Betolar Oyj (BETOLAR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Betolar's Q1 business review. I'm Melina Pinomaa, heading our Sustainability and Investor Relations. Today, we have a slightly different setup here. We have -- for the last time, Riikka Ylikoski, our CFO, after 3 years pushing Betolar forward, she'll be telling more about that, what will happen next with her. And then we have -- for the first time, we have Tuija Kalpala, our new CEO. Tuija came last year to Betolar as our Chief Operating Officer. And yes, recently, jumped into a new role here. Regarding the agenda, we're going to go through what has happened during Q1 regarding our business development or business performance and also Riikka will go through the numbers. And once again, we have the Q&A session in the end. [Operator Instructions] So Tuija, please.

Thank you, Melina, and hello, everyone. Okay. So let's talk about our strategic realignment. So our strategy execution has been advancing, and we have been really -- during the Q1, we've been focusing on that and really putting now emphasis in pivoting to capitalizing on high-volume opportunities. And what we are really now looking at and focusing with this realignment, or I would say it's rather, it's actually talking about focusing because our strategy hasn't really changed, but we are now putting more emphasis on side stream, mining and metals sector. And this is due to the fact that we have received our first customer orders in the mining and metal sectors during the Q1. And when it comes to the construction segment, so we have been very active in that segment, and we're still in that segment. But we are right now adjusting our activities to align with the market demand. So we have seen that the -- in construction area, it's quite challenging market situation. So we're now adjusting and looking at more on the side stream, mining and metal sectors. During the first months of this year, we also launched AI-based side stream analysis service. This is a service that we have. It's based on the data that we have gathered for several years in the company. And this is really targeted to the companies that have these side streams and especially these kind of side streams that are unutilized. So this is a really, really good way of -- an efficient way for companies to use this service online, and we are continuing to commercializing this. Also, what we have now announced is that we will have structural and operational changes in the company. And this is being implemented to support this strategic realignment, or focus as we like to say, by improving now the efficiency of the company and also making the company culture more customer-centric. So when you're increasing something, so you also have to decrease something, and this is especially because we are still in a start-up type of company. So we cannot do everything at the same time. So what we are doing now is decreasing our focus on concrete products. And this is because we see that many of the customers that we have been working, they are rather small in size compared to the other opportunities that we have. And of course, there is this unfortunate downturn in construction sector, which is quite challenging because there's not as many orders and as many projects or the projects are not progressing as fast as we would like to. So what this now means is that we see that we have this huge opportunity on the side stream, mining and metal sectors. And we really want to now focus on that side. We see that there's a high demand for sustainable solutions, especially in the mining industry. They have a need to lower their greenhouse gas emissions. And the good news is that we have a lot of solutions to support them. We have our innovations. We have several patents, and we have many things, how we can support this side, the side streams and the mining, metals industry with our sustainable solutions. What we also see is that the volumes are much higher, so the potential to grow faster on the mining and metals sector and, of course, the side streams is very, very interesting to us. And many of these projects there, of course, long-term partnerships. For example, we have announced our partnership with Outokumpu, and for example, that's until end of next year. So typically, these projects are also much longer, and right now, the nature of these kind of projects mostly is this NRE, so nonrecurring engineering studies that we are doing. So priorities going forward. So as I mentioned, so what we want to do now really is put the customer first. So really focus on this customer, focus -- thinking about what are the customer needs and what is the best way for us to serve the customer and help them to become a more sustainable and greener companies. And this really means that with the company and inside our company culture, we really need to kind of enforce and put the customer first and really think that what is the need of the customer, how we can support them rather than thinking about, hey, we have the great product, let's sell the product, but really thinking about the other way around, that what are the needs in the customer and how we can best support our customers with this journey to more sustainable world. And then, of course, number two, high volume. And this is what we talked about already. So looking at more of these opportunities, where we can scale up faster, where the volumes are higher and where is this kind of emerging business is, this emerging need to make this transformation. And Betolar has been, for several years, we have very unique RD&I capabilities. We have several patents, as I mentioned, and it's -- we have a lot of good innovations and many, many, many ideas and innovations in the pipeline. So we really need to also leverage this and really, really make this happen and help our customers and share all this so that we can have less CO2 emissions and more sustainable companies. So then Q1 main events. So first orders in Betolar's mining segment happened in Q1. We have updated our business and financial targets earlier this year. Our Annual General Meeting was held March 27. And as mentioned, the patent portfolio is also growing, and we're very proud of it. So we were granted a new patent earlier this year, which is really good. After the period, there has been some changes in the management. So myself, Tuija Kalpala, I was appointed as the CEO of the company a week ago. Our CFO, Riikka Ylikoski, announced that unfortunately, she will be leaving the company and also our CCO, Ville Voipio, has stepped down from the management team. We have also announced that we are starting now change negotiations, and we're going to be making some adjustments to our cost structure. And this was announced last week and officially started yesterday, on the 29th of April. So then about the Outokumpu case. So what we are doing with Outokumpu. So Outokumpu has said that they want their Kemi mine to be carbon neutral by the end of 2025. And we have now, together with Outokumpu, we are now trying to -- the goal is to achieve a low-carbon alternative to the current shotcrete, and this is by the end of 2025. So what we are doing first is we're going to be looking at this kind of blended mix design based on cement. And that's the plan for this year. And next year, we are going to go completely cement-free shotcrete for Outokumpu, and this is really good cooperation. And I would say just to start with this, all the things that we can do when we can help our customers. But in portfolio development, so right now, we have 6 approved patents already with the company. We have 9 innovations in the process and hopefully, many more to come. And this last patent that we were granted in Q1, we received this patent for a mobile method that treats these roads and foundation base layers with an activator creating a hardenable mixture through geopolymerization or this alkali activation, which is really, really the core of what we are doing at Betolar. And then, Riikka.

Thank you, Tuija. All right, the financials, yes. Our net sales, of course, it was lower than the expectations internally, and I must believe that also from the market, so amounted to EUR 28,000. Of course, it was bigger than the comparison year, but still on the quite low mode. Our EBITDA was minus EUR 2 million. It improved with EUR 1 million from the comparison year, and that's the -- we are showing the effect of our last year's cost saving activities. And our cash was about EUR 11.5 million at the end of the period. We are introducing a couple of nonfinancial KPIs, our operational indicators, new ones for this year. So we are starting to follow and show also the order intake which has, of course, grown dramatically from the comparison year. It almost amounted to EUR 400,000. It's an indicator that tells about the future revenues. And of course, now when we are moving more to the R&D-based work as a first phase with our mining and metal customers, so it's very important to show the future progress also with this indicator. And then we are also adding the number of the NRE projects. So these are R&D projects or co-development projects with our mining and metal customers, and we received 2 of them during the first quarter, and we will follow those now from going forward. We have been following previously, and that was more related to the concrete product business, the new -- number of new customer pilots. And of course, there was only one in the first quarter, but that's also showing the shift from concrete -- more from the concrete product side to the higher volume mining and side stream customers. Our personnel at the end of the period was 52. And of course, as we are in a start-up mode, and there is a lot of investments still needed for the company and net sales and the revenues are solely picking up, the cash is always the main concern. So we have decreased our burn rate and we can see the effect in our EBITDA currently. Now we are taking certain actions also on that side, as Tuija mentioned. We still have outstanding loan from EUR 2.5 million from Climate Fund and we are ready to withdraw that during this year. And last year, we -- the Business Finland granted us EUR 2.7 million for side stream development, and it's still fully to be drawn. And then we have the commercialization grant from Finnpartnership for our Malaysia case, as mentioned. Okay. This was my last time showing the financial figures for Betolar. It has been truly an experience for the last years joining carat site start-up, taking back to the First North growth market and it has been an experience. I have had the privilege to work in the company for the great mines. And of course, I wanted to thank all the stakeholders, all the investors, all the analysts that are following us. And I hope that you keep following Betolar. I will be now moving to another company, pushing forward the crane transition, which is my passion, and I will always follow Betolar as a shareholder from now on. But it has been a great privilege to work in this kind of company. Melina?

Thank you, Riikka. So looking forward, what will happen this year, we have our half year financial review and then Q3 coming up later in H2.

So going to questions. There has come up some questions related to now this new focus. First of all, maybe Tuija can take this one. So what does this realignment mean for the hollow-core slabs?

Yes. That's a really, really good question. So as I mentioned, we are now focusing and putting more efforts on the side stream, mining and the metal sector. But however, we still have our current customers on the concrete side and also hollow-core slabs side, and we will continue with these projects. Then we have really, really made -- we have really good innovation on this, and we have really worked hard several years on this side. So we will continue. But what it means is that we are not putting too much extra effort on it. So we will take care of our current projects, and we will look at -- there might be some interesting opportunities, new prospects and so on. So we will look how it looks and continue with this. But really now focusing more on this mining and metals and side stream side as well.

Then there's one question to Riikka. In Finnish, [Foreign Language]. So a question about grants.

Yes. So there were only these accruals booked to the Q1 figures. So we have still all the grants to be withdrawn now in the coming quarters. So based on the project progress, we also always booked the accruals based on the IFRS rules.

Then there's one question. Tuija, you can take this one. So regarding the personnel or the structural, what's it -- exchange negotiations. What will be the impact on the Kannonkoski or innovation expansion?

Yes. So right now, we have the exchange negotiations ongoing and no decisions have been made at this point. So we will come back to this topic once we are progressing with these negotiations together with our employees.

Then Riikka, [Foreign Language]

That's always a very good question. We are currently estimating with our activities that it will be about 2 years. And of course, all the progress that we get from the commercial side will shift that forward. So that will be the main focus now with Tuija's lead and our concentration to the mining and metal. So we see the great potential there. So I can see that there is a huge potential also to grow that 2 years forward.

And then there's one more. If you have more coming up, we'll wait for a second, but here's -- Tuija. What about the key markets? What is the biggest, or how is this written, where is the biggest demand coming from if we look at markets?

Where is the biggest demand? So well, right now, we are quite looking at the mining site, and of course, mining is a global thing. So we have quite a lot of interest in Finland, and that's our home market. So that's very, very interesting and looking at that. But also, we have in other places in Europe, there's a lot of demand and also Asian market is something that where we see that there is a demand, and it's growing. There would be probably other markets as well, but we also need to focus a little bit what are the markets that we're looking at. So the main markets that we have is, of course, the European market and the Asian market.

How about India?

Yes. India, yes, we see a demand in India, and we have several projects and customers already in Indian market.

Thank you. Good. I think we have all the questions been answered now. Thank you, Tuija and Riikka. Thank you for listening, and happy Labor Day. Thank you.