Nexam Chemical Holding AB (publ)

welcome to this year-end presentation with cleantech company nexum chemical holding to present i'm pleased to welcome ceo ronnie turnquist and cfo marcus nyberg after the presentation there will be a q a with equity analyst and viewers can ask their questions in the live chat so with that ronnie please go ahead with your presentation

Thank you, Mattias. Thank you for having us and thank you for watching our presentation of the fourth quarter at Nexam Chemical. I will do this presentation shared together with Markus Nyberg, our CFO. In summary, you can say that we have made substantial progress in the company and continue to build on our resilience, although we have a challenging market right now. Nixam Chemical is about making plastics better and more sustainable, working with additives and we have a significant ongoing investment in R&D and a lot of patented solutions for the future. So to give introduction for the new viewers about the company, we provide innovative additives to the plastics market to meet increasing challenges. And based on the same chemical and technical concepts, our additives land in very wide market segments. anything from lightweighting and miniaturization, working with small chips, up to providing solutions for airplane engines and other big structures. We also work very much in the area of renewable energy, in particular wind energy, and increasingly in the area of waste and recycling, and both of those are driven by strong global megatrends. We have segmented our business areas into the effect that we provide to our customers in order to improve their business models. So it's divided into four areas. One is lightweighting, where we provide additives that makes it possible to produce structural foams from plastics, lightweight construction materials. We have an area called high temperature where we can increase the temperature resistance of the most temperature resistant polymer materials there are in the world. We have one area, aesthetics, which acts towards improving the looks of plastics, providing the right color, providing durability of those colors and of the plastic itself. so that it suits the application and then we have our growing area where we put a lot of energy and effort right now is to improve recycled plastic materials and take them from being a low quality product to be able to make more advanced products with recycled materials through our additives. I will go a little bit deeper into the recycling area because it is an area which is quite hot right now. It is a very strongly growing part of the plastic industry and it's very relevant to creating a more sustainable world. So what we have is a portfolio of tailored additives that suit a broad range of applications. In every case, when we manage to create a deal together with our customers, In this area it is always based on a sound business case for ourselves and for our customers. And what it does is really adding a small percentage of an additive into a plastic recycled stream and thereby increasing what you can do with it, the application level so to say. It can also be used to upgrade the poorest qualities of recycled materials into something usable. Today the plastic consumption in the world is about 400 million tons and roughly just below 10% of those are recycled. If you look further, another five to ten years, it's predicted that the plastic consumption in the world will increase quite drastically. But there are initiatives and regulations and so on in many regions, not only here in Europe, also to a great deal in, for example, most Asian countries and many other countries, to increase the portion of recycling. And we contribute to the ability to really use those recycled materials. Just to put a point on the value proposition that we bring to our customers, it is often driven by economical reasoning. A very good recycled material, for example recycled PET from drinking bottles, can be used in many different applications but this is an example where they use it for other food packaging material. They need to use 80% of an expensive high grade material, 10% of lower grade recycled material at lower cost and about 10% of virgin material. and by the addition of a little bit maybe one or two percent of an additive from Nexam they can reduce the amount of the expensive material to maybe 30 percent and use much more of the lower cost materials. so in this calculation example for food packaging you can reduce the raw material cost with 30 percent on the on the materials put inside you add six percent because our additive costs something but the resulting total cost saving of the product is 25 percent this is a typical example for all customers i would say within the area of recycling So always there is a sustainability aspect to it, definitely, but there is also an economic aspect to it. When plastic materials are degraded, the molecules are shortened. In order to regain the properties of a new material, you need to lengthen the molecules again. This is the kind of core scientific idea behind our additives. This has been scientifically validated by the University of Torino in Italy where they have simulated multiple recycling processes by several recycling operations. In this case it was nine and you see that the numbers go down with the increasing number of recycling steps. And this is data so to say to show that the material becomes weaker and weaker and more and more degraded with more recycling steps. So you would say that maybe a maximum of five recycling loops can be allowed or something like this. However, with our additives, you see here the degradation increasing, you get shorter polymer chains. With our additives, we can bring it back. We, so to say, glue the molecules back together in the recycling process. So, if you introduce this in the ninth recycling loop, you get back to the same kind of material that you had after only four recycling loops. And if you would do this earlier, for example in the fourth loop, then you would come close to how the material was from the beginning. So that's the basic function of our additives in the recycling scene. If we look at the world around us, we have these 400 million tons of plastics. It's slightly increasing year by year. About 35 million tons are mechanically recycled and two tons are based on chemical recycling, a more advanced and expensive way of doing recycling. And that is also shared with bio-based plastic materials. So it's small but it's about 10%. We focus on the area of mechanical recycling because we believe that this will be the volume driver to manage this challenge in the world because of the cost situation. You also see here a split of the various materials, polypropylene, PPE, LDPE, so polypropylene is used for example in ice cream boxes or car components, LDPE is the typical plastic bag material, HDPP is also rigid packaging you could say, PET, drinking bottles is the biggest market there, PVC etc. Our reactive recycling technology covers more than 50% of the plastic volumes. We are specialized in the polypropylene and polyethylene and the PETs and some other you could call other thermoplastic materials. We were also active but this is the main drivers. So the patents that we have and the technologies that we sit on are applicable to the majority of the plastics out there. So that is a little bit of our position in that field. Coming back now to how business is going right now financially. In the quarter four we had sales that were slightly lower than the quarter before. We had the same challenge that we had in quarter three that a few of our customers in the specific field of PET foam had a very difficult market. And this led to quite a substantial reduction of the sales into that segment. But on the other hand, we have been quite successful in business development. So we were able to cover for almost all of that loss. The gross margin continues to increase. We had now 47% a year ago. We were at 44%. Marcus will come back to that figure a little bit. The EBITDA, which is a cash flow indicator, was 2 million and 1.6 at the higher turnover a year ago. So our ability to create earnings and cash flow from what we do has increased. The cash flow in the quarter was the total cash flow in the quarter was a little bit on the negative side. It was minus 5.5 million Swedish, minus 7.6 a year ago. And this was really a temporary effect. It's already gone now due to late incoming key raw materials that pushed deliveries too late in the quarter. Hence the invoices weren't due at the change of the year. The financial stability that we have achieved is quite remarkable. We fund everything we do, technical development, business development and the daily operations with our own cash flow. We had at the end of the quarter 20 million of an unused credit facility. It has now been increased to 25 million Swedish kronor and is still unutilized. So we have a very good financial stability. And just a reflection on this. When we had board meetings a year ago, we talked for one hour about the cash flow situation. We had a board meeting yesterday. We talked for a few minutes about the cash flow situation because it is so much more stable now. And all our energy goes into business development and increasing sales. So over the year we had a slight growth, approximately 200 million Swedish krona sales compared to 190 last year. And the EBITDA increased to 8.1 million compared to minus 5.9 the year before. So we are increasing our performance in terms of earnings generation at similar sales. We also have a lot of market activities, business development activity. One example is that we are now really trying hard to conquer the central European markets where Nexam have historically been quite weak with the business development manager based in Germany. We have had in the quarter the first real full industrial scale orders in reactive recycling additives for a really big major customer. So we're moving in from let's say a lot of small different customers in recycling into bigger scenarios. We've also received a decision to grant a patent for reactive recycling for polypropylene which is about 20% of the plastics market. And we have also received in other areas structural composites where we're also active. We've spent one and a half year of R&D and testing and so on with a very big customer that can become one of our biggest. And it's finally into full-scale production orders now. And many such, you could say, business development activities going forward. I would say in quarter four, the one thing I'm most happy with is that we have a very strong pipeline and loads of activity in the business development area. We have many, a lot of customer interest, especially within recycling, but also within all other areas, really. and then we we increased this credit facility through the swedish export credit agency which was a bit of a long process but now it's it's done so with that i would like to leave the word to marcus to dive a bit deeper into the financials thank you ronnie uh i will i will give you some uh some more details about the financial performance during the fourth quarter

As Ronny mentioned, we ended up with 48.6 in status, a little bit lower than a year ago, but we had a better margin and we continue really to focus on our cost control. We ended up with an EBITDA of 2 million SEK. We have a The cash flow during the quarter was minus 5.5. And as Ronny mentioned, that is due to that we had lots of raw material coming in a little bit later than expected. Then we had to pay it before year-end. We convert it and we sell it to the customers. So they haven't paid us at year-end. You can actually see it in the balance sheet. If you look at the accounts receivable, you can see it actually has increased compared to last year. And for accounts payable, you have the opposite. That's actually decreased. So that's a temporary thing. And as Ronny mentioned, we also got this additional credit facility from EQN. And for us, it's really good that we can see that our our banks and so on are really supporting us and really believe in our business and our business case. And then let's move on. And here we have actually the figures coming from the cash flow. You can see the net cash flow has really improved compared to 22 and 23 and also our operating cash flow. So we are really on the right track here. when it comes to our cash flow. And that we also can generate cash flow within the current business. And then we go into the margin, and now we actually have improved the margin for two years, actually up to eight quarters. We now have 47.4, if I remember correctly. And that's on a quite stable level, to be honest. Now it will depend a little bit on the customer mix and the product mix, but we think that is a long-term long-term margin that we can have. And then I'm heading back to Ronny again, so please go ahead.