Welcome to the PowerCell Q2 2024 report presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key on their telephone keypad. Now, I will hand the conference over to the speakers. Please go ahead.
Good morning, and welcome to the Quarter Two report from PowerCell, this time live from Gothenburg. And today we are here, Richard and Torbjörn. And it is my pleasure to have Torbjörn this time and also one more time. We announced earlier this month that Torbjörn will move on from PowerCell, which is a good career move for Torbjörn, which I'm happy for, but I will have the pleasure of having your company one more time. Moving into the quarter then, it is an interesting quarter to report on because we claim that this is a very good market activity, but on a softer market. And this notion of softer market needs to be a bit explained, because why we say that?
We are reporting 6% growth Quarter Two, and 17% growth, rolling 12 months. But it also is a record quarter when it comes to sales and also rolling 12 months. That's the best sales we've had in PowerCell. To be able to report that on what we call a softer market needs some explanation. The term softer market is related to the fact that we are transitioning away from the short-term project sales to a more long-term OEM-driven market sales. That is something that we have explained in Quarter One, and that will be kind of the theme throughout this presentation as well. So it is an interesting quarter. We feel like we have a very strong positioning that we will elaborate on during this presentation.
Part of that strong positioning is the launch of the new Marine System 225, which is an evolution of the existing PowerCell Marine offering. Once again, a product that has positioned PowerCell in a very strong way in the marine market. Looking at market share, we were number one in marine in Quarter One. We also received an order from OS Energy early in Quarter Two, on a smaller installation, the Marine System 100. We also had a government loan converted into a grant, generating a positive income, not top line, Torbjörn will explain more. And then also loan to secure working capital for PowerCell because we are now expanding into more OEM-driven sales. So, we are operating on a very interesting market where we have strong underlying market trends.
Shifting gears then to OEM business and commercially driven, customers, we also see now that the marine and power generation is now driving demand, in this, in this market. A bit more on the Marine System 225. We reported in Quarter One that innovation and continuous development of our offering is extremely important in a technology shift, and the market launching in Quarter Two was well received. The product will be ready for customer delivery in Quarter One, 2025. And as we said, this is an evolution of the existing, product, but with a 12.5% improved power rating, which is highly valuable. But also, more knowledge going into this product based on all the experience we have from different segments that constantly improve the core technology and the customer value.
We also have more supply value from Bosch, which we think is a very important part of our industrial stability. More subcomponents from the Bosch hydrogen portfolio, which is strengthening the PowerCell offering. We are also happy to report that we yesterday received or today received the first order on Marine System 225. It is a breakthrough order to a leading European OEM manufacturer. Four units to be delivered within first half of 2025. And this is also a very good indication that the market is acknowledging our innovation and product offering, but also that the marine industry is now accelerating this transition. Some more input from the market, because we are quite often talking about this transition and energy transition as something of the future.
This is a testament from one of our customers who have been operating our technology in their genset that has been touring around the world, giving power to the Extreme E Formula Extreme E tour. This was an event in Scotland previously a couple of weeks ago, where they generated 11 megawatt hours of power, which is the equivalent of 1,000 U.K. homes for a day. Eighty percent of that event received its power from green hydrogen being reformed to or transformed to energy through our fuel cells. So these components have been touring around the world. It's been to the West Coast of USA, it's been in the Middle East, it's now been in Scotland and Sardinia, experiencing different weathers, climates, et cetera.
Really being tested in application and actual use. And this is a very important proof point, because this is now happening, and we are now seeing more and more acceleration of the market where green hydrogen is available, but also where our customers are using different scales of hydrogen to accelerate this transition. So, quite interesting start of this year, 2024. And the strong position that we have built up with PowerCell is something that we're taking with us going forward this year and also, of course, next year.... Deep diving into the numbers, I now hand over to Torbjörn, and we will come back to the strategic side of the presentation.
Thank you, Richard. As you already have mentioned, net sales are up 6% in second quarter. And it's also up 17% in rolling twelve months. And this is what we call a softer market. And I think related to that is really that we have, during this period of time, with a bit softer market, strengthening our position and also delivered on a growth, which is a good sign for us in this sense. The product mix within the quarter is with higher part of project sales in this quarter and also year to date.
But it's also good to highlight that the royalty from Bosch is increasing on a rolling twelve months from almost 17 million up to 23 million. And we do not have the full visibility on where and how that arise, but it's a good trend going forward. And of course, that's recognized as net sales and revenue for us, but it also then comes down to 100% of gross margin supporting our gross margin going forward. Regarding gross margin development, the second quarter gross profit was 11 million, and with that, a gross margin of about 17%. I should really emphasize that this lower gross margin in the second quarter is highly affected by an inventory reevaluation of about SEK 8 million that appeared in second quarter.
But taking that out of account and then sort of equalizing between the first quarter and the second quarter, we would have a more balanced situation that more underlines sort of the overall trend and the underlying gross margin. And then we are at the year-to-date gross margin of 30% and the rolling twelve months of almost 38%, which is sort of. So it's not a shift in the second quarter to something really else, but rather a situation where we have a temporary effect from this reevaluation. And then, of course, underlying, there is a product mix change between quarters, and this time it's a lot on the project sales.
Mm-hmm. And also, gross margin has been a focus area for PowerCell for the last three years, and we are very strongly protecting the gross margin because this is the foundation for future growth, and especially to be able to leverage growth. Because, as a fast-growing company in a technology shift, you need to be able to leverage top-line growth, to make sure that your EBIT is improving over time.
On our cost side and OpEx side, we do have an OpEx in relation to net sales rolling 12-month of 62%. And that is then on the graph, you see the trend going downwards. And this is then, although we are increasing number of employees with 7% versus Q2 last year. So we are improving capabilities, but we are then focusing on having operating leverage, and we still have a positive trend, although on sales side it's been a bit weaker, although we have an increase. But this is then really a key that we are following and really emphasizing to keep that down to go towards positive numbers in results.
That's sort of the last bullet point that focusing on this will also then support our operating income, and we're having a good trend on this.
And just to once again clarify, this is one of the graphs where you want to see the trend going down.
That's right.
Because that's an improvement. Quite often, you want to see the opposite.
Regarding cash flow, we do have a cash flow in second quarter of -50.6 million SEK. But the year to date is -11 million SEK. There is a volatility in our cash flow on quarterly basis. In the second quarter, it affects us negatively in the timing of customer payments, and also that we have had quite high activity in EU-funded projects. That is then sort of where we get the payments then in the second half of the year. So highly affected, and I think we have seen it before.
We saw it in the fourth quarter 2023, and we have seen it before as well, and we will see it going forward, that we will have a volatility, and it will come back in a good way. And highlighted then that we are also driving product development projects, and we had SEK 10.4 million that was capitalized in intangible assets during the second quarter. And to end that, the finance part of the presentation is to mention what Richard also brought up, that we had a loan that was then transferred into a subsidy for PowerCell. And this is then being seen as another operating income, not as a revenue, but another operating income, but also highlighted as an item affecting comparability.
So, it's highlighted in the report and how we show it.
... Mm-hmm. Good. So then moving forward to focus for 2024, and we have stressed this before, and I need to emphasize it once again, we are now focusing heavily on OEM customer, and that transition is very important to us. And also the introduction of the new Marine System 225 is an answer to this transition because the OEM customer, compared to the traditional and old project sales, much more demanding customers, where you need to have a product offering that is not just creating value in its operation, but it's also creating value throughout the life cycle in the operational cycle at the customer site.
So that is once again, a bit more demanding when it comes to our product portfolio, which is why we have upgraded the product portfolio, but of course, also longer sales cycles and negotiation cycles because we're not selling one-offs. We are selling and negotiating long-term contracts, where you also have an aftermarket commitment. So that is focus for 2022, and the press release today, where we now have the first OEM customer on the Marine System 225, is, of course, a very valuable proof point to us, both to the fact that we are now having orders on the newly released system only 4.5 weeks after the introduction, but also the fact that the OEM customers are now starting to accelerate in the market. Then, of course, for 2024, continued growth and expansion in the U.S.
This is, of course, driven by the fact that the US is accelerating the energy transition, heavily subsidized by the Inflation Reduction Act, but also from industrial initiatives because you have some geographical aspects of the US market that is supporting the energy transition. You have some areas where you have the close coastal areas where you could have solar and wind power availability of the green energy solutions, where you could have electrolysis of hydrogen, but you can also produce methanol and ammonia. That then can be the energy carrier that we then reform into hydrogen as we operate an installation. So US is important from many, many areas.
We are also scaling the existing product generation to drive towards break-even and balance the cash flow. So once again, improving our product offering is extremely important, and I've stated this in quarter one, I do it now, and I will continue to do it. This is still an innovation-driven market. I am very proud, which also to have pointed out, that we now are developing PowerCell as a company that not only have good technology, but really solid industrialized products. But we also have an operation that can support our product offering, but also our customers in the transition towards the new installations because there is a lot of documentation, certification processes together with type approval societies for marine, in aviation, the aviation certification bodies, and also then, of course, internal control of PowerCell.
How do we operate our manufacturing and operations? How are we designing our products? We are now developing a company that is industrially mature, which is an investment into the future, which is also one of the positioning strengths that we have within PowerCell. So continuing to accelerate industrialization and next-generation product portfolio is also important because although we are adding in more value to the existing technology portfolio, we need to be competitive in the next generation. So development of the heavy-duty platform, which is 300 kilowatts to 1 megawatt, which will be the first megawatt fuel cell in the industry, but then also the next generation of the current size, the medium-duty fuel cell platform. Accelerating that industrialization is also important because that is what will make PowerCell profitable and competitive from 2030 and onwards.
Being able to balance both the short-term competitiveness and long-term while focusing on operational leverage to have a clear road to break even, that is something that I'm extremely proud of, how we manage to balance within PowerCell. Then, as we said, industrialized innovation, we in quarter one, we said that we will have new product features being released in quarter two and quarter three. In quarter two, we released Marine System 225, which I am extremely proud of. Of course, that system is designed also for a power generation version, so it will be suitable for our power generation solutions. It could be backup power, it could be intermediate load, et cetera. So preparation for that is of course ongoing, and we will see a launch of that throughout the year.
But also then in quarter three, something new as a feature to strengthen the product portfolio. As we said, there is a new phase in the market where we are moving away from the product sales to the OEM business. This is imposing new requirements on companies like PowerCell and also new opportunities. Much more demanding customers, much more real-life experience, where you need to create value not just in one project, but over a complete life cycle. This is where our industrial background of the heritage from Volvo Group, but also the collaboration with Robert Bosch, gives us massive strength in this market conditions. And then also the new opportunities.
When we move away from individual project sales to the more long-term OEM business, you build up a pipeline or a portfolio of repetitive business, which is, of course, a solid base for any company, but even more important for companies in a technology shift that needs to build a repetitive business... We have, as you know, the first signed commercial order in aviation together with Saudia. Their certification testing of flights is going according to plan. Very good progress there. But we now also see OEM activity in power generation and in marine, where we now think that marine will be the segment that is accelerating the fastest in the upcoming 6-12 months. And we have prepared for this for quite some time.
This is the market scenario that we have prepared for, investing in product offering, investing into the internal abilities and capabilities because there are new requirements on a company like PowerCell. It's a different thing to sell a number of units to a university, to sell to a commercial application where you have external auditors coming in and auditing PowerCell all the way through design principles to operation and production. We have invested into productivity and internal efficiency. This is why we have a very strong gross margin, although quarter two was affected by the reevaluation of inventory. But over time, we see that we have been able to protect gross margin and develop it. So we feel confident in the gross margin development going forward, while still bringing down cost to the end customer, because you need to do that.
You need to make the product that you sell to the market more cost-effective and more value-creating in the customer operation. And then, of course, investment into industrial stability and capacity. So we have a scalability of our production footprint together with Robert Bosch that is very strong for a company of PowerCell size, but also give us this asset-light footprint that clearly gives us a road to break even. That is quite interesting already in the early stages of the market development. So we are structured to reach break even, even in a low market, low-volume market. So we're working hard on that one, and hopefully we can come back in the upcoming quarters to show even more improvement on operational leverage and operational income.
So, continuing our growth journey, as we said, we have industrialized production established, so we're well prepared for what is coming. We have our offering that we have now called industrialized innovation for a number of years. Once again, repeating what that is, we are now approaching OEM customers with a product portfolio that is industrialized, standard components and solutions, but with an ability to tailor and customize to the end customer requirements to make sure that the adaptation and transition on the customer side is as smooth and effortless as possible. That is a very important part of being competitive in a technology shift. I would say it's equally important to the capacity and capabilities of your core technologies. So in a technology shift, you don't... You are not winning by having the best technology.
You will win by having the best technology products that can be adapted into a customer application. We think that we have a first-mover advantage from having multiple applications out there. We see that we are gaining knowledge and experience from aviation, marine, power generation, and off-road vehicles, as well as automotive, together with Robert Bosch. And this pool of technology or experience, where we see how the system is performing in actual life, is something that is giving us constant data points to refine and constantly evolve our product and technology. We see a growth in commercial orders. We have reported some in quarter two and now in early stages of quarter three. And we are working hard to bring even more commercial orders to the market.
We are ramping up production together with Bosch as a supplier and enhancing the deliveries from Bosch into our product technology, as we said before, where we have more components coming from Bosch, is also a way of securing gross margin, because Bosch is a highly competitive and cost-conscious supplier, but also giving us industrial stability. Then we need to comment on the market drivers, because we have had a situation where initiatives has been delayed, going from communicated projects to actually what they call final investment decisions. This is something that we have seen throughout both China, U.S., and Europe.
Having now more initiatives from governments subsidizing and challenging the industry is something that is going to hopefully accelerate moving into more what we call the final investment decision, but also the fact that we are seeing interest rates stabilizing, inflation stabilizing, and the fact that hydrogen is acknowledged to be one of the more important solutions of this energy transition. So we see the industry maturing. I think we mentioned in quarter one that there is a balance now, where previously everybody was going for green hydrogen, which still is a scarce resource and fairly expensive, to having also different colors of hydrogen available to accelerate this, because you have this chicken-and-egg situation.
Without hydrogen available, there will be no fuel cell sold or hydrogen electrification in the market because you don't have hydrogen to run it with. And without the components or products out in the market, there's no offtake on the hydrogen. So that chicken-and-egg situation had affected the whole industry up until now. But with the fact that the customers are now accelerating this by also using gray, gray hydrogen, blue, turquoise, pink, then we are getting more and more components out there, solutions out there, a critical mass, which then, of course, will create a market demand also for green hydrogen... accelerating that expansion and bringing down that cost. So we are now seeing the first indications of solving the chicken and egg situation, which is quite encouraging.
So as a summary, we are accelerating this transition, we see a lot of initiatives from governments. We have leading technology in the industry, not only the best validated fuel cell stack, but also industrialized together with a partner, Robert Bosch, that gives us a very strong competitive edge in scaling this industry now. And then we are now starting to see serial deliveries to commercial applications, and we are happy to say that we have an industrial footprint that we are quite happy with, and that will support our growth going forward. With that, upcoming reports, Torbjörn?
Yes. So upcoming report, next one will be seventeenth of October, and then for the fourth quarter, that will be presented in thirteenth of February, twenty twenty-five.
Very good. With that, we open up for questions and comments.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Henrik Alveskog from Redeye AB. Please go ahead.
Hello, gentlemen. Do you hear me?
Yep.
We hear you.
Hi, Henrik.
Hi. Hi, good morning, or well, hi. Yeah, great. Okay, I have a few questions here, and the first, just one on the gross margin, which you explained rather well, but I'm also interested to hear, is it... When you record sales according to projects completion, so to speak, are you conservative in those... When you include that in the PNL statements?
Yeah-
Is that one reason why the sales mix was negative in this quarter?
I mean, I would say that to that question, of course, we—it's for some of the projects, they are rather long, and then, of course, we are entering, even though we have matured our operations and the suppliers and also our technology capabilities, of course, we are breaking new grounds in some parts. So of course, in the estimations, we of course take into potential risks and maybe on currency effects and so on. So that's part of revenue recognition process that we have. But with that said, of course, we do feel that we are doing this according to a well-balanced estimation. And it's based on a cost revenue recognition.
Where cost builds up, that's also when we do recognize revenue. If that's a question to your or answer to your question.
Okay. Okay, yeah. Well, that's fair. Thanks. And then, completely different question then. Just if you could give us some sense of, well, your current order backlog or pipeline for the second half of this year. And, I mean, you had a rather strong second half of last year and, do you find it challenging to maintain this positive growth momentum in your top line?
Mm-hmm. Once again, we are not making the forecast that I know that you are requesting from us, and that we will improve. With that said, if you go back to last year, you will see that, as you said, you more or less have a hockey stick in quarter three, quarter four. But that was also the case in 2022 and 2021. So that is to some extent how the market is operating. So, no, we are not that concerned because this is kind of how the every calendar year is playing out. With that said, you need to work for every revenue in a technology shift. There is a constant battle.
What we see, though, is, once again, more OEM activity, but also shorter time from an order to a demand-requested delivery. So that will also perhaps strengthen our opportunities in the second half. But at the same time, it, we need to work hard on every revenue that we're bringing to the table, but we are not concerned, if that is a clear enough answer to your question.
Yeah, sure. Yeah, thanks. And then just... Did I interrupt you?
No, no, please.
Okay, thanks. Great. So, if you could just give us a very brief update on a few of your business partnerships. The HAV Group placed an order, and in the press release, you said the first deliveries will take place, well, basically now, Q3 this year.
Yeah.
Is everything running according to plan?
The development is running according to plan. As always, with this kind of market introduction, you need to have the full value chain in place. We are not concerned or seeing any significant delays in that one. But whether or not it will be exactly the volumes that we predicted, or we didn't give any forecast, that needs to be reported when they are occurring. But the development and adaptation is going according to plan. This is where we are a bit boring with not giving forecast.
Mm.
That is why I wake my word.
Sure, sure. And then, I guess it was a couple of years ago when you announced some sort of partnership with the Norwegian company, HAV Group, correct?
Yeah.
I'm just curious 'cause we haven't heard that much on how this is progressing.
Yeah.
Could you tell us anything?
Yeah, I have to admit that that was even before my time, in PowerCell. That is a collaboration that has resulted in the initial delivery to the European yacht industry that we reported in 2022, where the customer launched the boat. I think it was called Project 821, if you look at that. A 3.2 MW delivery. But that also is the result of the Torghatten Nord order that we received last year. So that collaboration has generated, I would say, in total, over 18 MW of power. But then, as always, the partnerships they are could be a bit, I wouldn't say volatile, but they are not necessarily providing value on a continuous basis. Those...
That marine industry is, in its nature, a bit project-driven because the ships are built according to specification. But it's generated a lot of value. So, a massive thank you to my predecessor who signed that agreement. So it's providing some value, yes.
Yeah. Great. And then just finally, on ZeroAvia-
Mm
... and your partnership with them, you, I know that they need to be certified and all that before you really can estimate when this starts.
Mm.
But you said that you will establish, well, assembly and maybe something else in the UK here, and are you starting to plan for that, or is that, well, later on?
No, good question, and I will try and elaborate as extensively as I can. As you said, ZeroAvia, they're going according to plan. You talked about order value. Of course, there is an element of estimate. We have been clear that it's a conditional order, and when we communicated this in October 2022, we communicated SEK 1.5 billion, and I think it was 0.5 GW of power. At the moment, if you look at ZeroAvia's communication, that is the equivalent of 800 propulsion units. Today, ZeroAvia have communicated that they have orders for 2,000. So we have a very conservative approach to our initial communication. So they are performing better than we expected, but still, that is an order pipeline.
So, you need to look at their communication. But with that said, they have now looked to relocate their manufacturing from the U.K. to the U.S., based on many merits, being close to their end customers, so they have started a factory up in Seattle. So of course, we are reevaluating, should we do production or final assembly in the U.K., or should we move together with them over to the U.S.? But we have, as part of our commitment to ZeroAvia, to have our final manufacturing and a final assembly very close to them, which is also then it will be an excellent center for PowerCell and of course, an aftermarket service port.
So, when we know more, when and where this will be located, we will update the information.
Mm. Great.
Good.
Well, thank you. That was all from me.
Thanks. Thank you. So we also have questions here that we-
As a reminder, if you wish to ask a question, please dial #5 on your telephone keypad.
Yep. We have a written order here. With the orders that you already have signed, do you have the capacity to take more orders from new customers? Yes, as we have explained, now we have a good industrial footprint, where we can both accommodate more volume in the existing footprint, but then also scale up quite rapidly. And this is where we have been talking about in an asset-light footprint. We have the stack manufacturing together with Bosch, both in Bamberg, in Germany, but they also have production in China and establishing production in North America. So we could have local sourcing depending on where our customers are. But at the moment, our supply is from Bamberg, and we are doing final assembly and also system manufacturing here at PowerCell in Gothenburg.
In Gothenburg, we can scale up our own production quite easily, both with more volume, but if we need to add more capacity, it's only, I would say only, but it sounds like that, but we need more tools and some more people. So the industrial footprint of PowerCell, we have the capacity that will support us through our business plan and to reach breakeven. So this is the asset-light model that we're talking about. So capacity is not an issue for PowerCell. Then we have a question that is a bit macroeconomics. "How big risk is a win for the Republican in U.S. when it comes to investment in the green energy transition?
PowerCell has big hopes for the U.S. market." I'm not that concerned because what we see is that the political side of this energy transition, it might accelerate or slow down, but what we see now is that the industry itself is investing heavily into this. And I think I've said this before, that I am convinced that if we could prove today that global warming is not related to man-made activity, I still think that this energy transition would continue because it makes sense from a societal perspective. With the increasing demand in electricity that we see in society, the fact that the grids, more or less all over, are completely filled, we need to see new solutions.
We need to have more decentralized energy solutions, and that's where the green energy is fitting into the mix in a very good way. And also we have seen, also from a political perspective, that dependencies on fossil fuels comes to some extent with a political and security risk. So transition in this way is also a way of minimizing that risk. But also, this is a business opportunity for many companies to leap in the value chain, to really challenge existing structures. So this is why we see that regardless of, I think, political structure, this will continue to happen. So I'm not too concerned about this. But of course, we are following development in a very, very close way.
And maybe to add there, I think, I mean, one thing is really U.S. governmental initiatives, but we also see that you have states like California or other states that are driving this-
Texas.
And Texas-
Yeah
... no independent of the governmental incentives. So, I think in the U.S., I mean, no matter what, there's gonna be initiatives in the different states there.
I mean, you have this old expression, follow the money. If you look at where do you see most activity, where do you see most investment? That is in the U.S., in states where you have a dependency on fossil fuels. That's why I mentioned Texas. You also see it in nations with a strong economy in fossil fuels. We are talking about Norway. We are talking about the Middle East. We also see massive investment and activity in China. So everywhere where you now have a dependency on the fossil fuels, that's where you see most activity in this technology shift. So that is also a very good indication. That is, this is not just driven by governmental subsidies, but this is also something that is happening because it makes business sense.
Do you have some kind of visibility for the Bosch royalties in the future? Could the growth get steeper?"
Of course, we need to allow Bosch to communicate Bosch activities. If we look at the macro factors, we know that China is most likely going to accelerate because you have seen subsidies in China moving away from technology development to stimulating demand of hydrogen in the market. So the prediction is that growth in China, of especially commercial vehicles, will increase second half of 2024. And that will, of course, then accelerate demand for Bosch because they have a number of OEM customers in China. But as Torbjörn indicated, we have a growth of the royalty in quarter two and for the rolling 12 months, which is a quite interesting trajectory.
So we're following up on it closely because as we pointed out, that is a 100% gross margin for PowerCell. Which one do you wanna...?
Yeah. I think we have a question here regarding cash position as well.
Mm-hmm.
The question is really: "Do you expect the cash position to be lasting, and will you need to raise cash, or will you need to add other options like long-term credits?" I think, I think for the second quarter, we did the press release, and we also then presented in the report that we have a credit and loan agreement with Nordea, and we are very happy with that. I think that really supports our ongoing business and the product portfolio we have, and the discussions we have with existing and potential customers to drive with the current product portfolio.
I think that will also be a situation going forward, that PowerCell will grow as a company, and we will need to work with both external debt, but also then, over time, we will look at potentially raise cash, but then not for the current product portfolio and the current sort of business platform, but rather to increase and scale up the development and to take PowerCell to be something else than it is today. And I think that, I mean, we are developing in both those dimensions, and we have been doing it, and I think we are highlighting it in this presentation as well.
And also then with PowerCell, which we say we are then sort of improving our position in the market, and we are then making also progress in the more strategic dimension of the company. So both looking at maybe raising cash to further accelerate those kind of strategic initiatives, but then going forward with the loan agreement with Nordea, but also then looking forward, we will also be looking at external debt. With that said, the cash position is good, and we see that we can grow the business from the cash position we have in a really good way.
Yeah. And what Torbjörn is pointing out here is the, I would say, parallel dimension of strategic development that you need to have in a technology shift. We need to focus on the short-term development of PowerCell, being highly competitive today, having a clear path towards breakeven, protecting short-term value as quality, delivery on time, all these kind of operational excellence perspectives. But we also need to make sure that we are competitive also from a 3-5-year perspective or 5-10-year perspective. Balancing those is extremely important. And we could have reduced investment in the next phase of the development, but then and shown better progress when it comes to EBIT and operational leverage, but then we would have jeopardized the long-term competitiveness of PowerCell.
So this is the balance point that we constantly monitor within PowerCell and supported by board, of course. And we feel that we have a very good position, and this is why we talk so much about we think that we have created a PowerCell that is very well-positioned for the market conditions out there. And hopefully we can come back in the following quarters and delivering more proof points on that one. We have a lot of questions. Should we take one more or? We have a question related to data center, whether or not we would enter the data center market, become a power supplier, and replace the diesel backup generators.
Yes, and this is where the introduction of the new 225 system is very important because we have a partnership together with Hitachi Energy, where we launched together the HyFlex unit, which is a diesel generator replacement. Hitachi is now working the market to launch this and drive sales. But this is also the product I showed from Extreme E that was in Scotland a couple of weeks ago, providing on-site electricity. That's also a diesel generator replacement. And of course, we have now a number of customers that have designed in the Power Cell core technology into their industrialized offering.
This is the kind of OEM customers that we need to nurture in the power generation business, because Power Cell will not become the tier one supplier, because we're not a manufacturer of complete container solutions. So we need to work with a number of OEMs to attract that market and use them as market channels. But also, and this ties into another questions about the collaboration we have with e1 Marine and Maritime Partners, we see that an integrated solution where we also have a methanol reformer will be quite valuable for also the power generation market. Because regulation in handling methanol as a fuel compared to hydrogen as a fuel, then methanol is a less regulated market. It's less hazardous, so time to market could be accelerated with that one.
So we are also working in the downstream aspect of our product portfolio to make sure that we can perhaps integrate even more solutions to make sure that the transition for the customer and implementation in the, in the customer side is as effortless as possible, as I said before. Any more questions? Torbjörn, you wanna-
Uh-
Do you have something more, or should we round off? It's-
I think we could round off if there's no other questions?
Mm-hmm
... online.
Yeah. So if we then summarize, we are reporting a quarter where we have higher ambitions than to grow with 6% because we view ourselves as a fast-growing company. But with that said, and doing that on a market that is transitioning away from product sales to OEM sales, which is delaying some of the orders compared to the short-term negotiation period of product sales. Even with that, we are reporting record sales in quarter two, record sales growing 12 months. And we have improved the operational leverage. So doing that and having a strong product portfolio, and we feel that we're well-positioned for the market conditions. We are quite confident, but that doesn't mean that we're satisfied. We want to do more.
We want to provide more value to our customers, but also to our shareholders. That is what we're going to work hard on, delivering in 2023, 2024, and continuously. As always, if you want to reach out to us, you can contact us through our webpage, LinkedIn, come by Gothenburg and visit our factory, see the production. Although now it's vacation time in Sweden, so it's actually Torbjörn and I and just a few engineers, continuous work. Production is starting up again in two weeks time. But you're always welcome to come by Ruskvädersgatan in Gothenburg, and hope you can stay in touch. With that, thank you very much, and we wish you a nice summer.