Polygiene Group AB (POLYG) Earnings Call Transcript & Summary

Good morning, and welcome to Polygiene Group's presentation of the fourth quarter. I am Ulrika Bjork, and I'm the CEO of Group.

I'm Niklas Blomstedt, and I am the CFO.

So we're going to introduce to you the fourth quarter from 2024, and I'm very happy to see how the company has performed during full 2024. So I will start to give you some highlights of the quarter, and then Niklas will give you the financial performance. And then I will give you an update on Polygiene and Addmaster, some updates from the quarter and also where we are as in the different segments. And then we're going to have a Q&A in the end as we normally do. So let's start with some highlights. As you know, 2024 has been a comeback year for the group. We have strong results and also the conclusion of the year, we ended up with a very strong growth, 45%. And we also have proven the scalability of the business. So we're delivering very good results overall in the year. We can also see that all the other key numbers has also been pointing at the right directions, and we continue to improve on all areas. As a result of these good key numbers, the Board has also decided to propose for the AGM a dividend and an update on the dividend policy. And the policy is actually a proposal to give back around 40% of the result after tax, which should amount to SEK 0.05 for 2024, and that will be decided on the AGM 8th May. We're also expanding our agent and distributor network, both in Polygiene and Addmaster. We have some new agents and distributors, and this is part of the future growth strategies to extend these networks. We also had some interesting breakthroughs in Scentmaster, which I will come back to. And then also, I will give you an update on the ShedGuard project that we now are in collaboration with the University of Manchester, which has been giving the project another dimension. But first, some numbers from you, Niklas.

Yes. If we look at the numbers, then a short summary, we can see that in the quarter, we had sales of SEK 44.7 million versus SEK 30.9 million in the quarter last year. Full year, we are having SEK 156.9 million versus SEK 113.5 million. We had a strong gross margin of 76.1% versus 70.6% and the full year, it was 70.8% versus 73.2%. We had operating cost of minus SEK 25.1 million versus SEK 25.3 million last year. Full year amount was SEK 85.1 million versus SEK 88.1 million. And EBITDA of SEK 5.9 in the quarter versus minus SEK 6 million and for the full year SEK 19 million versus minus SEK 12.2 million. We had an EBIT of SEK 4.4 million versus minus SEK 302.4 million. For the full year, it was SEK 13.2 million versus SEK 312.6 million. We had a strong cash flow of SEK 9.4 million in the quarter versus minus SEK 2.3 million. And the full year, we had SEK 21.4 million versus minus SEK 3.7 million. At the end of the year, we had a cash of SEK 68.7 million versus SEK 44.1 million. And as Ulrika said, the Board has proposed a dividend of SEK 0.05 per share or SEK 5 per share. If we go in a little bit more into the sales, we can see that sales was up 45% versus last year. That includes the 1% FX impact. And the sales in the quarter 4 is also better than we had in quarter 3. During the quarter, we'll have a stock buildup at the distributors in Polygiene of approximately SEK 5 million. And that's partly driven that the Chinese New Year is fairly early in 2025. Looking on the shares of sales, Polygiene is now up to 57% in the quarter because Polygiene increased with 55% during the quarter versus last year. Addmaster increased 32%. So their part of the share is 43% in Q4. From a region point of view, we saw that the strongest increase was in EMEA with 39%, followed by Americas with 33%, while we have a small decrease in APAC with 7%. If we then look on the other numbers, we can see that a strong gross margin of 76.1% versus the 70.6%. It's partly driven by FX, around 1 percentage unit, and also that we have a good mix with more Polygiene sales in the quarter with higher margin. And in the last year, we had an inventory adjustment of SEK 0.7 million. The operating costs include in the quarter a bonus of SEK 1.7 million. Last year, we had SEK 2.5 million for ending consulting contracts. The operating cost is also including variable sales costs. And for this quarter, it was SEK 4.8 million versus SEK 3 million last year, and this is driven by the increased sales. EBITDA, as we said, SEK 5.9 million versus minus SEK 6 million and EBIT SEK 4.4 million versus minus SEK 302.4 million. And last year, we had the write-down of goodwill of around SEK 295 million. The strong cash flow of SEK 9.4 million was driven partly by contribution from operating activities, strength in working capital and reduced investments during the period. We have had some small shortages on the supply during the quarter, so we had to do some air transport. And that air transport comes with shorter payment terms versus the sea transport. So that has a positive impact on the strength in working capital. And as we said, we have a strong cash of SEK 68.7 million. And the dividend of SEK 0.05 is approximately SEK 1.9 million.

Thank you, Niklas. And I will move into talk a little bit about Polygiene, the textile segment of our business. There is a good trend. There's a good drive in the textile business at the moment. As we can see, there was a strong growth of 55%. The share of sales for the full group was 57%, which also triggered the higher margins of the quarter. The sales within Polygiene is mainly driven from Europe and EMEA and the Americas this quarter. And we can see a lot of our customers that declined during 2023 are back on track again like Arc'teryx on running Eddie Bauer and Adidas. We can see they picked up volumes again that is really, really positive. But we also have new brands coming on board. For instance, we have this prestigious brand passenger from U.K., which is an outdoor brand we have a lot of focus on sustainability. So Polygiene fits very well in with their message. Yes. And then I want to update you on ShedGuard. And ShedGuard is an innovation project that has been running for 1, 1.5 years. It's a long-term project. We are in the phase now where we are going to test more fabrics. We're going to treat more fabrics and send for new tests. And we're going to have those results by end of quarter 1. Meanwhile, we have this partnership with the University of Manchester, who came in with extensive knowledge of microfibers. They have equipment, they have labs. So this collaboration with Polygiene's experience in textile applications is a super good match. And the project is funded for around 9 months, and this is super interesting. So meanwhile, we are waiting for the test results from phase 2. The University is now conducting 250 wash tests. That is a large number of analysis going to be made now to find out what are the common patterns to see on what fabrics, what kind of fabrics, if it -- the water has an impact, if it's normal filter water or the ionized water. We're also looking at detergents, if that had an impact. So there's a lot of analysis going to be made now. We're going to have the results from these washing tests within the next coming weeks here. So it's going to be super interesting to see how this project is going to work. And it's not only about to have good test results, it's about to have consistent good test results or to be a viable commercial product. So that's why we have to do all this work now if we're going to be able to put this on the market or not. But so far, it seems positive, I would like to say. So we have all reasons to come back to the ShedGuard project when we are introducing you to the Q1 in April. As I said before, part of our strategic growth is that we have to partner up with other partners in the network like distributors and agents because we are not many in the organization. We have 45 people. We have to have arms out there. So we onboarded Weichert in U.S. to have one salesperson in the West Coast and one on the East Coast. And Weichert is the agency that we also work with in Germany. So they belong to the same group. And Weichert is also the company who are doing all these big trade shows. So they are super connected to all the brands and all the industries. So it's a perfect match for us. And after around a couple of months now, we can already see very, very good results from them with incoming leads with prospects and projects. So this has been really good for the Polygiene Americas now. And then also, we're looking for technologies, tomorrow's technologies to extend the technology portfolio. So we have worked very hard the last couple of months here to try to find something that could be complementary to our StayFresh technologies. And the R&D team has worked really, really hard in the last months here. And then also another positive note on Polygiene is that we have a healthier customer structure. By analyzing the customers, we can see that there are more Tier 1 brand partners than before, and that is minimizing the risk if somebody who will change technology or do other changes, we still have more of the bigger customers now, which is very, very good to realize now. Then moving into Addmaster, the protection side of the business, the hard surfaces. And they also had a great quarter. I mean, 32% is a good growth. We can also see that if existing customer's picking up volumes again, but we also have new customers coming on board continuously. And the share of sales was 43%. And I think if we look full year, I think it's more around 50-50, but a little bit upper side on Polygiene this year. And EMEA is still the largest region with 61% and the full year is 70%. So we can see that we have growth in Americas, for instance. And hopefully, we can see that APAC is picking up as well. The Americas doubled the sales in Q4, but that is from small volumes, but it's also a signal of that U.S. is a future market for us for Addmaster. And the same with -- as with Polygiene, we have to extend our networks. So we have signed on a new global distributor. It's a German global company that have facilities in China. So they are going to promote and sell Addmaster's technologies from this year. So that's also exciting to follow how that will develop. And then we had a presentation at this conference. It's a big import exhibition that happens every year, and we had the stage where we could introduce and present Addmaster for a big audience. So that was really fantastic too. And then we have launched with Scentmaster. And Scentmaster is quite a small part of the product portfolio so far. It's mainly about Biomaster and antimicrobials, but we also believe that the Scentmaster has a great potential. So now we have launched oral products and other personal hygiene essentials like razors and shavers. We have toothpicks, we have other kind of personal hygiene where you need an antimicrobial to add value to the technologies. And we have several companies that have launched with oral products. I think it's 2, 3 different customers from different regions that has picked up this. And it makes sense to have a sent with mint or lemon or anything else, something like that in these 2 sticks. So it's a great match. And I think we can see more from this area moving forward. And then there is another positive note on the geotextiles. So we have partnered up with a big partner. It's one of the largest geotextiles in the world. And now they are relaunching Geoclean, the textiles where Polygiene -- Addmaster, Polygiene Group is included. And they are going to launch that under the name OSMORIA. So you can go into the website and see how nicely they are presenting these aquatextiles. And we were there on an innovation workshop with them to try to find more technologies that we could add to these geotextiles. So it is quite a good workshop, very positive, good partnership. And I think they also mentioned that they now have signed on Brussels Airport with the aquatextiles, which is quite interesting. And they are only launching this in Europe so far. So I mean, it's a global company. They have Asia, U.S. There are lots of other markets where this can be introduced in the future. So very exciting to follow this as well. Yes. And then there's another like interesting thing I want to mention is that Addmaster has its 25 years anniversary in 2025. The business was started by Paul Morris in year 2000. And we are going to highlight this during the year with a lot of PR. We're going to do a lot of events and also include our customers and partners in this. So it's going to be an exciting year for Addmaster for sure. And then we have a very busy spring here. We're going to go out and promote Polygiene Group as a good investment case. We believe that we are in a place now that we are confident that we are stable. So we have a huge schedule here in March. We're going to on a road trip across Europe. We're going to visit funds and investors in London, Paris, Frankfurt, in Zurich, in Copenhagen. We're going to have do lunch presentations. We have evening events, and we're also going to do one-to-one presentations that we have been signed up to. And we have produced this one-pager. It's like a folder that we're going to ship out both physically, but we're also going to e-mail to 500 contact investors, both private but also institutions so we can now for real go out and promote us to the stock exchange market. Yes, I think that was all from me. And if you want to go deeper in, you read the full report, and I think I'm ready for some questions.

We had some questions here before that was sent in before. Something was a little bit about -- it's been a little bit quiet, not so much news about products. I think you mentioned a little bit about it that there are some exciting things coming up. Do you want to say something more, Ulrika about that?

Not for now. But I think, as I said, we are looking into the future and what is tomorrow's technologies. So I'm sure we will announce something when we are ready for that.

There were some questions about ShedGuard and StayFresh Bio.

ShedGuard, as I mentioned, it is an innovation project. So it's still ongoing. It's absolutely alive and positive. For the StayFresh Bio, we launched that last year. It has been some strugglings because of it's a new technology. We need to have registrations. We have to do compliance in place and also, of course, testing. So we have tested with customers during 2024. And let's see what we bring in now in 2025.

And also, there are some questions about some competitors. There has to be some strugglings in the market. How we would sort of have a view on that from a customer point of view or acquisition point of view?

Yes. So there is a consolidation in the market for sure. There have been companies -- I mean, it's been tough years in the back. So there is a consolidation in general in the market, and Polygiene Group is always open to evaluate and to check what's out there. We do our due diligence. And if something is interesting, we will strike. But if it's not, it's not interesting. So we keep our eyes open and are updated on the market.

And then there were a question about the bonus. And what we can say that is the bonus is for everyone in the company. So all of the employees are part of the bonus program. It's both sales and the EBIT. So it's a combination of that. And based upon that is -- you have to do an overachievement versus the budget. So that's sort of the background now and how the budget -- the bonus is built up. But as Ulrika said, it's for everyone in the company. And there's not that much -- no, I think the ones we have new ones we already sort of answered in the ones we had before. So…

They've been covered in the presentation. That's good.

Yes, yes.

For sure. Yes. And I don't think we have anything more…

No.

To add, I can just like -- some people ask, how do you feel about the first quarter? It's very early. We had the Chinese New Year much earlier. So of course, we can't compare January to January. We have to look January and February together. I think in March will be the month when we know because then we can see how much we can pick it up from the first 2 months. But it's too early, but we have a very positive feeling. The company -- within the company, the super good aligned, the full team. We are focusing. We know that strategy and focus is one of the success factors here during 2024 to be aligned and to just like do the right things. And of course, there has been a recovery as well for existing customers. So we like following their trends. In general, I think we picked some market shares during 2024. We have had a bigger growth than the industry in general. So I think we are in a good place. So I really hope that we can continue on this path moving forward. So the next report will be in 24 April, and then we will release the Q1. And I hope I can come back with more updates regarding ShedGuard and other news. Okay. Thank you so much for listening. See you next time.