was affected by the stronger quarter in 1Q2022 with peak production carried forward from the preceding quarter 4Q2021, plus recent softer consumer demand in 1Q2023 amidst a recovery from the post-China reopening in 4Q2022. AMBU contributed about 75% of Nanofilm’s year-to-date (YTD) revenue.
The Nanofabrication Business Unit (NFBU), similarly saw relatively softer demand which affected the mass production schedule of key projects. NFBU contributed about 6% of the company’s YTD revenue.
The Industrial Equipment Business Unit (IEBU) mainly executed on last year’s backlog orders, with also a softer year as cautious customers cut back on capital expenditure. IEBU contributed about 19% of Nanofilm’s YTD revenue.
Sydrogen maintains strong growth momentum with a high growth rate from its low base, although mass production of its coated Bipolar Plates (BPP) was delayed due to customer’s requirements for higher technical specifications. Sydrogen contributes less than 1% of the company’s YTD revenue.
Business Outlook
The macro environment is forecast to remain challenging, with consumer sentiment dampened by ongoing geopolitical tensions, inflationary pressures, rising interest rates and recessionary fears. However 2H2023 is looking brighter, with customer activity expected to ramp up then. China’s gradual recovery is expected in 2H2023, which will present opportunities to Nanofilm.
Amidst an uncertain operating environment, Nanofilm will remain focused on executing and delivering its business strategy, deepening existing client relationships, and diversifying its customer base:
Geographic expansion of production facilities
- Continues to enlarge and diversify its manufacturing footprint by expanding into new strategic locations.
- Has secured a new site in Osaka of approximately 900 sqm which is commencing renovation.
- Also actively looking for a site in Europe for market opportunities in the Industrial segment.
Capability and Product expansion in new segments
- NFBU has expanded optical and sensory solutions into new products lines for existing customers
- IEBU has developed new product lines such as Solar Cadmium Telluride (CdTe) inline system and Diamond-Like-Carbon (DLC) coating equipment for external markets
Expansion of Green Plating business
- ApexTech, Nanofilm’s Green Plating solutions which replaces electroplating of connectors in electric vehicles, is progressing as planned with initial batch equipment at China’s Zigong site to be commissioned and qualified in 2H2023
- Inline coating equipment coming onstream in 2024
Steady progress of hydrogen energy business
- Sydrogen on track for mass production of BPP coatings in 2H2023
- Increasing engagements with customer base to provide BPP coating services
- As part of product roadmap, has also started prototyping fuel cell systems for selected use cases in mobility, stationary power and charging stations
Continued investment in R&D
- Nanofilm will constantly invest in R&D and innovation to develop technological breakthroughs for commercialisation
- An example is expanding its Green Plating solutions into three variants: (i) Decorative (anti-corrosion, aesthetic coat), (ii) Power (anti-corrosion, conductive coat) and (iii) Power+ (anti-corrosion, conductive, hard coat)
Inorganic growth through Joint Ventures and M&A
- Nanofilm continues to actively assess synergistic collaborations and potential partnerships in various regions and markets
- Seek to extend its capabilities and market access as well as product and geographic reach
Sustainable Growth Engines
With its strong fundamentals backed by its proprietary deep-tech platform and operational excellence, Nanofilm is well-positioned to offer differentiated nanotechnology solutions in its key end-markets (Consumer, Industrial and New Energy), as identified as growth opportunities.
The company is focused on executing and delivering its growth strategy to propel forward and achieve its longer-term objectives.
Nanofilm’s share price as of 19 April 2023 after market close was S$1.650.
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About Nanofilm Technologies International Limited (MZH / NANO.SI)
Listed on the Mainboard of Singapore Exchange Securities Trading Limited (“SGX-ST”) on 30 October 2020, Nanofilm Technologies International Limited (“Nanofilm”) is a leading provider of nanotechnology solutions in Asia, leveraging its proprietary technologies, core competencies in R&D, engineering and production, to provide technology-based solutions across a wide range of industries. Nanofilm’s solutions serve as key catalysts in enabling its customers to achieve high value-add advancements in their end-products in an environmentally sustainable manner. Nanofilm is a constituent of the FTSE ST All-Share Index, FTSE ST China Index, FTSE ST Large & Mid Cap Index, FTSE ST Mid Cap Index, MSCI ACWI Small Cap Index, MSCI Singapore Small Cap Index, and the MSCI World Small Cap Index.