Betolar Oyj (BETOLAR) Earnings Call Transcript & Summary

Good morning, and welcome once again to Betolar's business review for Q3. My name Melina Pinomaa. If we haven't met before, I'm heading our sustainability and Investor Relations. And here today, we have Riku Kytomaki, our CEO; Riikka Ylikoski, our CFO. Today, we're going to go through some main events happened in Q3. And after that, Riku will go through the numbers. [Operator Instructions] Riku, please?

Thank you. Dear audience on site and online. Some highlights from the quarter 3. First, starting from the concrete products. We got pretty good progress, especially in India. Maybe something to mention about our communication. We typically announce our customer -- first customer in specific countries. So we are not announcing all of our customers and pilots in every country with repeating country in a way. So in this period, we got some progress also in terms of new pilots, but then especially we got commercial production starting up in India. In the construction elements, we also carried out tests and pilots in Southeast Asia when it comes to hollow-core slabs, invest upcycling first commercial contract, and that is the 1 I was referring to, was opened in Thailand. Also we got side stream research conduct in North America. A pretty positive news came from Business Finland. We got -- this is a positive decision about EUR 2.7 million funding for our research and development. Also, we got some changes in the management team earlier announced -- Tuija Kalpala announced in summer time, but starting with Betolar and now she started in early October. And when late summer, it was also announced that Janne Rauramo, Strategic Partnership Manager, his leader of company and at the latest by end of November. Also, we launched in autumn time, a pretty massive cost-saving program and where we target EUR 5 million annual savings. As part of that, we also conducted change negotiations, what comes to our own employees, but there is a minor part of the cost-saving program. Then here, some other highlights what comes to the business progress in quarter 3. In addition to those customers ramping up in India, our Geoprime product that are shortlisted EMENA Green Building Awards. Also, we reached piloting readiness stage with our upgraded recipient dosage system. As we communicated already in quarter 2, we are upgrading the -- our recipes in system for -- to better meet local standards in even toughest requirements. Also in terms of construction elements, we are, in addition to hollow-core slab product, we're also piloting and developing products for different kind of load bearing applications, for example, wall elements. In Mining segment, we got a lot of good progress there in terms of developing solutions to cemented back paste backfill CPB product shot grid and the stabilization of the tailing applications. And also, we took part of the coordination group on the circular economy in Finland has innovation in Mining segment. In terms of our strategy, as we have communicated, we have put quite a lot of emphasis to bigger building elements, construction elements, mining and waste upcycle, not to forget the free cash product, but especially in this quarter, we got good progress in mining and waste upcycling. And the Thai property developer order from Pruksa Group, example of that progress. And also, we have done many other research throughout Europe and also in North America. I think that is in a nutshell, the progress in quarter 3. So I will hand over to our CFO, Riikka.

Thanks, Riku. So our net sales for the Q3 was EUR 167,000. And cumulatively, we are reaching EUR 300,000. This is, of course, still early-stage revenue numbers on its numbers, but we have increased from the comparison period. Our EBITDA was, of course, consisted of the out of effort to the R&D development and will be now affected going forward with our cost-saving activities. Our cash position was still fairly strong. So we have EUR 15 million of reserves in our balance sheet. This is, of course, affected by the Business Finland funding, which will be then withdrawn during the next 1.5 years. And we have also a climate fund loan to be withdrawn, and that's worth of EUR 5 million. Our personnel remained almost at the same level during the Q3 and our number of new customer pilots was 5. And as Riku said, we have been piloting in the side stream area and also in the construction element area and still returning to our net sales. So that was -- that consisted of both the license fee, the chemical fee, but also the research of engineering fee coming from the side stream activities.

Regarding our next year, we have our calendar already updated, so you can mark those into your calendar. Also -- yes, I guess that's for most of -- our annual report will be also launched in March in our Annual General Meeting end of March.

Good. Maybe then we can go into the Q&A. This is a bit shorter this business review this time. But there were some questions from -- through -- coming through the chat box and also if -- are there any questions in the audience, feel free to raise your hand. But the 1 question to maybe Riku, can you answer this one? What type of customers are in the mining segment and from which countries?

Yes. First of all, Finland is 1 of the leading countries what comes to mining industry, especially now [ think ] with geopolitical situation, rare earth metals of importance and most of those can be found actually in Finland. From that perspective, piloting in Finland is also very good for the global progress. But then we have contacts, of course, not only in Finland, but Nordic countries, for sure. In Central Europe, amount of opening mines is rather limited, but also we are present there and also in Asia. And what kind of customers -- yes, they are mining companies. We have this 3 type of solution with paste backfill solution, it can be the shot grid and also stabilization of the tailings. So we are progressing all of this.

Good. Thank you. Then there was 1 more question regarding the side-stream service that we are offering. Could you maybe talk more about that? What is it? What Betolar sells in the side-stream side?

Yes, that's right. Good question. First of all, typically, is the big mine. For example, it starts with a feasibility study. But for example, what materials we can use on-site side-streams that are available, mostly as a waste at that specific mine. So it starts from the feasibility study. And when we study what is the side-stream, how that can be utilized, where in the mine what we call like a nonrecurring engineering fee, NRE. But then the next stage would be that the pilot customer would start using it in a kind of a production scale ramping up in local probably reasonably big volumes typically. So it's a little bit of digital business in terms but it can take some time, even years sometimes to develop, get the environmental approvals, et cetera. But when it goes and starts can be massive volume.

Thank you.

Sorry, maybe 1 more thing I would add [ variously ] AI, our artificial intelligence platform, where actually the side-stream service actually is probably the first commercial service where we can utilize the accumulated knowledge what we have received from the pilot already. And when -- as soon as we get the sample from a customer, we'd rather soon start to know but what kind of a recipe can be utilized in that specific site.

Yes. Then there is a question from -- yes, this is finish actually. [Foreign Language]. So regarding the change negotiation -- change, what is the word in English.

Change negotiations.

Change negotiations. So what were the impacts regarding the personnel?

Yes. First of all, we communicated the saving program and that is worth of EUR 5 million, and the majority of that comes from other services, external services and so forth. And the minority from that cost saving comes from the employee-related actions and when our negotiation was concerning max 9 employees -- own employees and outcome was in that range. So it was affected finally for 7 people close to what we announced and the [indiscernible] didn't specifically come out with announcement since the majority of our cost savings come from our services and external costs.

Then continuing with the cost-cutting program, how does the program affect your growth opportunities? What has been the trigger that you have noticed that you don't need some of these resources to be cut as much as earlier?

Yes. Maybe in my short summary of quarter 3 progress, I already tried to highlight that we have shifted our focus more towards side-stream analysis, side-stream services, mining and bigger building and construction elements. Still, of course, continuing with good big customers in terms of free cash products. But when there is a certain need for -- like with mining and side-stream related services and employees whereas we don't need so much of this probably which is kind of piloting with like hundreds of different kind of smaller customers.

Yes. Thank you. Then a question to Riikka. How much interest bearing that do you have? How long do you estimate you can operate with the current cash position and funding?

Of course, the funding questions are on the table all the time. We have the only loan that we have is the climate fund loan. That's the only interest-bearing loan that we have currently. And we will now, in the coming future withdraw the another EUR 5 million of that. But the financing-related questions are always on the table. And of course, when we are looking at the different possibilities to increase our portion in the value chain. So there are opportunities in that area.

Thank you. Then there's 1 more maybe back to Riku. Majority of the sales came from pilots. What has been the main reason why clients have not progressed forward from pilot phase?

Probably address the [ central began ] earlier interim report, but very certain delay from our customers piloting and testing in a factory scale to when market acceptance that we need to go and market the product in the marketplace and when there is a certain, probably longer time needed what we -- maybe earlier estimated. But of course, the green transition mere currently, maybe some customers looking more about the cost, but these megatrends, they will not go [ whereas ] getting stronger. And probably in the short term might affect also this market circumstances. But in the longer term, medium term, megatrends will drive demand and also the speed, how fast [ force products ] are introduced to a market.

Good. Hey, thank you, Riikka and Riku. These were all the questions from here. Thank you for joining and hopefully see you back in February.