I-Tech AB

Hello and welcome to today's presentation with iTech. With us presenting today, we have Magnus Hanell, Acting CEO, and Cecilia Olausson, Director of Regulatory Affairs. If you'd like to ask any questions, you can use the form that is located to the right, and we'll take that up after the presentation during the Q&A. And with that said, please go ahead with your presentation.

Hello, everyone. A very warm welcome. this August morning with a little bit bad weather outside, but hopefully a nice warm message from ourselves here. Today I'm here, Magnus Enel. I'm in the role as Acting CEO and also Cecilia Olausson besides me. So I'm going to lead you through this webcast and the Q1 future report of iTech. I would like to start by just giving, for those who haven't listened in to us earlier that much, give you a short background on what iTech is, what we do and why we do it. And I think most of you know that we are a listed company. We've been on the Nasdaq Stock Exchange since 2018. We're basing the company on a unique and protected technology, i.e. the Select Hope. And what does this product do? We have, so to speak, a proven ingredient biotechnology in Selecto that we add to the mixture of paints. And when added that and when the Selecto is attached to the surf or on the surface of a ship, it repels all the barnacles that try to settle. which is a very unique most of the biocides out there today usually kill the organisms but we repel them instead so after a few hours they go back to the normal state and the purpose of this is of course to improve shipping and improve by enhancing the power of coatings uh i make sure that we have the best coatings available. And the result of this is that we produce lower emissions to air and sea by reducing the carbon footprint from the fuel burned in the ships. And I take as company has a strong growth behind us and we have hopefully a strong growth ahead of us. Today we have more than 30 available products on the global paint market, so to speak. And six of the nine largest paint companies actually produce commercial paints sold to the shipping industry. This has led to that we have produced and delivered more than 20 metric tons of Select Hope. And you should remember, I haven't said it today, but earlier, that we only use as low as 0.1% of the total volume in the paint bucket is Select Hope. So 20 metric tons goes to a lot of paint. And in fact, there are more than 2,500 ships out there using the technology today. And with such a good product, we also would like to have a good market opportunity, and we do have. We estimate that the total market opportunity for Selecto is somewhere between 350 and 500 million US dollars, which is far from where we are today, but hopefully we can gain it over the years to come. And just a glimpse of the quarter, we are continuing growing, both in turnover and profit. And in fact, it is our best quarter ever again. On the sales side, it's driven a lot by Japan and Korea, which are our most significant markets today, contributing with 35% respective, 50% of the sales. And for the quarter, we amount to almost $43 million in sales. compared to the 33 million SEK last year, resulting in an EBIT margin of 24%, slightly above last year. We're coming back to the reason why it's not more later on, but it gives us a solid or a very good net result of almost 9 million Swedish kronor compared to 7 million last year. So looking into why we are on the market today, because we know that there is a huge demand for reduction of emissions. Today, the seabourn trade stands for almost 3% of the global carbon footprint. And we know that there is over 100 million tons of CO2 in potential savings only on the coatings. Coming from the base today of 800 metric tons rough clearing carbon dioxide emissions from the shipping, that is a significant part. And the role of selector can really make a difference in the savings for coatings. The second part of why we exist is actually to protect the marine ecosystem. Today, we know that alien invasive species are regarded as the second biggest cause of extinction of species. That means if we are having fouled hulls in Asia or in other places in the world that are bringing organisms into the oceans close by in another place, that is a significant risk of actually introducing new invasive species and also extinction of other species. So that is a really focused area of this. And the third part is the material optimization. All the trends are moving into more optimized biocidal composition. And what do we mean by that? It means that we're trying to reduce the biocides that are in the paint. As I said before, we only use 0.1% of Selecto, gaining for barnacles the same effect that 30, 40 or 50% of copper do. By reducing a lot of other biocides in the paint bucket, we can also increase or utilize a much better material optimization. Then looking into the general trends. As I talked before, there is a huge need of reducing carbon dioxide, not only in the shipping industry, but the shipping industry as such, through IMO, which is the International Maritime Organization, it's a UN body, they have set the target that we should get to zero, net zero, or close to net zero greenhouse gases by 2050. I said also earlier that we are today producing 800 million tons of carbon dioxide. That should be reduced by 40% until 2030. And the base for this reduction, the 40% reduction, is actually 2008. So we should reduce it from the more than 1 billion metric tons that we have to 28. Jone Peter Reistadler, and down to just about 600 in 2030 that's the difference of. Jone Peter Reistadler, Almost 200 metric tons that are to produce on into 2030 and then we have another indicative checkpoint that we should be on a 70% reduction until 2040 and then finally the net zero by 2050, of course, we can't do this alone, but. Selector is an important part of making sure that we are utilizing the best systems for the hull and giving the best results with the lowest emissions. To make sure that this happens, there are a few initiatives introduced. One is that they have introduced a carbon intensity index, which is an operational measurement where you have a classification of each ship and how well they operate and how energy efficient they are operating the ship. So that is ongoing and it's an ongoing reduction in order to keep the high grades. Then we have the energy efficiency index, which means that you're looking into how well you have designed the ship. So that is what the shipyards are looking into when they're designing and producing the new ships. And then we also have the upcoming EU emission trade system where it also will start to cost a lot of money to have the carbon dioxide emissions. And so now we're giving you a slightly good view, I hope, why we're doing this, what we're doing and how we're doing it. But also, I will come back to the customer development and the Porter as such. But as most of you also are aware of, we are in a position right now with the renewal of our certification in EU. So Cecilia will give you a good overview on what we have ahead of us in that sense.

Yes, thank you. Yes, so... This is where we're at at the moment. We're in the middle of the picture at the socio-economic analysis process. So... We have gone through working group meetings and we have received a BPC opinion where ECHA and the member states agreed to the initial proposal made by Norway. Which means that for Selecto to remain on the European market, we need to demonstrate that Selecto is needed for the maritime industry. And as you can see, we also include medetomidine here, because that is the name that is used during the assessment. So this is the active substance name for Celectope. We, or you as stakeholders, can provide input to this process, and I will talk a bit more about that later. Once the socio-economic process is done, to demonstrate the need of Solecto, that will be discussed by the Standing Committee on Biosilo Product, which is organized by the European Commission, and is consistent of the member states. And they will look at what has been submitted, both from us, and from other stakeholders. And then basically they will consider, is there enough input or has a need for select hope been demonstrated that could override the recommendation from the BPC recommending then that select hope should not be approved in Europe. Following that discussion, it could be one discussion, it could be more discussions. So therefore, the timelines are a bit, they're not exact. This will then move into a voting procedure where the member states then vote on if select hope should remain on the European market or not. So the socioeconomic analysis and the process. So, as I mentioned, ECHA has concluded that medetomidine, the active substance in Celecto, should not be renewed on the basis of endocrine disruption. And as we previously communicated, we still believe that this conclusion is flawed and that the scientific assessment has not been thorough enough. However, independent on this recommendation, SelectO can still be approved if certain conditions are met. And there, you need to show that a non-renewal will have a negative impact on the EU. It could be negative impact on society. It could be financial negative impact. It could be environmental negative impact. And all this information is then collected in a public consultation where interested stakeholders, such as paint makers, ship owners, shipyards, et cetera, can contribute. This is a standard process. There has been numerous consultations previously, and there are consultations ongoing as we speak. Looking historically, a majority of those substances has been renewed. So we are positive. Looking at why Celecto should remain on the market, it brings socioeconomic benefits, which we have also shown in an extensive report that will be submitted from ITEC. And what we can see is Celecto helps reduce fuel consumption in ship. It limits the greenhouse gas emission. It helps prevent spreading of invasive species, as Magnus talked about. But we can also see an overall benefit for the environment if Celecto remains on the market, since it will help reduce the use of biocides, for example, to a lower amount released into the environment. So the public consultation will open soon. Exactly when is something we're not informed about, unfortunately. What we know from the moment is that commission expects it to start end of August, beginning of September. Of course, we will inform all our stakeholders when this happens. It will be launched at the ECHA website. And Any information that you would like to submit can be done so confidentially, if you would like. So what type of information are we looking for? Well, details on Meditomedine and Salictope's economic and environmental benefits for the world's shipping industry. Of course, European Commission and ECHA are most interested in information around EU. But of course, shipping is a global business. So we are interested in any information highlighting the need of Celecto. Other information that could be submitted is proof that Mediterranean does not have endocrine disrupting properties when used as an anti-fouling substance. That this has no relevance in this use. information about or concerns about the lack of rigor in the process could also be submitted. So generally, any kind of support is appreciated at this stage.