I-Tech AB

Welcome to this presentation where iTech walks us through the interim report from the first quarter 2025. With us today is Marcus Jönsson, CEO of iTech.

Welcome to this webcast that is being broadcasted from Vendal today, where we are going to present the Q1 report for iTech. I will dive straight into our development and showing you the rolling 12 month results, which continue to look very good. So the positive momentum that we saw on the business throughout 2024 has continued into Q1 this year. So we come to that in here where you can see more regarding the strong start so net sales then were up nearly 50% and closely trailing the record quarter Q4 2024 so and it amounted to approximately 57 million SEC and then the quarter last year was 38 so a really solid growth there we also see that that we have a healthy increase in that we were giving also, I think, during Q4 or the later part of 2024, which has to do with our sort of optimization of our supply chain. EBITDA landed close to 20 million SEC, which is almost a doubling, up 76% at least over last year. So very good results there. And the same with the EBIT, which was 7.7 million SEC. cash flow plus 26 and then puts us at the cash balance of 126 million SEK. So continuously very strong finances then. So, EBITDA margin landed on 35%, which was also, I'd say, a new record in that sense. However, we are seeing then that we have increasing headwind in terms of currency, and that's linked to our operational currency, the US dollar, and sort of the appreciating value of the dollar versus Swedish crowns, right? And then we see we have negative short, medium, but also then longer-term effects on the business, if discontinues, right? So that is something we will see increasingly throughout the year. But overall, then we would say a very, very good and strong solid If we look at the geographical spread of sales during Q1, you can see that Asia even increased a little bit over the full year 2024. So now it's 99% of the sales to Asia and only around 1%, I think 1.3, 1.4 to Europe. And you can see that also the split between the countries in Asia changed in Q1 compared to the full year 2024. So during the full year 2024 approximately half of the sales was to the Korean market and then we have seen now a shift here in Q1 that actually Korea represents a third, Japan approximately a third, a little bit more and then China then growing strongly in Q1 so almost one third from China. So that is a recent development right but you can see that Asia is dominating as a region for us and for SAILS. And now we come to what is changing then and definitely I think it has been a turbulent start to the year, I would say, with the new administration in the US and all the executive orders, etc. coming out of there. And we definitely see this impacting the outlook and really impacting trade and the shipbuilding industry. We do not see it yet impacting our business. And that's, of course, what you see in the numbers. But really, we do see rougher seas ahead here. If we start with the shipping market overall, I mean, we are still in positive territory and we are sort of 17 percent over a 10 year average. But we see now this is turning and that, for instance, is seen in charter regulations. and that its demand is softening a little bit for trade. There was a very strong growth during 2024. So the seaborne trade measured in ton miles was growing by nearly 6%. And that's the fastest expansion in 14 years. And the growth in volume was 2.1%. And of course, you could say the trade miles or the ton miles growth take a longer route, et cetera, during last year's, et cetera. So there has been a really positive momentum that is shifting. We see that with the sort of the current policy landscape, then if you look at North America will be heavily WTO that we have been sort of reading here in front before the report. So what we see then, or the predictions from these two institutions is that North America is expected to drop 12.6% in terms of exports and 9.6% in terms of imports during 2025. And the US represents about 12% of world trade. So in all in all, it's subtracting 1.7 percentage from the trade growth and turning then the overall figure to zero or slightly negative depending on what source that you're reading here. So essentially from the prediction of an expansion we are now moving into a sort of moving sideways or even going down and I think also the signals for a recession here can of course that means that this accelerates further. If we look at the deliveries of new vessels, which is important to us, and we will come back to that later on in the presentation as well, that has been a healthy growth. And the projection is still that this will continue to grow in 2025, because essentially the ships that were ordered a number of years ago, those are the ships that will be delivered this year. We saw that the contracting of new ships also grew very much during 2025. But that has really slowed or even halted in the first months of 2025 as a consequence of all the uncertainty that we see in the market. And of course, it has been uncertain times in terms of making investment decisions and placing orders for new ships. There's also been an array of executive orders from the Oval Office and also then one concerning or relating to maritime shipping and US trade and more specifically related to US shipbuilding and sort of on penalizing, you could say on one hand, Chinese-owned, Chinese-operated and port fees that are quite substantial going forward. And of course, the longer term idea with this is to stimulate shipbuilding in the US. So the US today has very, very little part of the global shipbuilding. So it's mainly, you could say, naval vessels and sort of domestic vessels that are being built in the US today. But really, this is a play to stimulate it and we see it more as a long term play. A potential consequence of these USTR measures could actually be or benefit the other North Asian shipbuilding countries like Korea and Japan, essentially because there is a specific penalty on Chinese-built ships. So one way to avoid that then is, of course, to place orders with the Korean or the in sort of waiting for the opportunity to actually build ships in the US. But this is really a long-term play. And I think, I mean, the estimates is it's three to six times more expensive today to build a ship in the US than it is to build it in Asia, right? So it is really a long-term play and not something that we will see affecting shipbuilding shorter. Talking about sort of the, the fundaments then of the global fleet, I mean, significant fleet renewal over time, right? And we see today that if you look in deadweight ton again, that about 42% of the order book now is alternative fuel capable, meaning then that you can use more sustainable fuels, although the majority of those ships are LNG powered, so liquefied natural gas, which is of course not a green fuel in itself, but it has a lower CO2 emission profile than classic bunker fuels. Also, we saw a landmark meeting happening here in April in the IMO, in this what is called the MEPC group, where they actually then made an agreement on emission regulations more globally and also then assigned the price to the emissions It's something that is needed to sort of level the playing field. Up until now, it has really been Europe taking the lead and going ahead and implementing that, for instance, the EU ETS, but also the fuel EU maritime legislation that is coming into force this year, which is essentially mandating use of more renewable fuels going forward. And this is a step in that direction also for the global fleet. So what we see then is significantly more volatile conditions, hesitations for people to place orders and also then essentially some volatility and turmoil in terms of the established shipping routes and trade routes and also cargo being shipped. So essentially, it will definitely impact shipping going forward this year. However, if we look at high tech, then we come back to the small world, we see that the foundation of our value proposition remains strong if we bet them long term, especially with the last comment there on the progress in the IMO regarding sustainable fuels. So the maritime challenges, the key challenges they are facing, including really emission reductions. But also then more and more. And we saw that also from from the more and more regulations regarding the transfer of invasive species and thereby regulation for biofouling management. And of course also the emissions to water, right? So what type of coating solutions that you're using and how that affects the marine life is increasingly in focus going forward. So this remains really strong and sort of with an aging ship fleet and a desire to transition to more green fuels, which are more expensive, definitely having a clean hull is increasingly important. And that has also been pointed out, I think, in this roadmap that we talked about previously as well from the IMO. So where better biofouling management has the potential actually to help improve the efficiency and lower CO2 emissions by up to 25%. from the global shipping field today. And we see a number of initiatives in that sort of direction as well, with the energy efficiency indexes etc. and the carbon high-tensity indexes being put into play and also being developed and going forward. So a very clear path for the IMO and for global shipping so far and some good progress as well during Q1 this year. The case hold of water you could say. And then coming into ITEX world and the challenge of barnacles. Why are they such a bad challenge? And we talked about this a long time or many times before. So this is essentially a recap for our new listeners then. But barnacles, they really have a big impact on drag resistance and the friction in the water for the ship, which increases fuel consumption or results in speed loss. And barnacles, they do thrive in most marine environments. Of course, the warmer the water is, the more activity you have. And they essentially superglue themselves to the surface and are extremely difficult to remove. And essentially, when you try to remove them, you typically damage the ship's coating and essentially so much that you have to go and send the ship for repainting essentially afterwards. Which means that then really the most efficient And we talked about it in Q4 or the year-end presentation as well, right? But what if a third of the global fleet actually was using 36% more fuel than needed just for a day? What would that mean in cost and emissions? And what we presented then, I think already in February, was this slide, right? A new in-docking data study that we conducted in the end of last year, beginning of this year, where essentially we asked Safina, coating partner to ship owners to look at their data and they essentially they give advice and suggest solutions for ship owners what type of coating to put on the ship they were looking into the data sort of on the conditions of over 760 ships and what they could see there when they came in for dry docking then a third of those ships really had completely unacceptable levels of and a third of the underwater area being covered in barnacles, which means then 40% or more additional fuel if you want to sail at the same speed. And what we also found in the study then was that the ships that were coated with Select Hope had a significantly improved condition in terms of that. So almost no or very little barnacles in those cases. And today, actually, then we thought of showing you some data. What does this mean for a ship owner or ship operator? that your ship is fouling and that you have for instance barnacles growing on the ship's hull. So I want to show you some new data then and first we need to talk a little bit about vessel performance. And when we mean that's the performance is essentially, you know, you have a certain RPM on your engine and you can measure then what is the speed I get through water. And you can look at that over time and that essentially you get a plot like this. You can see a lot of dots sort of seemingly all over the place. And of course, there are a lot of things impacting the speed of a ship, right? The wind force, the wind direction, the waves, the wave direction, the currents and so on, right? Hence, you will get this really scatter of data points if you try to measure then what sort of engine power results in what type of speed. And essentially, what you can see, though, is you see here the graph, the speed loss is sort of on the negative x-axis here. you have versus sort of your set speed. What is this ship supposed to sail at? What speed with certain engine performance, right? And then you can see over time and what you see then is essentially a linear reduction in the speed over time, right? When you go into dry docking and you apply a new anti-fouling coating, then that performance is gained back again. The ship can sail faster through water and you start a new round of degradation. and sort of have to go into docking approximately every five years. So this is sort of a typical data set then for a ship owner. And I was speaking to several of performance monitoring service providers, so essentially companies then that help ship owners to monitor the performance of their ships. So they install essentially sensors and they have softwares and data models to see how the performance of the ship and sort of the speed through water develops over time. And sort of what they told me, you know, looking at their data, one specific service provider said, yeah, typically, you know, I have we have a lot of tankers and bulkerships in our fleet. And what we see on average is all of, you know, all of this data, approximately they lose 7% of the speed over the five year period. And of course, there is variation in this data set. So you have some vessels that have premium antifouling coating that is really optimized for their specific route and the activity level that has close to no speed loss during the five year period. And there are plenty of examples of sort of catastrophic examples. I mean, he mentioned one specific year, he could see a data set of a tanker that was idling outside the coast of Mozambique for three weeks. And essentially after that, the speed was heavily impacted and they sent down divers to look and they could see that both the sides and the flat bottom of the ship 30% or more cover of barnacles and slime and algae etc. So essentially that chip would have to be sent to cleaning and most likely at the cleaning event they would damage the hull coating so much that they probably would have to clean it again very shortly afterwards or actually consider an early dry locking for that chip because it simply wouldn't perform. So I mean this data set is of course covered with examples of ships and how they perform. And then you can say, OK, so what does this mean for a ship owner in terms of trying to translate the speed loss then into money? So we prepared a little case just as a case of example. So the rule of thumb, they say, is, you know, whatever speed loss you have, you can multiply that three times to sort of get an estimate of the additional fuel that you need to recover that speed. So essentially a ship that has a speed loss of 7%. If I want to sail at the same speed, I have to increase the engine power and the fuel consumption three times seven. So 21% actually, the fuel consumption. And of course, that would have a massive impact over five years. And the nice thing here is, of course, if it's a linear effect that happens over time, you can see then, okay, what is the impact, right? So let's say that the ship captain, he was just compensating all the time the speed loss, right, with increasing the engine power and increasing the fuel use. In the end, over this five year period of time here, they would have overconsumed bunker fuel for a value of 1.8 million US dollars. So quite significant. right? The other option that he has is, of course, that, okay, I, you know, we'll just sail slower because it's no problem. You know, there is congestion in the port anyway. We will have to wait when we get to Rotterdam, etc. So we just steam along, you know, slower. But that, of course, also has an economic impact. And that economic impact depends if you are sort of a ship owner that yourself, you're operating the ships and you are doing sort of the the trade service yourself, or if you are a ship owner that just charters your boat to others. And typically, when you charter your boat, you have a fixed daily fee. And I assume the quite low rate here of $15,000, which is quite a low rate considering today's situational conditions in the market. But anyway, then over this five years period, you would have lost 45 days of productive time. That would have an equivalent value of 670,000 US dollars. So also substantial money to be saved by having a better antifouling solution. But then you come to, okay, what is the trade-off then? What is the cost of the premium antifouling versus sort of a basic paint scheme on the ships? And that could be an example we heard is up to $200,000, right? That's the... difference that that can be. So of course, depending on the conditions of the market, are there good rates or are there bad rates, etc. What is the likelihood that the ship owner would put on a high performing coating? It is always a balance and you could say, is there enough money around to spend on service or do I have to save on that as well? So things that actually impact premium coating a lot. And just to reiterate what we've said in the past as well, we do see an increased number of ship owners choosing premium antifouling coating. That has really grown its share in recent years, and we expect that to continue. And that leads me to the market outlook then. So we in iTech, our solution then is used both for new builds and for dry dockings, right? And we estimate then with sort of the 10% increase, there will be around 2000 new vessels being put on the market this year. And the dry dockings, they simply follow, you could say a regular scheme. They have to come in at least every 60 months. However, of course, there is some wiggle room here. And typically what you see with the ship owners now is that times are uncertain, the charter rates are dropping, etc. Then the ship owners are trying to postpone the dry docking as long as possible to maximize the value that they can get because they know that the charter rates will go down. So let's wait and see and not go in for a service event right now. Yeah, I mean, reflecting, you could say our sales, both for new ships or vessels and for dry dockings, then China is dominating. But for new ships, then Japan and Korea are quite sizable markets as well. And that's something we talked about in the past. And the opportunity then for select hope and for good anti-fouling technologies, we estimate to be around three to five hundred million US dollars overall. So that is sort of the market that we're tapping into. So, yes, for the newcomers, our solution is Celectopthen, which is a substance called medetomidine that comes out of pharma. It's used as a sedative in veterinary and human medicine today. And it has the opposite effect on barnacles. It actually makes them temporarily hyperactive so that they cannot settle on the ship's hull. But it doesn't kill or harm the barnacles. It's a temporary and non-lethal effect. It enables coating companies to make more innovative a better performing coating that has a lower also environmental footprint. And it is commercially proven now and used in six out of the nine largest paint companies. We hope to see number seven coming during this year and it is applied then to what we estimate a little bit more than 3,000 chips so far. So we believe we have a very scalable business with plenty of additional potential. I mean three global fleet of 110,000 chips, there is definitely room to grow. Our model is outside asset light. We have outsourced the production and we are looking into continuously optimizing, you could say, our supply chain and production setup. So that is also what we are reaping the benefits of now in the gross margins. We are essentially a knowledge company, so we're based on intellectual property, formulation, know-how, and sort of knowing the customers. And we have a really unique technology with Selecto. There is no direct competition today, but of course, other anti-fouling solutions are available. We also cannot avoid this topic. I mean, to most of you listening in, you are aware of our re-registration process and the challenges that we have faced here in the European Union. And we have continuously talked about that. What we know has happened now is that the standing committee on biocidal products have had this meeting in March with got during the public consultation. So essentially, all stakeholders were able to submit their comments, et cetera, to ECA's proposal and also describe sort of how they use select hope and why you know if they believe it should stay on the market etc right and we did as we have reported earlier receive quite a lot of input in this which we are very happy about so thank you if you also took part in that and that's really important now but we expect this discussion you could say regarding the input and the way forward to continue now also in the june meeting going forward and that the situation will become more clear towards the end of the year. And what is it actually that the European Commission is suggesting? Sort of to give SELICTOPE renewed approval or another decision? What we also can say is that since the current approval of SELICTOPE will end in June this year, we expect now that the standing committee on biocidal product will announce that there is a temporary extension of the current approval. And that is sort of a standard procedure that is done in all these cases, because they typically they drag out in time and they are not able to finalize their assessments in time. So they extend the current approval. So that's of course, we will not lose our license to operate in Europe in the middle of this year because they haven't decided. in the coming month. So that's that on the European situation. I think we are arriving then sort of at the outlook and I think what I want to say here today and we really see increased uncertainty and market turbulence that is affecting the sentiment in the industry. People are avoiding taking decisions whether that is to place orders for new ships or doing service events etc. And the market is sort of reorienting itself in terms of global trade. And of course, the last word is not said here, but definitely it has an impact on our market. And we haven't seen much of it in numbers in Q1, but we just want to flag that this volatility that we keep on talking about, that we have volatility in our sales over the And also we see then, of course, the currency headwinds really weighing in on us during this year, right? Because the US dollars, as I wrote in the report, it has depreciated with approximately 10% during the first quarter. numbers. So really flagging for a worsening macro environment and it's really interesting how quickly this changes. When we presented it in February the signals still overall looked all positive and now that picture is really completely different. So it just tells you a little bit of the volatility in the world that we're living in. Of course Besides that, we are We did announce in the beginning of the year another customer coming on board and we expect them to launch products as well during this year. And also, as we talked about here a number of times, we have business development activities that really have accelerated them. And we, of course, look forward and would like to present more details on this during the year. But there is very good progress and momentum on some very interesting new growth opportunities for the company. So more on that to come. And of course, we continue to work with the operational improvements and we hope to be able to present sort of more on that during the year. And then you can see the effect also in the gross margins. And also you could say now the advocacy regarding regulations and renewed approvals is becoming, you could say, more or less running business, right? So we have sort of signaled during last year that we have taken on higher costs for that. And I mean, we see that continuing for the good part of this year. Essentially, the costs that we have associated with advocacy and new renewal of approvals, etc. So that is what is ahead. All right. That was actually the presentation, Fredrik. And now I'm eagerly awaiting and happy to receive your questions.

Thank you for this presentation, Marcus. We have received some questions here for you. Could you provide any additional detail on what percentage of total net sales CMP and PPG accounted for during this quarter?

Yeah, we have talked about, you could say, diversifying customer base, right? I mean, if you come from sort of like 2023, you know, C&P was representing 80% of sales, essentially, right? And what we saw during 2024 was really a diversity and the use of Senectope. We ended the year essentially with C&P then representing 66% of sales during 2024. So you could say a good solid progress on diversification. That trend is still there and we see actually the same result this year that C&P now in Q1 represents about 66% of the net sales. Meaning then that PPG is, you could say, in that increasing pool of customers that represents 33% of the net sales. I don't have the exact numbers now, unfortunately, for PPG, but, you know, they are coming from a low base, right? But we see them being quite successful and really increasing their sales dramatically. So I think, you know, stay tuned on that to see how that develops during this year. But essentially stable then, you could say, C&P 66%.

Thank you for that answer. I noticed that some major companies have been in the customer portfolio for several years but still represent only a small portion of total sales. Should we expect these to scale up over time or how should we think about this?

That is definitely our ambition and what we, of course, try to convince these customers of, right? You're absolutely right that some customers, you know, they are using our product, Select Hope, in some niche products, right? They are solving specific challenges, for instance, and have had, you could say, yeah, sort of a stable business for these products, right? Our challenge is to convince them then to use them also in the mainstream products, the higher volume products, right? And that is ongoing. And of course, you know, that is, you know, the challenges can be related to technical and essentially they will have to reformulate and implement new technologies. And that could actually be beyond only using Selector, right? Because our product is highly, And if you go in and make changes in the product, it typically takes customers some time to do this. But we are working very actively on that. And really, it's our target that they would also grow their sales going forward.

Thank you. Why is it easier to initiate sales for new wheels compared to dry docking? What is the current share of each segment?

Yeah, it's a very good question. And the success of Select Hope really started in the new build segment, because essentially you can see the effect very, very quickly. So the bottleneck of new shipbuilding is the dry dock. So what the wharfs are doing, they are hurrying to put the ship together so it can hold water. and they put it out in the dock instead, sort of outside the dry dock, in the water, and then they complete the ship there. And at that time the ship is lying still in the water for between 6 to 12 or even 18 months, if it's a very complex ship. And during that time of course the ship is sitting still in the dock, it's warm water, it's summertime, It's a perfect sort of condition for various fowling to settle on the ship. And when the ship is ready, it actually has to pass the sea trial. So they take the ship out to sea and they sail it, you know, they rush the engine, they test it and so on. And it has to sail at a certain speed because that's what the shipbuilder has promised, right, to the customer. And of course, if you have a lot of fouling under the ship's hull, it will not pass these tests. And historically, what they had to do was to bring the ships up in the dry dock again and blast them and put a new layer of paint in. But what they can do with Selector then is essentially they can skip that. So they can have the ship in the water and use specific outfitting paints they have with very strong, good protection against fouling. And then the ship is ready and can be delivered when it's finished. So it is a huge saving and that's easy to see the value of Selecto. For the five-year period, you can hear already there, it takes five years to see the effect of a product. So that's why it takes longer in dry docking. Commercial sales for Selecto started in 2014. So we are essentially now only two dry docking cycles down the road from when we were put on the market. But of course, dry docking is 10 times bigger than the new build, right? So that is the segment where we need to increase the penetration. And hence the data that I was showing now regarding the effect of SelectOpe over a five-year cycle, right, is very important to us, right? Because it clearly shows there is a lot of savings to use SelectOpe also over sort of the full five-year period, not only when you are building chip in the docking.

Thank you. Do you expect the optimized production to balance out negative currency movements on gross margin in the coming quarters or should we expect a somewhat decreasing gross margin?

Sorry, Fredrik. I think I forgot to answer a question also. The split between new build and dry docking. That was part of the earlier question.

Yes, it was. Please.

Yeah, sorry. So, yeah. Historically, we have said we had about 60-40, right? 60%. with our internal target to really grow the dry docking business. And for instance, the PPG product that we talked about is one such product that is really targeting both new build but definitely dry docking business. So it's an important product for us. However, when we analyzed the numbers, we said we had very good growth in 2024 and specifically in the Korean market. where there is a lot of new builds. So I would say it's still 60-40 or even for the full year 2024, it could actually be a little bit higher even for new builds. So we are still analyzing the numbers on that. So it is, you could say, our growth, our untapped market is in the dry docking segment. And that's where we are working, you could say, both technically and directly with the customers. And sorry, could you repeat the question of the gross margin just so I get it right?

Yes, of course. Do you expect the optimized production to balance out negative currency movements of gross margin in the coming quarters? Or should we expect a somewhat decreasing gross margin?

Because of the currency, you mean? Yes. Well, no, I wouldn't say we will see a decrease in gross margin because of the currency as such. I mean, the gross margin, I mean, we are our operational currency is U.S. dollars. Right. So we both buy, you could say, product and selling U.S. dollars. So so that does not affect it per se, you could say. So I think we would see percentage wise that we can continue to improve the gross margin.

Thank you. Next question. You talk about a slowdown in shipping orders and generally weaker shipping industry with rates down, etc. How and when would you expect this to impact ITEC? Presumably it won't impact 2025 much, but could it impact you during 2026?

Well, as I said, the likelihood that we see volatility in our business as well has increased dramatically. So it goes really quickly in today's world, right? How things are changing. So I would say that this year has, you know, it's become less certain where we will end this year, right? And I would say this volatility... already impacts the shipping business, right? And of course, we are upstream of that. So, I mean, already today, there's impact. So we definitely would see that, I would say, this year, right? But we don't know exactly how it will pan out. So I would say already this year, we should expect to see the effects of the ongoing transformation in the global order.

Can you give us an update on how much of your business was represented by C&P in the first quarter?

Yes, 66%. I think that was the first question as well. So they sort of maintain a stable share in Q1 as well.

Thank you. Can you give us an update on how your business with PPG is developing? Is it growing strongly? But you are only presenting one product, I believe.

Well, the fact is that this product that PPG introduced and launched during last year is their new flagship product. So it goes both for new build and for the dry docking segment. They apply, you could say, a little bit differently depending on if it is a dry dock or a new build event. But it is really a flagship product. So it is the product to be in for PPG. So it's quite important for us. And I think we also wrote that in the report. Sales with PPG is up like 300% if you compare it to Q1 last year. And of course, you could say that they basically launched the product during Q1 last year. Of course, you know, it's up from a low base.

Do you think they may include Select Hope in more products?

Yeah, we certainly hope so. And if there will be additional products going forward, yes.

What's your base case on the gross margin going forward on the back of the currency movements headwind? Are we looking at closer to 50%?

No, I mean, we don't give a certain number estimate here going forward. I think that the target is to continue to improve the gross margin per se.

Yes, thank you. We have even more questions here. You did not specify the regulatory costs for this quarter in the report. But judging by the higher external costs both quarter on quarter and year on year, it seems they are higher than in previous quarters. Should we assume this elevated level will continue until a decision is made in the regulatory process?

Yeah, we shouldn't expect them to go down in sort of this year. No, exactly. We expect it to continue to be on a high level, like you say, right now in the Q1 level approximately. And that is due to all the activities that is being done linked to re-registration.

Thank you. Asia accounted for 98% of your sales this quarter and China was the fastest growing market. What is your view on the potential for growth in the Chinese market future?

Well, I think it's a massive opportunity to grow in China. I would say also with C&P, the existing customer and also new customers. So it's such an important market. However, I think we talked about this earlier as well. The conditions in China are very different from Korea when it comes to new build. Most of the Chinese shipyards are in river delta. have in Korea and China. So you could say that the the the fundaments of the business that value proposition is still very strong, right? And that's where the growth opportunity comes in China. I want to say also on the external costs as well, Frederik, sort of, yeah, I mean, we see sort of stable costs, I would say, on the regulatory affairs. I think we also see an increased cost and that is also linked to our business development activities. We see that, you know, we are, of course, increasing our resources here and sort of our efforts on business development. And that's another source of additional costs for us going forward. So it's not only the regulatory associated costs that is making the base for the growth of the external costs.

Thank you. The new product launches you mentioned, are these primarily for the dry docking market or new build markets?

If we speak about this new user, the Asian Codings company, we cannot say yet. We do not exactly know the proposition of those products. So we know they are in the making, but we don't know the details. Hopefully both.

Thank you. Could you elaborate a bit more on the expected currency effects coming quarters? Should we expect that the effect to hit more the coming quarters or Do you have adopted a hedge strategy, for instance, for handling these effects?

No, I think we should expect increased strategy. And of course, it depends on where the currency will go from here, or the exchange rate, essentially. But we haven't seen really the negative impact to that extent yet in Q1. I think we will see more of it in the coming quarters of the year. And then depending on how this develops, it could be even more pronounced effects.

Thank you. Can you elaborate a little on your customers' buying pattern? Are they building inventories in these market conditions or is the top line predominantly driven by higher volume demand from end users?

Yeah, I would say predominantly the demand, right? So everybody wants to avoid building any type of stock, I would say, in the market conditions that we are in now, right? But our customers do need a minimum stock level, right, to actually operate the business because it is... not as predictable with the dry docking business as it is for new builds. A dry docking event, simply a ship owner can decide from one week to another, let's dock this ship, let's see what is available. And of course, to be able to catch such spot business in the dry docking segment, you need to have some basic level of inventory, if you are a paint company. And you need that in many places, because you don't exactly know where your customers will come in. So it's basically demand. That's the answer.

OK. You have a strong cash position. Where is that being allocated in the near future?

Yeah, well, we have a dividend payment that is proposed now by the board to the annual meeting. And that is one thing. And then we will see. I mean, we we need to have a strong cash position, I would say, you know, as a tool. to really secure the ongoing business, but also then to selectively invest in some of the business development activities that we have here. And of course we are counting on the cash position we have to help us with that going forward.

Thank you. How many of your six suppliers have included your products in their broader product lines compared to niche?

How many of the six active customers have included them in broader, in more than niche products? That's a good question. I would expect three to four of them, but that was something I would need to check. But yeah, at least half, I would say.

Thank you. One last question here for you, Marcus. Can you just develop a little bit on the macro and economics effects on new build sales relative to repainting at the moment?

Yeah. No, and good again that we reiterated. So we don't see sort of the turbulence today affecting the new build shorter, right? Because the The ships that are being completed and painted now during 2025, they were ordered several years ago. And sort of the order books for the shipyards in Korea and Japan are, and I would say basically in China as well, are full. They have a lot of work in the coming three to four years. Of course, you could say if there is a severe downturn, people may start to try to get out of the orders of the ships that they have ordered, right? But then we are sort of into really negative territory. So, you know, we haven't seen any effect whatsoever so far of the turbulence, you could say, on the new build, except that sort of the order in in the first quarter. So the filling up of the pipeline, you could say, four or five years down the road, that is what is being affected right now for new business. And as I said, with the service event, that can be affected day to day. So if the rates for charter rates are falling, then the owner can decide to try to postpone because there is some wiggle room. You can wait six months with dry docking your ships. So let's do some additional runs while the business is still here. but also we see that if there is a downturn and you know a softer demand that's typically also when the ship owners do service events right because then there is time you know you're not losing that much money so it can also be eventually a positive drive on on the service and the dry docking business right so i think the problem is that it's it's very difficult to say right now because there are many different signals sort of in pointing in opposite directions thank you

Is your cautious comments regarding the outlook based on actual observations so far in this quarter or the current quarter among customers or just a very general cautionary comment?

It's a strong generally cautionary comment and sort of of course speaking to the customers.

One last question. Have you noted any expansion towards retrofit repainting in your customer's product offering?

Sorry Freddy, could you repeat that one?

Have you noted any expansion towards retrofit repainting area in your customer's product offerings?

More products you mean in that area? Yeah, I would say we saw that trend during 2024. We hope that to continue, right? That we see more and more products that are targeting the dry docking or the service segment, right? So that was a trend that was happening or was positive during the whole last year and which we hope will continue also this year, right? That we will have more products than targeting the dry docking segment.

Thank you. And that was every question we got in for today's presentation. Marcus, any last words for the audience?

No, I mean, thank you very much for listening in and for bringing forward such good questions. Yeah, I hope I did my best to reply to them. And, you know, thank you for the interest and confidence in ITEC and see you in another meeting going forward. So thanks for today.