Polygiene Group AB

Good morning and welcome to this pre-recorded webinar of the PolyGene Group's third quarter. My name is Ulrika Bjork and I'm the CEO of the company.

And my name is Niklas Blomstedt and I am the CFO.

So moving into the highlights of the quarter, we can see yet another strong quarter with impressive growth and profitability, and alongside with a positive cash flow. We also could present some new strategic innovation partners in the PolyGene Freshness area. And also again, AdMaster's website is becoming a really effective tool for lead generations. And I will come back to that a little bit later. And we will also have a refocus on the investor relations.

Moving into the financial update. We have sales of 40.8 million SEK versus 28.7. We have a gross margin of 71.6 versus 72.2%. Operating cost of 21.8 versus 20.6. EBITDA of 5.7 million SEK versus minus 1 million SEK. And an EBIT of 4.2 million SEK versus minus 2.4 million SEK. have a positive cash flow of 3.8 million SEK versus 2.3 and at the end of the period we had a cash of 58.2 million SEK. If we go in a little bit more deeper on the sales, we can see that the increase then to 40.8% is an increase of 42% versus last year. And that includes a minus 3.4% in FX impact. You can also see that we have better sales versus the last quarter, quarter two this year. In the quarter, we had a small stock buildup at PolyG distributed. That was 1.7 million SEC. But for the whole year, we are still around zero in inventory buildup. The share of sales is a little bit the same as last year, 57% in PolyG versus 43% in AdMaster. Last year, it was 59% versus 41%. Admaster had an increase with 48% versus last year, while Polygine had 37%. And the big increase, if you look from a regional point of view, we can see in EMEA, with an increase with almost 60%. And IPEC had an increase with 10%, while Americas had a decrease of 7%. Looking a little bit more in the details of the numbers, as we said, sales was at 42%. The small increase that we have in the margin is mainly driven by distribution sales apology, but that's partly offset by better mix in AdMaster. We have a cost that is 1.2 million higher, but that includes also an extraordinary cost during this year of 1.3 million SEK, including, for example, a bonus accrual. The EBITDA was 5.7 versus minus 1. EBIT of 4.2 versus minus 2.4. And as we said, the cash flow was 3.8 million SEC versus 2.3. If we include FX, it's 3.9 versus 1.2.

Thank you. And as you know, we have two different business segments. So it's the Polygene, who is mainly about textiles, and we have Admaster, who is more about the hard surfaces. Gonna start to give you some highlights on the Polygene freshness side. We saw an impressive growth of 38% during the quarter. We can also see that the share of sales has gone up to 57% in the period. But if you look at it year to date, we have around 50% on each business segments. The sales are mainly driven from EMEA and China this quarter. We see some great improvements on our biggest customers in Europe this quarter. And the category workwear is actually growing quite well. We've seen almost a double in sales this year, and it's quite small number still, but I think this category have big potentials if you think about the value that Polygenes Technologies can add into this sector. What we've seen also is that the existing customers, they are showing increasing demand. We know that we come from a quite heavy year like 2023, but now we can feel that the business has recovered and we are back again. And we also have some new collaborations for sustainable tech. And I will look into that a little bit later as well. And Shedguard is actually the project. It's an innovation project where we address the microfiber shedding. And we are now entering into phase two, which means that we have continued with the results from the first phase, taking that learnings into phase two. And now we have around 10 partners that will continue to develop this technology with us. And we estimate that this phase will be finalized around the end of the first quarter next year. But it's still interesting. But we also know that the more we learn about this, the more complex it's getting. So it's a lot of testing that have to be done. But we will, of course, continue to follow this project very, very closely. And then we have the Stay Fresh Bio that we have under evaluation and testing for several brands out there. And we also had some new product launches with our customers. So we have, for instance, Origin, which is an American company who are taking back the production to America. They are doing lifestyle, sports and other kind of categories. They are launching with polygene this year. We also see an increase in Adidas in China. So they are launching several new items for the fall-winter 2024. And we have a new brand, Chasen, which is a brand from Netherlands who are doing lifestyle, doing jeans, t-shirts and other garments with polygene stay fresh included. And then we have an old customer, Gregory, who have been doing a backpack with us before. And now they're moving into the hard goods and the travel suitcases. And Polygene is incorporated in the active chill compartment where you can put your stinky clothes inside and still have a fresh bag. As I mentioned before, we have entered two interesting collaborations with some sustainable tech companies who have made some innovations. The first one is Officina39. And the second new collaboration is with a company, also Italian, called Quick Dry Frame, which is a technology for moisture management. And they have decided to offer odor crunch within this technology. And this partnership, what does that mean for Polygene? I think we will see us as an attractive supplier for these technologies. So we are depending on their success if we will succeed. We are not going to promote and sell these technologies from our sales force, but we will of course encourage and help them as much as possible to succeed. Another collaboration we have since a couple of years is with Storm Care. They are producing aftercare products for the consumer markets. And now we are promoting these sprays also to our brand partners. And here is one, Origin, that I spoke about before. They decided to launch these sprays with their brand and Polygene's brand to their retail stores. in 2025. Looking at AdMaster for the quarter, I want to present some highlights. We have a strong growth of 48% versus last year. The share of sales was a little bit lower than the average for the year. It's around 50-50. EMEA is still the largest region that 78% of the total sales in AdMaster comes from Europe. But we also can see that this quarter, America has had a quite strong growth as well. We also got the first geotextile order that we did this three year agreement in the beginning of the year. And now we can see the first order has been delivered for this year. And it's very exciting. I hope we can come back with more information moving forward. Then we have some interesting activities. The AdMaster team, the sales and technical team, they were visiting the soft listeria conference in September, and they had the opportunity to present why we should include antimicrobials into the food processing. So it was a bit educational, but it was also a good opportunity for us to promote AdMaster and our technologies. And we also saw some new customer launches. We had this Colombian customer, it's an old customer that had been dormant for a while, but now we have reactivated it and they are doing these cling film into the food processing. And that's why I just wanted to show you. We also have Marks and Spencer that have launched a full line full range of cling film, baking paper and other kinds of food processing and food packaging with Biomaster and Biomaster co-branding on. We have Zeal, which is a company who do these healthcare equipments and this is a thermometer for ears and they have incorporated Biomaster for a more hygienic product. and you also have seen a great improvement in the performance of the new website just wanted to mention that this is the main channel for new leads coming into admaster historically it's been the best channel to create new opportunities it is on from the website and from people searching and the seo and we've seen great improvement the third quarter we had visitors more than the full half first half year we've seen the leads 72 more leads than the first half year just coming in august and september the last two months So this is actually bringing super, super big potentials for next year sales that some of these leads will hopefully transfer into real business and real customers moving forward. And we also took a decision to refocus on the IR market. We've been a bit quiet there for a while, but I think with a couple of good reports in our back, I think it's time to go out and attract new shareholders and to try to increase the base shareholders and also to make PolyGene Group a little bit more visible in this market. We signed an agreement with Redeye for coverage so they were going to cover us from now on moving forward. We also launched the PolyGene Group website will be more for investors and we have included some new features that are interactive so it's updating it automatically on the owners list and on the share price etc. And we also have more investor meeting booked activities. We have breakfasts where we're going to promote and talk about policy moving forward. So to summarize up this quarter, I'm extremely proud of the results and where we are at the moment. We're just going to continue what we started, and I hope we can finalize the year in the same spirit as we had before. the full year. I also would like to address that the focus moving forward or the main focus is the growth strategies and how we're going to increase the top line. Because with this scalable business model, we know that when we increase the top line, the result will follow. And we have our four growth strategies. We have the organic growth, which is basically growing on the existing business we have, in the markets we are, with the technologies we have. But we also know that we have to continue with the product development and find new technologies to build the future. And then we have new markets. It's basically, as we said, AdMaster today is mainly in Europe. There are so many other regions where we can grow into. And the last one is the M&A and PolyGene Group is always open to explore new opportunities in this field as well. So these are the main focus areas and of course we have a lot of action plans beneath every one of these strategies. So if here are any new potential shareholders, I would like to just give you a quick overview of the investment case. So we have the value proposition where both Admaster and Polygene are right in time with offering to the markets. We have a comprehensive portfolio with innovative technologies. Our business model is highly scalable. Asset light, we don't have a lot of investments in manufacturing and in production. The margin structure is strong. We can see that we create positive cash flow quarter by quarter. We are debt-free, and the cash position is quite strong. And overall, both PolyD and AdMaster has been around for quite some time, and we are established, experienced companies.

I've also got some pre-submitted questions and we will try to answer them here now. One of them was around the sales priority for PolyGene and AdMOS at the moment. I think we talked a little bit about it, but maybe we can add a little bit more.

Yeah, the focus is definitely on the top line and the growth strategies that I presented, where we now have laid in a lot of action plans to just continue the path we are into now.

And then we got the question about the margin. What is influencing the margins in the two segments? I would say it's mainly mixed and driven by distribution sales and total manufacturing sales. But I would say it's more or less during a short time period. If you look on a longer time period, that would actually more or less... even out so if you compare year on year it's not that big difference and the main difference is then if it's more distribution sales and total manufacturing sales and then of course there's a fx impact but overall we have a fairly stable margin year over year The next question we have is regarding the CSRD, if that would involve initial cost and will the reporting lead to higher costs going forward? As Ulrika has said in previous presentations, we have started the job already and I would say the main part of the cost for the startup of the project has already been taken but there's some cost during Q4 as well and at this time I would say we don't foresee any major cost when we have reported it when we have implemented it it could mainly be the auditing cost but we're trying to tweak it nice and slowly as we're not obliged to do it during next year and we will then try to use as much internal resources as possible

And I think an interesting comment on the CSRD that it's mainly at this stage, it's mainly to find added value and business opportunities to our customers more than the reporting because reporting will come with later stage.

And then we got the question of how we can use the strong cash position we have. One question was regarding if we could purchase our own shares. But I would say that's not really allowed on First North. So that is nothing we can do right now. And the other one was regarding dividends. The dividends is something that the AGM is approving based upon proposal from the board. So it could be possible, but it's nothing that we decide. It's the AGM that decides that.

Thank you very much for listening. We will be back with the Q4 report in February 2025. Thank you so much.