Aker BioMarine ASA (AKBM) Earnings Call Transcript & Summary

Good morning, and welcome to the presentation of the Second Quarter 2026 for Aker BioMarine, where myself, Matts Johansen, the CEO; and the CFO, Katrine Klaveness, will take you through the financials and the highlights from the quarter. The second quarter '26 was yet another strong quarter for Aker BioMarine delivering $57 million of revenue, up 5% year-over-year for the group as a whole, with an adjusted EBITDA of $12.9 million for the quarter. Human Health Ingredients delivered another record quarter with revenues at $34.1 million, that's up 17% from the same quarter last year, with an adjusted EBITDA of $15.9 million, up 14% year-over-year. The underlying krill oil business grew 21% year-over-year, continuing the very strong growth we have seen in the previous quarters. Consumer Health Products delivered a fairly weak quarter with $26.4 million, down 6% year-over-year with an adjusted EBITDA of $1.1 million. But there were some great development in the quarter, which will hit us later in the year. One was a win of a Lysoveta contract that we have announced to the market earlier that will deliver $4 million in the first year and $6 million in the second year. And also this morning, we also sent out a release informing the market that we have secured a new Superba business, which will rank among the largest customers we have. So as mentioned, $57.9 million of revenue, up 5% from the same quarter last year and EBITDA down about 4% to $12.9 million. Now moving into the segments. Human Health Ingredients, as mentioned, 17% year-over-year growth, while the krill oil revenues were up 21%. The difference between those growth rates is that we saw less of our QHP product, that's the byproduct from production Houston, which means that we produced a little bit less than planned in Houston in the quarter. And as a result, we produced less QHP that we could sell. This will normalize itself throughout the year. So the underlying growth of 21% for the krill oil business is driven by a combination of solid volume growth across all markets, but also favorable pricing driven by product mix and a larger share of encapsulated products. Our gross margin is stable. We have somewhat higher SG&A following some investments that we have done in sales and marketing organization to support our Algae and Lysoveta business long term. And as a result, EBITDA margin is slightly lower than what it was the same quarter last year. I also mentioned Houston had a bit lower production in the quarter. We had some power outages and some improvement programs that impacted the production schedule. We'll catch up the shortfall later in the year. But as a result, we produced less QHP and we have less QHP to sell to the market, which negatively impact the quarter. We secured a new Lysoveta business, first big contract. It's for the Chinese market, a big launch later in the year, with a guaranteed $4 million of revenue in the first year and a 50% growth in the second year to $6 million. That kind of kicks off larger business for Lysoveta. We already have some small and medium customers that are doing really well, but this is the first kind of large customer, secured for that product, and it's a good start for the further development of Lysoveta. I also mentioned earlier that we have this morning announced to the market that we have secured a new Superba business. Just now. It will be one of the largest businesses we have. We will start delivering on that business in the fourth quarter this year. So we haven't seen impact of it yet, and we'll start to see the first impact in the fourth quarter. But this is a significant business for us and a great achievement for our sales teams to also land this big opportunity. On top of that, there is constraints in the global fish oil markets now, both driven by uneven supply and demand now for a long period of time, but accelerated through the El Nino effect, which means there are less anchoveta harvested in South America, which means there's less raw materials for fish oil manufacturing. We are trying to get in position both with our algae products and our krill products to be a solution for brands when they want to diversify their product portfolio and have other alternatives for consumers if there will be a disruption in the supply of Omega-3. Moving to Consumer Health Products, a fairly weak quarter, 6% down. Main reason for that is that every year, we get new products on the shelf. Last year, we got many of them in the second quarter. This year, we'll have them going online a little bit later in the year. So underlying, I think Lang is tracking towards our goal of modest growth. And that is -- the weak sales is also impacting the EBITDA. And that's why also we have $1.1 million EBITDA versus the $1.3 million that we have in the same quarter last year. We have moved our Epion portfolio now over to a partner called Pattern. They're an AI-driven engine for e-commerce sales, specifically on Amazon. And they are basically the largest reseller on Amazon. So they will now buy products from us at a lower price, but inclusive of marketing costs, meaning that going forward, they will carry the marketing costs, and the price they paid for the products will reflect that. So that has a short-term impact on our revenues. But longer term, it will be very positive for the Epion business. And with that, I give the word over to Katrine, that will take us through the financials.

Yes. Good morning. I will present the financial figures for the second quarter. Starting with the P&L statement. Revenue for the quarter was at $57.9 million, up 5% from same quarter last year. The increase is driven by Human Health segment showing 17% growth, as Matts have already alluded to, where Superba krill oil sales had 21% growth compared to same quarter last year, driven by both volume and price due to product mix with more capsule sales. Cost of goods sold are stable across segments, but gross margin in Epion is down due to new revenue model with Pattern with lower wholesale prices compensated by lower selling costs. SG&A is up on higher activity and sales in Human Health Ingredients, but lower in Consumer Health products from cost reduction in Epion. About $4 million is adjusted out of the SG&A as a result of non-recurring project work, including the potential HHI transaction, the protein transaction, and restructuring work in Human Health Ingredients. Net financial items is higher than normal due to the redemption cost of the bond as part of the refinancing that was partly recognized in Q1 and in Q2. Net loss in the quarter was $5.4 million. For Q2 last year, an impairment of the Understory Protein business led to a higher loss. Adjusted EBITDA for the group is $12.9 million for the quarter, slightly down from Q2 last year at $13.6 million as the transitional service agreement with the Qrill Company is terminated, leading to 0 TSA income. Moving over to the Corporate segment. The Corporate segment reported an adjusted EBITDA of negative $4 million, significantly down from Q2 last year due to a positive elimination between the segment last year as well as TSA income from the Qrill company of $0.5 million. The Corporate segment now also includes parts of the old emerging business approximately $0.25 million per quarter. Adjustments of $3.9 million includes preparations for the potential HHI transaction, the protein sale process and restructuring costs, as mentioned earlier. The adjusted EBITDA in this segment reflects the underlying SG&A level going forward. Over to working capital. The company purchased the entire 2026 Nutra volume in the second quarter, increasing inventory with 7,500 tonnes of Nutra. In parallel, part of the Nutra purchase from last year was paid this quarter, increasing net working capital with $7 million from Q1 this year. Settlement of the 2026 Nutra volume purchase will be primarily in Q3 2026. Investments. CapEx for the quarter was $2.9 million, mainly related to Houston maintenance work and the feasibility study for the capacity expansion. Total CapEx for 2026 is expected to come in somewhat above the 2025 level at $10 million for the full year. Cash flow. Negative cash flow from operations of $6.3 million due to Nutra payments in the quarter of $9 million. Cash flow from investing activities was negative $2.9 million, as discussed on the previous page. Cash flow from financing was positive $9 million and included further drawdown under the working capital facility. Net change in cash for the period was marginally positive at $0.1 million, ending the cash balance at $19.7 million and total available liquidity was at $23.7 million. Net interest-bearing debt is at $185 million in the quarter, up from Q1 this year. The increase is driven by the Nutra settlement in the quarter. The new bank loan structure has a leverage covenant calculated by net interest-bearing debt over adjusted EBITDA with a threshold of 5.5x. The company is compliant at 3.8x. The company is also in compliance with a minimum liquidity covenant of $5 million. Finally, the balance sheet. Property, plant and equipment additions are related to Houston equipment mainly. Other non-current receivables refer to paid tariffs that are due for refund. Inventories are up as a result of Nutra purchase done in the quarter. Cash is at $19.7 million. Assets held for sale includes Understory Protein after all IP rights have been sold to Human Health Ingredients for $8.2 million. Interest-bearing debt reflects the new bank loan after refinancing of $175 million. Total equity amounts to $135.9 million, equaling an equity ratio of 34%. That concludes the financial section, and I will hand the word over to Matts to conclude.

Thank you, Katrine. We'll now have a look at the outlook. So for Human Health Ingredients, we have seen strong development in this quarter, just as we have seen in the previous quarters. And we expect the positive development for Human Health Ingredients to continue also in the coming period with the continued growth and improved profits. And even of Consumer Health Products posted a weak second quarter, we still expect Consumer Health Products to get back into a modest growth mode, when all the new product wins from this season has been implemented. And as we have announced earlier, we have engaged Jefferies and Houlihan Lokey as investment banks, to support us towards a transaction in 2026. And as also we have said earlier, we will not provide any update on that process and unless some of the information on this one will be when the process is concluded. For Understory, we are in advanced discussion with 1 particular party, but it's the same there. There will be no further updates on that process until it is concluded. Sorry. With that, we will move over to Q&A, and you can now all send in your questions to ir@akerbiomarine.com and we will answer the questions now.

Okay. Thank you very much. So yes, we have received quite a few questions here, starting off with some, I would say, general market questions. The first one to you, Matts. Any views on new contract wins on Lysoveta expected for second half and onwards? And will the product be available for any new markets in the second half?

Yes. So I mean, we got that new contract in the second quarter that we have reported, which is for the Chinese market. So that's the first kind of a big contract, going to be 10 tonnes now in the first year and then 15 tonnes in the second year with prices around $400 a kilo. So a quite significant business. And then we're onboarding customers all the time. Typically, the customers that are being onboarded now are small to medium brands kind of early adopters, fast-movers. And then we have dialogues with also big companies and big brands, which typically take a little bit longer time to launch. So there will be a stream, I would say, of new Lysoveta customers coming in the next quarters. And then on the markets, we are -- we have the U.S. market opened. We have part of the Asian markets, Australian market open. And the big next market is the approval we're waiting for in the European Union, which also opens up for Norway, and we expect to have that in the beginning of '27. So then also the European market will open.

Okay. And then any development on the krill oil versus weight reduction project, so to say?

Yes. So first of all, we have a second study ongoing. So that we had the first study we published last summer, and then we followed up with another study. Many brands, they would like to have 2 studies to kind of confirm a claim. So that's ongoing now. We should have the results in 4 to 6 months. But then we have already some customers starting to use it. I mean, we announced this kind of big win in Costco in December, that started in December last year. They are using it, and you can see it sometimes in the social media with some of the influencers they are activating. They are talking about it. So it's starting to pick up, but it hasn't kind of been a mainstream product on it yet, but I know it's a priority for many brands.

And then any noteworthy developments in new markets, I guess, for krill oil in general?

Yes. So we are established already in most markets. I think the 2, call it, emerging markets for us now is Brazil, India, where we -- in both of these markets over the last couple of months, we have gotten an office up and our first employee. So they are kind of starting up now. But apart from that, we are already established in all the key markets. And you saw the deal we announced this morning as well, which is U.S.-based. So even kind of the more mature markets keep growing and keep opening up new opportunities. So yes, so that's the situation there.

Okay. Then over to you, Katrine. So with another Nutra payment coming in Q3, should we expect net debt to continue to increase in the coming quarter?