Polygiene Group AB

Good morning, everyone, and welcome to PolyGene Group's presentation of the first quarter. I am Ulrika Bjork. I'm the CEO of the group, and here is Niklas Blomstedt, the CFO. First, we would like to start to give some summary or like an overview of the quarter before we go into the details. So as you know, before we had three quarters in a row where we have seen business coming back. We have slowly seen growth, the three latest quarters. And now in the first quarter, we have a strong growth, both compared to last year, but also compared quarter over quarter, the Q4. And that is really, really pleasant to present that. And when the growth is strong and we have a good sales increase, we also see on the profitability that it comes immediately when we have this scalable business. Another thing that was very important this quarter is that we had the launch of the Admaster website, and I will come back and talk a little bit more about that later. And then the first quarter is always a very intense period when we visit trade shows and exhibit on the big shows around the world. And that is the perfect opportunity to introduce our new technologies and also to meet and reconnect with the industry. But first, some financial figures.

Yeah, to make a short summary of the first quarter, we can see that sales is 35.1 million SEK versus 28 million SEK. We have a gross margin of 68.7 versus 76.4. The operating cost was down to 18.1 million versus 21.6 million. And as Ulrika said, we have a positive EBITDA of 4.8 million SEK versus minus 1.4 last year, and an EBIT of 3.3 million SEK versus minus 2.8 million SEK. And we also have a positive cash flow of 2.5 million SEK versus minus 1.2 million SEK last year. If you would include the FX impact as well, we have 4.7 versus minus 0.6. And we have a cash of 48.9 versus 47.6. If you look a little bit more on sales, we can see that we are up 25% versus last year. And the main increase is in PolyGene, we increased 70% versus last year, while AdMaster had a smaller increase. The main increase in PolyGene is driven by sales to distributors. We're starting to see that the increase in the inventory levels as well during this quarter. With this increase in PolyGene, we can see that the shares of of Q1 on the total sales is now 45% versus 33% last year, while Admaster is down from 67% to 55%. Region-wise, we can see the increases is coming from APAC and Americas, while EMEA is down 18% versus last year.

So in brief, as we said, sales is up 25%

The lower margin in this quarter versus last year is mainly driven by the sales distributors and also the product mix in Admaster. Cost, as we said, was down 16%. It's driven by less consultants, lower freight, lower marketing cost and test cost. The marketing cost is maybe not the saving. It's more of a different time versus last year. EBITDA of 4.8 million SEK is a margin of 13.7% and the EBITDA of 3.3 million SEK gives us a margin of 9.5%. And as we said, cash flow 2.5 million versus minus 0.6 million SEK.

Thank you, Niklas. It's a pleasure to see these numbers. We can see The financials are very stable. All the key figures are pointing in the right directions. So it's a very, very satisfying morning today. I'm going to go into speak a little bit about the business and some highlights from both Polygene and from Admaster. And as you know, we have splitted the sales and marketing for the both entities. So we have Polygene, the freshness side, and then we have the at MasterSign, who is hard surfaces and protection. So some highlights from our textile business. As we've been communicating here, we had a strong growth from last year's. It's 70% up versus last year. And it's also important to see that we have a small increase from Q4. but we need to keep in mind that the first quarter is always a very slow quarter due to the Chinese New Year when practice we have at least three weeks where it's no sales at all or no production. So of course that also impacts if we compare quarter four to quarter one. The distributors have started placing orders again. We have seen some absence the last month of last year there was no orders from the distributors but now they have start placing orders again and we can also actually have some sometimes now it's been really really tough that we have to ship very urgent because it was out of stock and we had a lot of orders waiting we can also see that the strongest category is sports and outdoor with a growth of 30 percent This is still the biggest segment with a share of over 55%. The home textile was stable. It was flat against last year. And then we have a decrease in lifestyle fashion. And that is driven mainly by one brand that didn't place any orders in Q1. But we have seen it picking up in April now. So hopefully that will be in the full year, not a decrease. The growth is mainly driven by the existing customers. Of course, we have new partners as always. And some examples here is the central martial arts, which is a new segment for us. We are treating boxing gloves and head protection and all these equipment for these kinds of sports. We are treating with both Stay Fresh and Auto Crunch, the combinations. And then we also had a new entrance into the pet industry. I don't know if you remember, we did some cat litter last quarter and now it's coming dog beds. So I think this is a segment that we can grow further on because there is a big interest. So with Black Lab, we have treated these dog beds and leashes and other accessories. And another brand, it's a Chinese brand called Pelliot. It's a sports and outdoor brand. It's a manufacturer, but they also have a lot of retail and online sales. And that's quite big customers and it's also new. We have a lot of positive meetings with brand partners because now we've been around trade shows in US, in Europe, and also in China. And we can see that the discussions with partners is completely different from what it was last year when it was quite hard to get in touch. There was quite low interest for production since the stock levels were so high. But it's completely different now. We have many positive meetings. I just came back from the US from the functional fabric show in Portland, and it was very, very interesting to meet and see the customers and hear what they think and what they believe and what they demand for. So for me, that was really, really interesting. And then, of course, we have the stage fresh bio, which we are promoting to our customers. And we are now in testing phase with some of our customers in Europe. And we know that in US we have to wait to launch until the registration is done within one year, but we are already out promoting it and testing it. And then I would like to give you a small update on the Shedguard development. So this technology is to reduce microfiber shedding and also to protect clothes from peeling. So it's a two side effect technology. We announced at ISPO last year that we are going to launch this innovation project. And in the beginning of this year, we got in contact with, I think it's eight partners who signed up for being an innovation partner and help us to develop this further. So we are now in the final stage of phase one, which means that we are compiling the first test data with these partners. So the trials are made. We got, I think, three of eight. test data back and we are waiting for the rest to take next step. So depending on the results, we will take the decision of how phase two will look like. If the results are satisfying, we will move on to what we call phase two. And that means we're going to offer this as a commercial product for our partners. And if not, if we have to go back and change something, we have to start over again and do new tests. So this could be a development process of at least this year, if the results are not perfect after the first trial. And we can see the interest for this technology is very, very high. I mean, it's so relevant for all the businesses and it's also have a super good benefit for the end consumer where they can have clothes protect the clothes from peeling and thereby extend the lifetime of these garments i hope i can give you a new update in q2 i'm hopeful i've seen some of the results but still we have to collect a lot of data to be able to take the right decisions the process of chemicals application process it's a huge of parameters that you have to adjust it could be dosages and temperatures and when do you put in the chemical before or after specific bath. It could be before or after brushing. There's a lot of processes. So of course, to analyze this will take some time for our technical team. But as I said, I'm very hopeful for this technology. If we move on to product protection and AdMaster, There is some highlights. As we said before, AdMaster is quite flat versus last year, but it's up 33% versus Q4. And that's interesting because we could see that AdMaster dropped in sales the last, I think, two quarters. And to see now that they are bouncing back again, it's really good because their sales are quite flat during the year. It's like not these seasons. So to see this is very satisfying. The launch of the new Edmaster website in January has been very positive. We have good engagement with the visitors. We have all the key metrics. We measures are positive. More visitors. They stay longer at the website. I think the average was four minutes and that's quite a long time. And I think it's because we work really hard to get content for new customers, but also for the existing ones. So all these blog posts, all these things is to work to index the website and. You have to remember this. This website was closed for two years, so there is some. SEO work to do to get it back on track again, but everything points in the right direction. We also can see that the leads coming in. When a customer is filling in a contact that they actually want something. That has increased increased. a lot if you compare to the old website. So I think in March we have at least 1215 qualified leads and qualified leads is when they actually ask to buy something. So I'm super positive and happy for this development. Then we also strengthened the team in AdMaster with an internal sales assistant. And this is because we want to free up time for the business development managers to be more out visiting customers. to be able to put more time in front of the customers. And then we have backup in-house with a sales assistant who can help out with smaller customers, administration work and other things. And this has been turned out very well just after one month. And as you know, AdMaster could be applied in all kinds of materials, all industries. So we have to focus. And that's why we picked three of the categories out to say, this is the focus areas. is where we're going to spend marketing money this is where we're going to go out and actively search for business so it's in the automotive it's in the industrial professional and in the healthcare sector and there were some new customers in admaster as well and just two examples here because they are interesting in many ways we have this sabic it's a saudi arabian company i think it's one of the largest polymer company in the world they are doing these wall panels for hospitals and clean rooms, like antibacterial treatments. And I think this customer could potentially grow and be quite significant, big with us. We can also see on our lead forensic, it's a system we see who is visiting our website and there are a lot of requests and a lot of visitors for companies doing these kind of healthcare clean rooms. So I think that is a huge interest in general. And then we have these piping for agricultural and poultry farms where we treat with Biomaster to keep bacteria and other microbes away. And then we also have projects in the automotive industry. As you know, we try to enter the airline industry, but we also understood that this is, that's even a longer road in, and there are much more cars produced every year than there are flight seats or interior design to airplanes. So we actually switched our focus to just go automotive. And it's a long sales cycle as well. But if you get in and you are nominated, you will be there for a long time. But it takes really long time to get in and be specified. But we're working on it. And then just some general updates. We have a much lighter, more efficient organizations. We had 41 team members versus 47 last year, so it's quite a smaller, more efficient team. But I also think for myself it's been a good process because I'm much closer to the business now and decision. Ways are much faster, so I think. It's good to be a tight tight team and of course also when we don't have the the group since we separated the businesses. We don't need these group functions in the same way as before. And now when we have this new company structure in place, all are aligned. There's a lot of energy in the group. And we also try to focus a little bit more this year on the IR. We have been very low on that last year. Of course, it's hard when the numbers are not with us, but I think we will start to do some more activities to investors. And we're going to start to update our IR website, and it will be launched, I think, end of Q2. And that will be on polyginegroup.com. So that will be a corp site where we have the IR. And then we have Polygine Admaster as the businesses. And this is just to make it more structured and clean. And we also start to prepare for CSRD that's coming. It's a new EU initiative that will be a legal requirement from 2026. But PolyGene believes that we can actually gain a lot of benefits for our business by doing this and collecting this data and do the process as soon as possible. So we actually going to start this year. We have picked a partner and hopefully we could actually report next year. So 2024 years. annual report could be CSRD compliant. Hopefully. That is what we're aiming for. And then we have the AGM coming up 16 May in Malmö. So if any shareholders here are listening, you can read the press release we sent out and follow the process and sign up. You're welcome. And then just a last slide of what is the focus, the coming, I mean, in the two, three quarters that we will focus on it is of course to continue the top line growth and improve the profitability that is like always main focus. Then we also not need to keep track on other key figures like the cash flow is super important and also on our margins. And next is of course to get the new technologies commercialized. So we have like the chef guard. Hopefully we could have a product that we could sell to the autumn if everything goes in the right direction. then the stapler's bio of course to get that also out and and fully commercialized and then we also do an overview of the supply chain we always do that but now it's time again to just check our setups always to to chase after better more efficient ways of shipping goods and then the last focus now is actually we change a little bit in the marketing strategy because last year was a lot about co-branding, you know, the new branding, we had the new websites, we did a lot of toolkits, but now this year it's all about to add value to our partners. So we actually working really hard to create toolkits for our brand partners so they are able to communicate and sell Polygene in the right way. So we are doing POS material, we had to create an ebook, we are doing campaigns together, videos. There are a lot of things that we have developed now that will go out to the brand partners this year. So it's a lot of work. We have a lot of things to do, but it's always more funny when the numbers are with us as this quarter. That was my last slide. Do we have any questions, Niklas?

Yes, we got some before the meeting. One was around Shadowguard, but I think we covered that in there.

Yeah, I think I said what there is to say today.

And then we have a question about the continued momentum in recovery of sales. I will say, as Ulrika said, we see versus last year, we see a lot of more activities in the market. But it could be a little bit more difficult and challenging to promise a quarter by quarter growth going forward as well. It's still a fairly unsecure economic situation in the world. It's difficult to promise anything, but I was saying versus last year, it looks better.

Yeah, and I think we have so many things that point that it will be better because we have the new website. I mean, that will not deliver sale today, but that will come over the period. And I also think that we have a pipeline that is quite interesting, that if some of those things happens, we have the geotextiles that We signed this agreement. We haven't got any order yet, but that will come according to the agreement. So I think there are some good things to look forward to, but you never know what could happen. We have experienced everything the last two, three years, so you never know. Any other questions?

No, it looks like we covered everything.

Yes. Okay. Then thank you and see you again in July, the Q2. Thank you.