I-Tech AB

Hello and welcome to today's webcast presentation where we have iTech presenting the Q1 report for 2024. With us presenting, we have the CEO, Philip Chabain, and CFO, Magnus Henell. If you'd like to ask a question, you can use the form that's located to the right and we'll take it up during the Q&A section. And with that said, please go ahead with your presentation.

Well, thank you everyone for tuning in to iTech's quarterly report, the first one of the year 2024. It is with great pleasure we will run through this presentation together with my CFO, our CFO, Magnus Hanell, and myself, CEO. We will split the presentation, and then we will be ready for questions once we get through the last slide. So by that, let us bring us into the first slide. So for you who may be new into the game, iTech is interface technology. company based on trying to make surfaces smooth and efficient. And in this case, it's about marine ship hull surfaces, so those who are in contact with water, and trying to avoid marine growth attachment to those surfaces. To keep them clean is essential for efficient transport through the sea. And that's where our ingredient technology, Selecto, makes a difference. Our growth has been substantial over the years. We have now more than 20 available customer products using our ingredient technology Selecto. We are part of the product portfolio of nine of the world's biggest, sorry, of six of the world's nine biggest paint companies. And to date, we recognize that the technology is serving somewhere on the whole of more than 2,500 ships. That's still a ways to go knowing that there is 100,000 ships out there, but it's a strong indication that the technology is well received on the market. The total opportunity for those 100 vessels and a whole bunch of small or medium sized or bigger sized yachting vessels are included. We could go to 350 to 500 million dollar as a total turnover figure on select up sales. That's the total maximum. We're listed, as you know, on NASDAQ First North. We are protected through patents, IPR assets, but also regulatory hurdles that needs to be overcome by others. So it's a very protected area. And we're quite few in this industry. We're only seven other biocides, if we categorize them a bit, that actually are available for the paint makers to use. And biocides is part of almost all unfouling coatings sold in the industry today. So it's a small and very condensed industry group we're in. The purpose, as I mentioned, is to enhance the power of the coatings and make sure we lower emissions to air and sea by reducing the friction on ship hull. And in our case, that's all about avoiding barnacle attachments to the whole surface. And that's where our technology is significantly more powerful and sophisticated than many other approaches that have been tested and used in the past. So for this quarter itself, we are proud to present a growth on sales amounting to 38.3 million SEK. That's to compare to 30.8, the same quarter last year. And certainly so, a quite big shift from the fourth quarter last year. So all that is really positive indicating growth this year is here. We are on a steady pathway to a very interesting future. But it also comes with the positive aspects of a strong earning. We display here the EBIT margin being 24% compared to 27%. We'll go into the details of that a bit more later with the help of Magnus. And it all boils down to a strong positive natural salt of 8.6 million to compared to 6.7. So it's nice to see how the natural salt is growing here as the sales are growing as well. And we conclude also that a group of three customers are now engaged in driving this top line. We did have commercial sales to six different customers of the period, but on the more magnitude of side things, it's three that we look on specifically. And that's a welcome contribution. So what brings us to work in the mornings? Well, first of all, it's the product Xelictope's correlation to make marine hull coatings much more efficient and higher performing than what they've been in the past. This is a technology that links into a puzzle of ingredients and other technologies that the paint maker are producing and developing. And altogether, that brings forward that fouling coating that's expected to sustain for the lifetime of the dry docking interval, normally five years. If that works optimally, 100 million tons of CO2 can be saved. And that's in an industry that's responsible for quite a big part of the global CO2 emissions. So it's a high impact if we succeed and certainly if our customers succeed to integrate our technology in the best possible way. But it's not only that. If you dive down and understand the marine ecosystems, you get quickly familiar with the risk of having invasive species or alien species being transported around these different ecosystems. We have had, as most of you probably know, the issues on the ballast water side, which to a very large extent is fixed through technology innovation. Now the next focus is hulls, because if a hull is fouled with whatever organisms, they are constituting a quite high risk to actually bring on and transport species that in some cases may be invasive. So several ports around the world are requiring documentation on how well the hull is maintained, how to try to make a risk evaluation of the fouling condition. Jone Peter Reistadler, Of course, this drives industry, meaning the shipping community into investing in high performing much more reliable at fabric coatings that maybe they had to do in the past, so a negative. Jone Peter Reistadler, Hard for having a family condition will likely result in a non accepted port calls with a lot of extra work and cleaning somewhere out in the ocean, these are the two main factors driving the development of. premium antifouling coatings and they are taking a bigger share of the total market than before. These are the two driving forces. And the third one is trying to optimize material use. And that goes for any industry in any condition, of course, right? Don't use excessive amounts of anything. And in our case, with our super small or minimal amounts of SelectOpe that's used per liter paint, it is a part, it's actually a tool to see if the paint maker can optimize and reduce the amount of chemicals used or biocides in the paint itself. without compromising performance. And there are a few examples of that. That's not the only way forward, but there are a few examples of that. So that's the third trend that may come along, trying to bring down the buy side of loadings to a lower level than what's been used in the past without sacrificing performance in any shape or form. Three good reasons to go to work and three good reasons to speak to you as hopeful investors in iTech. Over the quarter, we have had very exciting news. For us, it's not every day that new customers come on board and certainly not in combination with a new, very broad-spectrum premium anti-fouling coating. Here we are with PPG's new anti-fouling coating called Nexion 810 that is containing Celectope. And that's replacing the previous Nexium products year over year here, although they will probably run in parallel for some time. It's a copper-free, low-bicidal, self-polishing paint with very strong emphasis on better performance, emission reduction, and sustainability, which all goes fully in line with what we hope that our customers will do when they take maximum use of our technology. Again, it's not the only way to use it, but it's one way. So this was a major event for us, although we've been working with PPG for more than 15 years, I think. Finally, things came into place, and here we are with the Nexion 810. We're excited to see what that would bring for us and the industry in the many years that are ahead of this product. So that also brings us into the now almost famous customer charge. As you know, there are only nine customers in this industry, if we focus on the shipping part of it, that make any difference. And if you're going to be really tough on these nine numbers, it's actually boils down to six that are controlling 80% of the global market. So we're expanding that list a bit beyond those six, because there are a few that are really big on a local geographical level. And there's one that are emerging that will probably take much more space moving forward. The interesting thing here is again the launch of PPG, which is a green checkmark, and that is a dry docking product that can also be applied as a new building stage, but it's certainly designed for five-year service. Then we also had adjusted the potential launch column a bit. One thing is that we were a bit optimistic in the test scheme on that final fine-tuning project that was to clarify and approve the product for launch. That was taking a bit longer time, which is not an indication of issues at all. It's just an indication that things takes time in an industry like this, but there's no major changes other than a short delay in time. But on the other hand, there is a new customer showing up on the radar that we have engaged in on licensing agreements and commercial discussions. None of that is complete, but it came much faster than we expected. So we added that as another second blue checkmark because it certainly appears like something is cooking, although I cannot really set a firm timeframe on it. But we believe that within 10 to 18 months, which is quite broad window, there is a chance that these two materializes. Again, be a bit patient on those timelines, but at least it's in the right frame of the development process to believe in that. So both of those blue check marks are products that are either alone going to cover both the dry dock and new building or they're actually more than one product in pipeline which will then cover either new building and or the dry dock. So let's see how that plays out but it's clearly interesting activity ongoing. So that's on the customer side and We also have to show the strong position that Selecto has, in this case at Shigoku Marine Paints, this pioneering customer, also the largest contributor to the top line. When they display some of the products, should be said, at the Sea Japan exhibition in Japan, in Tokyo, not too long ago and this is a picture of how that looks and it's uh of course from an itech perspective extremely encouraging to see how well they attach to the brand how well they take you so the very specific mode of action in our molecule which is a repellent technology in sharp contrast to all other technologies used in the market. So the small dosages, the biological effect that we have, the biotech approach that lies behind the research is now brought forward and used by one of the three biggest paint makers in the world. In this case, Chagokumari Paint. So of course, it's warming for our entrepreneurial team that has been working for this for 15 to 20 years. Let's see that this is now coming through in this way. The final push before I leave to Magnus here to present some financials is the overall industry ambitions pushed by IMO to reduce greenhouse gases. This is a slide you've seen many times before, but it's important to reiterate the fact that 2030 means a milestone. It's associated with the milestone of reducing 40% CO2 per transport work. That's quite a big difference from where the industry is today. So ways to go and more premium antifouling and more other technologies need to come on the board of ships to achieve this. Looking forward, obviously, some sort of energy transition is needed. Fossil fuels will probably move out, at least if we believe the targets of IMO. Already, which is quite near term, if you think about it, 2050, the whole industry is supposed to be net zero, almost net zero greenhouse gas by 2050. And that's a significant undertaking to achieve that. Everybody knows that that's conversion to different fuels, which are much more expensive than today's fuels, meaning efficiency measures need to be fully in place and proven before that step can be taken. Again, that plays in favor for the marine coating industry and hopefully Select Hope continues to play a big part in that transition. But there's also other aspects coming in like the EU emission trade system that's going to actually hit the cost side of any transporter I think next year starting or at least 2026. And then there are different indexes on the ships that are also being measured that may have an impact on financing capabilities. and or charter rates. So many different things are now in place to step by step transform this very important industry for globalization into something that is probably the most sustainable transport sector per ton goods shipped that can be put in place. So that supply chain is important. We really happen to be part of that. Now I leave to Magnus to review financials and some words on production, because that also is part of Magnus' responsibilities. So go ahead, Magnus.

Thank you, Philip. It's very nice after the encouraging talk about the customer development and all the traction we gain from customers to look in a little bit more to the financials and It's very nice to present after the hiccup in the last quarter to present a growth curve on the top line again, where we should be and hopefully will continue to be moving forward. You can also see that on the profit level, the material level, we are growing a little bit. But of course, the quite weak quarter, last quarter, still has an effect and will have so over the year. when you're talking about the 12-month rolling. And also that we're keeping the operating cost levels somewhat intact. We will come back to that later on as well, concerning the ED cost and stuff like that. But overall, it's really nice to show you the growth uptake and that we are also increasing the earnings. And a little bit more detail, as Philip said, we had a strong growth on the sales side We're doing 24%, giving us the best quarter ever on the turnover. When we're looking into the operating profits, then we grow with 9% on the EBITDA level. And that should be said, it's compared to a very strong quarter last year. So that is very satisfying. But taking into account the cost side as well. Of course, we are significantly burdened by the EDA-related cost that amounts to roughly 1.3 million SEK this month. Well, this quarter, I mean. We should also take into account that this is the first quarter where we have the full effects of our transfer into new premises, new laboratories, etc. We've set a costume. But we did discuss the customers before. C&P continues with very strong growth with 30% up compared to last year. And as Philip said, PPP launched a new product in the quarter and it's already impacting on turnover. It's the third customer that shows some impact with 4% of the actual turnover. And we had some interesting news during the quarter as well where We concluded that we now, with all the deliveries we made to customers over the time, has exceeded over 20 metric tons of selector. And it should be said also that in every one liter of paint, it's only one to two grams of selector. So it's quite a lot of liters of paint that has been out there. Jan-Willem Wasmann, Taking this day also would like to go in a little bit to the balance sheet it's not common that we discuss it, but as we all see, we have a very strong balance sheet, we have a good conversion rate with a strong cash balance. Jan-Willem Wasmann, Very much depending on that we have a so far, a very low net worth of capital it's only 7% on 12 month rolling. It should also be said that we will have to spend some money over the year. We will soon, maybe not this year, but soon into next year, come into a tax payment position since our tax assets will be reduced down to zero. And then we start to pay tax, of course. We are debt-free. That's very important to say. And we're also repaid over 60 million SEK that we borrowed from the Swedish Energy Agency and Almi over the year of 13 to 18. We have the final royalty payment to the energy agency in Q3 of around 800,000 SEK. So that's not really burning us. So what will we use cash for? Well, of course we will need to increase working capital a bit. because we are transitioning to a different supplier setup where we would need to take a little bit higher responsibility on the working capital. We also announced that we are on a dividend scheme with the company, which we intend to move forward over the years. And then, as Filip has said in other corporate reports and also in the annual report a little bit, we are assessing new growth plans and potential execution of those, of course. We are strongly equipped with almost 100 million SEK in cash and we will hopefully find very good ways of putting this cash into work. So a little bit about production as well, which is my responsibility as well. Today we have one main manufacturer continuously running in this industrial scale production. if they are not on the full scale of their production, but almost. But in order to strengthen this, we're also on the verge to reopen our cooperation with a second supplier, which is a very interesting, also a large medical company, medical API company in India. But I think that the more interesting part here is that we, late last year we did reveal that we are putting some investments into a new supplier which is a specialized contracted research and manufacturing supplier where we have invested in the familiarization on their site and they are now investing in facilities and we have the aim to start delivering from them in q3 q4 this year so why are we broadening the suppliers i think it's very important because we need to secure the supplier redundancy. Sitting on only one or two suppliers is not healthy for a company like us, where we need to deliver timely to our customers. Of course, we also would like to increase the process yield. With every increase in the process yield, of course, reduce cost, but it also improves the production sustainability. And the focus is, of course, not on cost, But when, for example, if we succeed in establishing higher recycling of raw materials, et cetera, which will of course reduce our carbon footprint. And then the third part is we want to secure the most efficient production setup. And that's not talking only about the process. It's talking about everything around the production. It's process, it's the material handling, it's logistics, et cetera. where we want to achieve the highest possible customer satisfaction and, of course, the most attractive total production costs. So then I leave it for you, Philip, after this short financial run-through. Finally, we had a new amount of sheets.