Polygiene Group AB

Good morning and welcome to the presentation of PolyGene Group's second quarter. I am Ulrike Bjork and I am the CEO of the company and I'm here together with Niklas Blomstedt, who is the CFO. We will do as we always do. We will have a short highlights of the quarter, then we will go into the financials and then I will give you an update on the different business segments.

And then we have a Q&A in the end as usual.

so the quarter has been a really really positive one as you know we had a strong q1 and this positive trend continues into the second quarter we see a strong growth compared to last year we have a profit result profitable results in the bottom line and we can also see strong positive cash flow and a lower cost base so all the key performance indexes are actually pointing at a very very positive direction and the financial position of the company still strong. We have a debt free balance sheet and as I said, a strong positive cash flow and also cash in the bank. So the financials has been really, really positive for this quarter. If we're moving ahead, you can see here on the sales curves the last years that we have a trend disruption that we can see that now rolling 12 is pointing upwards and as you can see we had a couple of quarters where we are above 40 million i think it was five quarters that we had in 21 and 22 and we are definitely heading on that way again and then some highlights from the business so we can see the market is recovering but it's also a very very hard work from the team So I want to thank all of them for the hard work we have to come back on track again. The measures we took last year in terms of reduce the team and also to create some new strategies in place has actually been paying off. To separate the two business areas, PolyGene and AdMaster, it makes a more stronger and clearer message out to the different target groups. And as we wrote in the report, we can see that July has started very well so far. So now over to some financial key figures.

Yes, let's start with a short summary, an overall summary. The sales has increased from 25.4 million to 36.4 million. We have a gross margin of 65.2% versus 74.2% last year. Operating cost is down to 20.1 million versus 20.6 million last year. And we have an EBITDA of 2.6 million this year versus minus 4 million last year. EBIT of 1.2 million SEK versus minus 5.3 million SEK last year. And cash flow, as Ulrika said, very strong with 5.6 million SEK during the quarter versus minus 2.8 million SEK in Q2 last year. The cash in the bank is 54.3 million versus 47.1 million SEK. If we look into a little bit more deeply into the sales, as we said, we had a strong quarter versus last year's is up 43%. It's also slightly better than Q1 this year. And the shares of sales, we can see that the polygene part is 46% versus 39% last year, and Admaster is 54% versus 61%. We had an increase in PolyGino 68% and AdMaster increased with 27%. Looking on the different markets, we can see that the biggest increase has been done in APEC, which increased over 100%, mainly driven by China. We also see a good growth in India with 23%, while America has been more or less flat during the quarter. And the increase in APEC is driven in both segments. They're also a part of distribution orders that has fallen into quarter three due to some of the small problems we see in the supply chain. If we look into the other parts of the P&L, we can see, as we said, the sales was up 42%. We see a lower margin this quarter versus last quarter. It's mainly driven by currency impact and product and customer mix in the increased sales balancing and the ad master business. Cost is down 2.4%, driven by the relocations of consultants to employees. I think it's important to have in mind that the commission is higher in those numbers with 700,000 SEK, and that's driven by the sales numbers. So even if we see that the sales is increasing and driven by the commission, we can still see that the cost base is lower this year versus last year. We have an EBITDA of 2.6 million SEK versus the 9.4 million SEK. And then a bit of 1.2 million SEC versus minus 5.3. And as we said, the cash flow was very strong with 5.6 versus minus 2.8. If you put in the FX effect as well, it's still strong with 5.4 this year versus minus 500,000 last year.

Thank you, Niklas. And now I will go into the different business segments, Polygene and AdMaster.

So just to show you how PolyGene is look like now, you could go into the website that we have separated the communication to the market. So PolyGene Freshness is now all about textiles. It's all about building this ingredient brand where we can have a demand from the end consumers. And this area is mainly driven by sustainability and also to help our brand partners to become more sustainable and make their products be even better and prolong the lifetime of those. So this is how the website looks when you get into the Polygene site now and the message is more clear, it's more understandable and it makes more sense for this audience. So Polygene is focused on building this ingredient brand. The communication is very much B2C to prove to the end consumer that there is a value for them to choose garments with Polygene inside. And this is quite different from what AdMaster is achieving. Some highlights from PolyGene. As Niklas said, we see a very strong start of the year and also in the quarter, both 68% and 70%, I think, if we look year to date. The distributors have started placing orders again. We had some orders come in in June, but due to some challenges in the supply chain, we had to push those into the third quarter. But this challenge is not about shortages. It's just that we have to be able to plan better now when we see that the demand increases, especially in China. So we have to just extend the delivery times from the supplier to be shipped to the distributors in China. So it's just temporary and this will be up and on track again in July. And as Niklas also said that APAC is the winner. We have doubled the sales the first half year and China is of course the driver in this growth. And the reason why China is going so well now, I would say it's actually three main factors. The first one is of course that we have a local team over there. So it's a very strong team and we work really, really close to the customers there. We've seen sales coming back from existing customers, but they also onboarded quite a lot of new customers this year. And you can see in the picture here, it's from Pelliot. It's an outdoor brand in China selling mainly through the big Alibaba, the Tmall, all these big online sites. And this is how they market Swedish silver in their presentations. And then of course we have seen really, really good results from the partnership with STT that we onboarded last year. They have been having recurring orders coming back with quite some good volumes coming regularly, which is very good for our business. So I would say that Asia is definitely a winner and especially China for PolyGene. Another very positive news is that the European Commission has been extending the decision for the biocides program until the 31st of December 2030. And what does that mean? Yes, the review program is an evaluation program where they actually go through all biocides on the market in all kind of product types. And then they go one by one and decide for the future. And this program has been going on for 20 years. And now they can see that they will not be in time. The goal was to be finished by this year, but they have to extend. So another six years for the silver that we use is absolutely safe and legal and compliant to work with. And this is a very good news for those who thought that this is something that will be banned. That is not the case. So for six years more until we have a decision. And hopefully that decision will be positive when that happens. Just some comments on the ShedGuard developments. I promise to come back in Q2 and see how it's going. It's a technology to reduce microfiber shedding and to protect clothes from peeling. And this started out as an innovation project in the beginning of the year. We have been finalized the first phase that was to start first testing with six different innovation partners. Those test results has come back and now we decided to move on to phase two, which is actually to share these test results with 16 choose and brand partners and Mills. And now we go into another testing round with those. And the challenge here is to get consistent data and we need a lot of data points. to be sure to find the absolutely right mix, the right fabrics, the right application methods. So it is a time consuming project. We will not see any commercial orders this year. And I think if the results is going to be positive, that we really hope and think they will, we can see commercial orders first next year. And we will give you a new update in the end of Q3, when we hopefully have some new results the second phase of this very interesting project. Moving into AdMaster and the half surfaces. This is how you can see on the website now how AdMaster is a completely different messaging. It's more tech, tech and data driven. It's more science based. It's a completely other counterpart on the other side, and that's why the AdMaster website has been changed to be more technical and more B2B aligned. The look and feel is, as you see, quite different. And if polygene is driven by the sustainability, Admasters is driven by hygiene, hygienic surfaces. And to be a thought leader in this industry, we have started to write these really good educational articles. And we have them on the website, but you also present them in social media to show and educate how important it is with hygiene. And here is some highlights from Admaster. Also strong growth in the quarter compared to last year. The margin has been a little bit lower than expected, but it's because of the product and customer mix. There has been a bigger share of distributor orders this quarter. We can also see that the top customers are ordering again. We have seen big orders from the packaging industry. We have seen big orders from distributors in Vietnam. Yes, and as we can see, APAC is still, as in policy, the fastest growing market and 78%. And even if EMEA is still the largest region and APAC is quite small, it's really good to see how it's picking up in other regions as well. Very positive is also that we saw the first geotextile order since the new agreement was signed in January. And this order will be delivered somewhere in Q3, Q4 this year. And the team has been very active. We have many trade shows we have attended in medtech, flooring, aerospace, automotive. And this is to meet with existing customers, but also to find new potential leads. And last, the new website is performing according to the plan. We have a goal to get the Admaster website back to the numbers we had when the old Admaster site was online.

And then we have some general updates.

In the annual meeting, we have a new board member, which is Sofia Sasson. We have then also reduced the board members to four people. We started, I would say, the CSRD process journey, and we will try to implement this during 2025 and have a sustainability report. We launched, as Ulrika said, within the split of the Admaster and Polygene. We also then launched an overall Polygene Group website, focusing more for the investors. And during the annual meeting, we also finalized the Warrant Programme for 2024 to 2027. Thank you.

Sorry, I lost my voice there. And then some focus areas moving ahead. We will still continue to grow the top line. We will improve the profitability. We will keep track on the key figures and the cash flow is important, but also to guard and monitor the margins. So we keep those by plan. And then to get the new technologies commercialized, we have the Shed Guard project running, but we also have the Stay Fresh Bio that we are working on now to get out in the market. We have some tests coming up here end of August with a big player. So let's see how that turns out. And then also to don't rely only on the product portfolio we have today, we have to also think about what is tomorrow's demand, what kind of technologies will be on the market in the future. So we have very, quite intense work with the product development, both on the PolyGene side, but also on the AdMaster side. So I hope I can come back very soon to tell you more about these projects. And then we also are doing an overview of the supply chain to avoid these shortages, like we have to plan now since the supplier have announced that we have to order more early because they have extended lead time. So this is something we are working on to not be in the situation again when we have orders, but they can't go out in time. But that's just temporary, as I said. Okay, so let's move into the Q&A.

I think, Niklas, you have... Your questions.

Yes, we've got some question. Before the meeting and we can start with them and then we can see if there's something coming up right now. One of the things we've got we've got question was regarding the customer base and and the loyalty to customer loyalty and how we do to what kind of actions were taken to work sort of mainly with the customer loyalty.

Yeah, I would say that the separations of the two business areas has been very good for this because now we can work all in with apology and customers to add the value. And then we can work on the Admaster side on the way that their customers need to be handled. And we are working close to the customers. We know that the relations are key. We know that we have to stay very close to them, even if they are not like last year, whether they're not buying from us, we still need to be very, very close to know what's going on. So I think the support that we can offer, both from technical and marketing, is actually what keeps this loyalty to stay with us and not go anywhere else.

And then we got the question regarding the competitive situation, especially on our main markets. How we see that right now.

It depends on its competition in different regions. Yes, there are, of course, different competition in different regions. We know that some regions are very price pressured, I have to say, but we also believe that we will not just go up from price because that is not something we can win. We always have to add the value we do to actually make the customers want to buy and stay with PolyGene, even if there is a price competitive situation in some regions.

We also got the question a little bit about the development products. I think we touched a little bit on that one, but maybe we can say a little bit more on the products and technologies. As we have right now, it's the shareholder and the buyer that's official. As you said, we are also looking into The next generations products as well, but that's not really official right now.

We haven't announced anything yet to the market regarding the projects because we still want to work a little bit more before we announce something, but there is a quite extensive projects going on on the development side.

And then we got question about the cash flow. If it's if it continues to be good, if we are thinking about investing it in more like in an M&A or dividends, Yes, as you've seen, the cash flow is really good and we have a strong cash situation. And as always, there's also a discussion internally and also with the board what we should use the cash for, if we should use it to invest in continued growth or in M&As or dividends. So the discussion is ongoing, but there's nothing that we can communicate, especially what we will do. We have noticed a strong cash flow.

Yeah, and we are not just piling up money, of course, that will be used, but also in the best way. And we still have a. A really ambitious growth plan for the company, so we will come back on this one.

And there was a question about add master a little bit quiet to say about more exciting customers.

Well, I think it's a we have the geotextile customers can come in this this quarter that will be delivered. As I said during the year, that's a very interesting one. projects in the pipeline, interesting ones. So I think we will, we are not press releasing every new customers. We try to talk about these things in these meetings and sometimes we not even mention, but there are of course new customers coming in.

Maybe we can tell, because we've got the question about the core industry, if there's something new there or is it still new that we're only working with officially.

We work with more. There are more customers, more automotive customers coming from the OEM in China. And we also work directly with, I think, four or five big projects that we have NDIA signed. We have ongoing discussions. But this is a very long term sales cycle because if they want to approach something new in this industry, it takes a very long time to get in and you have to be in the right window when they are changing technologies but when you're in you will be there for a long time so it takes quite some time to get in and get nominated as a technology but on the other hand if you get in you will would be there for quite some time and then we also got the question about the long-term forecast if we will leave new long-term forecast and as we

As we said in the Q4 report when we released that, for the moment we are not planning to leave any long term forecasts.

Not externally, no.

That was all questions we got.

Are there any more questions? No, not right now. There doesn't seem to be any more questions coming in.

OK, and then I think we're ready.

Yeah, then we're done. Thank you so much for listening and see you in October for the Q3 webinar. Thank you. Bye.