I-Tech AB

Hello and welcome to today's webdecos presentation with iTech where we have the CEO Marcus Jönsson and the CFO and Director of Operations Magnus Haenel presenting. After the presentation there will be a Q&A so if you have any questions please feel free to use the form located to the right and with that said please go ahead with your presentation.

Thank you very much, Martin. And it's a sunny and crisp winter morning here in Möndal today. And Magnus and I, we look forward to present to you the highlights from the year-end report that was published earlier today. The first picture we have for you is this development of the sales and the profitability of the company. And as we choose to title the year and report, it was a top line sales sprint in the last quarter that crowned this successful year. And we will come back to the details on this in the presentation. But as you see, iTech is a growth company and we are in a very interesting phase at the moment. Of course, great accomplishments start with great people, and this is actually the entirety of the company. So IPEC today is consisting of 16 highly professional team members with, I would say, a very good diversity, both in terms of gender, ethnicity, languages, and of course, competences and key skills. You can see we have a strong R&D team, a strong marketing and sales team, And also then a support team, you could say backing this up with the regulatory affairs and production and synthesis and operations management. So if there are new people in the audience today, just a short recap then of what IPEX is focusing on. So we are in the maritime shipping industry and we have developed solutions to prevent fouling or growth of species on the underwater part of ships. And we are with our solutions then targeting a subset of selected challenges that is facing the maritime industry. If we start with the big and very important one, it's the emissions to air. So the shipping industry is representing about 3% of the world's release of CO2 gases to the atmosphere. And there is a strong drive, you could say, from nations and also the international bodies to reduce the carbon emissions from shipping. There is a number of initiatives that is launched in that direction. And we will come back to that, but fouling them or growth of species underwater is a major drag for the ships trying to run through water. And it's something that would increase the speed, sorry, increase the fuel consumption if you want to maintain the same speed of your ship. Another important topic is the transfer of invasive species where traditional or historically marine shipping has played a key role. Essentially, that is the transfer of different species from different places around the world to local coastal areas. With the risk, of course, of damaging the natural diversity that is present in the local environments. And here you could say ballast water and the growth on the ship's hull have been the key for this, historically. Another important challenge is the emissions to water. of various chemical substances. And of course, then biocides is a part of that, you could say. And that's a challenge that we want to minimize, of course. So Celecto, which is the main product of iTectan, is a Swedish invention from Gothenburg University and from Chalmers. And it's essentially then a substance that targets mainly hard fouling, what we call barnacles. So it is a substance that doesn't kill or harm the organisms, but it actually repels them from settling on the surface. So that has a clear advantage in terms of reducing the drag and thereby the fuel consumption of the ship. It is also then a key to have a clean hull if you want to protect the marine ecosystems from invasive species. And at the same time, Selecto is very, very much more effective and efficient than previous technologies. So the dosage that you need in a paint formulation to reach the desired effect is very low compared to traditional technologies. So it also represents a really huge step forward in terms of reduced emissions to our oceans. And this passion, you could say, for sustainability is really a key part of the DNA of Select Hope and of IPEC as a whole. And today we will actually be presenting to you some really fresh data from an in-docking study that we have recently performed in collaboration with the Safina Group. So the Safina Group, one of their businesses is actually coating consultancy. where they are supporting ship owners when they bring their ships into dry dock to have them repainted and refitted. They are there to advise in what type of coating system to select and what type of coating systems to also apply how and where, etc. And you can say that they target really the top quartile of ship owners that are really interested in performance. So you could say that the data set that we are showing here is also, you could say, among the best cases in the global shipping fleet today, because it is from customers that actually care about the performance of their ships. So previously, iTech have demonstrated a number of successful cases on a ship level, et cetera, where you can see the effect of select hope. And now today, then, we are showing some of the first data on the fleet level, so owners and the fleet level. And this is really exciting. So what we have here is the data is 761 inspected ships. So of course, a small subset of the about 20,000 dry dockings that are happening every year. And this is over a period of time as well, we should say. So it's probably around five to seven years. And since SEDECTO has not been around on the market for more than approximately two dry docking cycles, but we are now able then to find also ships that have been coated with SEDECTO. And that's the data we show here today. So if you start on the left side, this is, you could say, an overview picture of the result of the whole population of around 700 ship sets. And you see two bars here. One is the flat bottom. So that is the bottom of the ship, the underside. And then you have the vertical sides there. And these are two areas that potentially are problematic when you want to avoid fouling, right? And essentially what the data say here, more than 33% of all the inspected ships have more than 10% of animal or barnacle fowl, right? And this is really an unacceptable result in terms of fuel consumption, because this would sort of result in more than 40% additional fuel use to keep the same speed through water. Also, you could say the yellow bar is not the completely perfect result, and only 20% approximately of the fleet have a very good performance and prevention of particles. Out of these 761 observations, we have found then 12 ships that actually have been using Sevecto during this period. And that is the data that is represented to the right here. And you can see there are clear improvements, right? So the number of ships that has absolutely no barnacles has increased more than 50%. And also in general, there is a lower prevalence of barnacle fouling. There is one new, say, observation here, which is orange, which would then signal that you have more than 10% barnacle fouling on the ship's hull. But if you go in and study the report in more detail, you can see that at least some of this fouling comes actually from a coating breakdown. That is the picture you can see on the far right side here of the bow of the ship, where the coating has been damaged by the anchor. And of course, Selecto does nothing there to prevent the fouling. So this is really positive data for us. And of course, a strong group that we will use going forward as well to the relevance of the technology of SelectOpe. And we're really happy to be able to share that today. If we look at the market then, around 1,800 new ships were built during last year. And we have approximately 20,000 dry dockings happening each year where the ship comes in for maintenance and usually for a recoat of especially the anti-fouling coating then underwater. The majority of the market for us, both for new ships and for dry docks, are in Asia, where China is the leading country, but also then followed by Japan and Korea. These are the key markets for us to target. We estimate that the anti-fouling technology market opportunity for iTech is in sort of a gross level around $300 to $500 million. So a lot of growth to go for still. I take today then, we have a unique technology, intellectual property and formulation and process know-how, how to produce and formulate the product. So it's one of our key strengths. We are targeting, you could say, the top coating companies of the world that represents sort of more than 90% of all the antifouling coatings. And that is essentially nine companies where we have a contact and ongoing dialogue with all of them. So the company is asset light in the sense that we are outsourcing production and focusing mainly on the science and the formulation development and the sales and marketing of the product. We today estimate that our penetration is around 3,000 ships out of a global fleet of 110,000 ships. So much more to do. All right. That was short about iTech. So I will hand over now to Magnus to take you through sort of more detailed highlights of 2024. So please go ahead, Marcus.

Thank you very much. And as Marcus said in the beginning, we're very happy to stand here in front of you and present this report. And when we look on sort of the highlights of the Q4 report, we see that we had a very good growth in Q4, but overall also in 2024, we had growth. almost 50% sales growth, which is a very good accomplishment. One of the more important stuff is that our diversification continues. Today or last year, we had 33% of the sales from other than our main customer, Shibuko. Previous year, it was 80%. And I think both the development of going into the further customer base, but also it worth noting that Shibuco had a 20% increase of sales also last year. So it's not that this customer is declining, every customer is growing, but the new customers are growing a little bit more, so to speak, and that is quite reasonable. They're coming into the market, they're growing their product portfolio, etc. And taking these very nice revenues and the gross margin of the company, which I will come back to, where we show a very nice operating profit, which is growing by 94% up to 45.5 millisec. So taking the entire year into account, taking the position of the company, the board has decided also this year to propose an ordinary dividend as well as an extra dividend. They are increasing the ordinary dividend from 75 euro per share to one krona and remain with an extra dividend as previous year. So all in all, this gives a dividend to the shareholders of 175, corresponding to roughly 53% of the net profit for the year. And going a little bit more into detail, what does this mean? Of course, we have another record year. It's both a record quarter, but also overall record year with almost 180 million in sales we have a very nice still gross margin of 53 it's worth noting also here that that uh it's slightly increased during q4 also come back again but this is an effect of the investments were done in enhancing production and also in order to reduce the the production cost and that uh will continue over time. It will not be a step change, but we do see that we will be able to increase with additional percentages over the coming periods. And we talk a lot about our extra costs, but of course we have significant operating costs in the company as well, I think you all know that we have a business model with a lot of leverage in it. And now, for the first time, we actually achieved 30% EBITDA margin despite all these extra costs on the ED situation. So that is also indeed very good to see. And the cash conversion continues. We had... We were building quite a lot of network and capital over the year, and that is due to prepayments for production, as we have been discussing in previous calls, but also an effect of the significant increase in sales during the last quarter. And coming back to the geographical spread, we clearly see that it is Northeast Asia, just as Markus said before. Northeast Asia is where we really drive the sales. We increased the total sales to Asia to 97% this year. It's almost 3% in Europe. And it's so little to the rest of the world so far that it actually doesn't show in the graph. And when we look into the distribution of these 97%, we see that Korea today, which is the main market to go to in the beginning for all our customers. Shibuco started there. The other customers are starting there as well. But that is sort of the main market to start in. And that today represents 50% of our total sales. And Japan is very strong still. It's 30%. And China up to 13%. And hopefully we can grow that even further over the coming periods. And then the rest of Asia is going towards Singapore, the small 4%. But there is a Really nice picture showing, not showing the growth, but showing the importance of Asia for our products and how well they accept it over there. So it's been an eventful year. Sometimes you sit in the office and you think, well, nothing is happening, but a lot is happening. And on the operations side, we have going into new supply agreements and we have new products launched by our customers. On the leadership, it happened a lot. We had our previous CEO, he resigned and went up to being a chairman of the board. Previous this year, I took over as an interim CEO. And before coming in here with Markus, who will lead us in the future. And we also increased the additional capabilities in the team, so to speak. Marcus, you can have the happy announcement on the right.