SHARES of Nanofilm Technologies International  (MZH) fell 28.8 per cent on Monday to S$4.25 even though the firm is expecting better performance in the second half of the year as it enters its peak season for business activity and as new projects - such as hydrogen fuel cells - progressively come to fruition.

This is following a disappointing set of half-year results announced last Friday. Net profit dipped 3.1 per cent to S$17.9 million for the first half of this year, from S$18.5 million the previous year, amid higher costs in manpower and manufacturing overheads.

Revenue had improved 24.2 per cent to S$96.6 million for the six months ended June 30, from S$77.8 million in the corresponding period last year.

While topline growth was led by its advanced materials business unit, which saw an 18.5 per cent increase in revenue to S$76 million, chief financial officer Kay Lim said in a media briefing on Monday that the firm was "not happy" with the performance. He added that revenue for the advanced materials segment was dragged by delays in projects as a result of global supply chain disruptions caused by chip shortages.

Still, plans are underway for Nanofilm to capture a greater market share in its 3C (computer, communications and consumer electronics) sub-segment. Mr Lim is anticipating a recovery of the mass production of consumer electronics such as wearables and smartphones that have continued to deliver strong growth.

This is given that its services and products in the 3C sector tend to be in line with new product launches or product upgrades in the third quarter. This is, however, subject to changes in consumer pattern or the group's customers' timing to launch new products or product upgrades.

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The nanofabrication business unit also underperformed and failed to meet the firm's expectations, declining 47.8 per cent to S$1.7 million, primarily due to the end of life of projects though the firm is expecting more new projects to come. The industrial equipment business unit clocked an 80.8 per cent surge to S$19 million as more customers increased their capital expenditures, said Mr Lim.

Meanwhile, the group is looking to anchor its presence in the electric vehicle (EV) space through its hydrogen energy business and will look towards capturing greater share in established end-markets.

The firm had in July announced that it had a definitive agreement with state investment company Temasek to enter the hydrogen energy and hydrogen fuel cell business through a joint venture (JV), Sydrogen Energy.

Mr Lim said that there is strong potential in the fuel cell hydrogen market given that it is still "very much in a nascent stage".

"We will control certain parts of the supply chain all the way from making certain components and parts with our nanotechnology, our advanced materials coating, followed by the follow-on treatment as well as processes to deliver the whole finished components for our customers for integration and assembly," he added.

Hydrogen fuel cells will generate electricity that is cleaner and more efficient, as they emit only water; unlike conventional sources of energy, they do not emit carbon dioxide or other pollutants that are harmful to the environment.

"So with that, we strongly believe in terms of contributing to negative or reduction in carbon emission, hydrogen fuel cell will be one of the key technologies when it comes to energy transition," said Mr Lim.

Recent management changes have also come into focus following the resignation of its chief operating officer (COO) Ricky Tan.

Nanofilm said that the management change is part of the firm's overall re-organisation, and that the weaker set of results is solely due to operational reasons and has nothing to do with the restructuring.

"We have been working progressively to increase the independence and the strength of our various business units," said co-deputy chief executive officer Gian Yi Hsen.

This will also allow Nanofilm's business units, which have already gathered experience over the past nine months, to operate "on their own with full responsibilities for production and sales", he said.