Polygiene Group AB (POLYG) Earnings Call Transcript & Summary

Hello, and a very warm welcome to Polygiene Group Third Quarter 2026 Webinar. Today's presentation will be divided into 3 sections. Our new CFO, Anders Nordgren, will begin with the financial update, and after which, I will provide an overview of the business, and we will then conclude with a Q&A session. Anders, over to you.

Yes. Thanks, Sandrine, and hi, everyone. Great to be here. This is my first quarterly report and presentation at Polygiene. And yes, I look forward to many more in the future. But let's start with having a look at the third quarter. The third quarter was financially challenging for us, something that we also mentioned in the CEO message. Group sales came in at SEK 26.3 million in the third quarter compared with SEK 36.4 million last year. At the same time, the gross margin declined to 63.7%, with higher silver costs being one of the main drivers. On the positive side, our costs continue to develop in the right direction. Costs in the third quarter were significantly below last year, including lower administration and personnel costs. This helped, but was not enough to offset the shortfall on sales or top line. So as a result, EBITDA came in at minus SEK 3 million in Q3. From a cash perspective, cash flow for the quarter was negative with SEK 16 million -- SEK 16.4 million, mainly due to larger supplier payments related to inventory buildup that we secured earlier during the year. We ended the quarter with a cash of SEK 34.2 million. And since 30th of September, we have seen significant payments coming in, which has strengthened the development beginning of Q4. But to understand what drove the sales decline, let's look more closely at the development in our 2 segments. The 2 segments, Addmaster and Polygiene showed quite different developments during the quarter. Polygiene sales declined by 51%, while Addmaster grew with 17%. The lower sales in Polygiene were largely due to limited distributor sales as distributor inventory levels remain high throughout Q3. As a comparison, distributor sales amounted to SEK 9 million in Q3 last year. When those sales do not happen, as was the case this quarter, the shortfall becomes significant and visible. On the positive side, in addition to the lower cost base, Addmaster grew by 17% during the quarter, reaching sales of almost SEK 15 million. This partly offset the decline in Polygiene, but not enough to compensate for it at group level. So to sum up, a challenging quarter. Addmaster continued to grow and our costs move in the right direction, while elevated distributor inventories continue to hold back sales in Polygiene. And with that, I hand back to you, Sandrine.

Thank you, Anders. As you have seen from the financial results, the third quarter has been a difficult one for Polygiene Group. Sales have remained weak, particularly on our textile business, and we continue to operate in a very challenging market environment. However, today, I do not want the business update to focus only on the quarter that has just passed. I also want to show you where we are making progress against the priority the priorities we set at the beginning of the year and also where we are taking actions to strengthen the business for the future. And there are 3 areas I would particularly like to focus on today, and that is diversification, the changes we have made to improve operational efficiency and the continued repositioning of Addmaster towards higher-value technical solutions. At the beginning of 2026, we set out a number of clear priorities for the group. Of course, during the first half of the year, our focus was very much on execution. We had to respond to the significant changes in input costs, particularly silver. We had to adjust pricing and review how we operate in some of our markets. But as we move through the second half of the year, some of that work is now translating into more structural progress. Diversification is becoming increasingly visible, both in the markets we serve and in the technology we bring to those markets. In the Americas, the restructuring work we discussed earlier in the year is now complete, giving us a leaner and more integrated organization. And within Addmaster, the technical solution strategy is gaining momentum under Kurt Myer's leadership. So while the current trading environment remains difficult, the organization itself is moving forward. One of our key strategic objectives has been to reduce our dependence on traditional sports and outdoor applications. Now that doesn't mean moving away from those markets. They remain very important. But what it does mean is broadening where and how our technology are used and workwear is a very good example. We are seeing a growing number of partners recognizing the value that freshness, comfort and product longevity can bring in professional applications. And building on the success we reported already in Q2 with the U.K. company Orbit International during Q3, we received our first order from French workwear company Car. Fashion and Lifestyle is another area where we are beginning to see some good progress. We attended our first dedicated exhibition in this market recently in Shanghai, and we had really positive response in that show, but we also received our first order from. And at the same time, our technology portfolio is becoming broader continues to gain traction with upcoming launch, for example, in footwear with adidas in Asia and other chronic 20 trials are progressing well with mills across different regions and in a wide range of applications. So this broadens our and gives us more ways to address consumer needs. The important point for me is that diversification is no longer just simply something we are talking about strategically. We are actually starting to see it in the commercial activities of the business. And this brings me to something that I find particularly interesting. During the year, we commissioned a consumer research across 5 major markets, the U.S., Japan, Germany, France and Australia to better understand our consumers think about freshness and odor control in clothing. And the results reinforce the feedback we obtained in a similar market research conducted in China about 3 years ago. And it also reinforced our belief that the consumer need is very much there. 77% of respondents told us that freshness is important to them. 75% identified everyday apparel as one of the key categories where freshness matters. And perhaps most importantly, 78% said that they would be prepared to pay a premium for order control technology in their clothing. However, there is also very clear challenge that has come from this market research as only 42% of the respondents are currently aware that this type of technology exists. So for me, that is one of the most important findings from the research. We spent as a company many years developing technologies that deliver performance and also building strong relationships with brands and mills. The next step is to make sure that consumers understand the benefit those technology brings. The opportunity, therefore, is not just about technology, it's also about communication, and that will increasingly influence how we work with our brand partners, particularly as we move further into new sector, new market segments like everyday apparel, workwear and lifestyle application. Now I would like to close the loop on another priority we had discussed during the year, the Americas. Earlier in 2026, we shared that the operating model in the region needed to become simpler and more efficient. And that restructuring is now complete. So on the solid surfaces side, Biomaster USA has been integrated into Addmaster. And the U.S. warehouse structure has been removed. So commercially and operationally, resources can now be managed more efficiently across the wider organization. And we have taken a similar approach with the textile side. The Americas and EMEA commercial teams now operate under one leadership structure. This helps us share expertise and also resources more effectively while keeping local customer relationships that remain important in North America and in Latin America. Now this is not simply about reducing costs. It's about creating a structure that is better suited to the size of the business today strong platform which we can. Turning to [indiscernible] remain really encouraged by the strategic business. Since joined us in August as Head of Commercial Growth. We have further increased the focus on application where our technology clearly defined customer problems. This includes areas such as antimicrobial resistance, health care, clean water and food security. circularity, resource efficiency and product traceability. These are markets where the value proposition goes well beyond simply adding an additive for a marketing USP. These applications require technical expertise and understanding of the customers' applications and increasingly, the ability to develop tailored solutions, customized solutions. And that is exactly where I believe Addmaster should reposition itself. Whilst we are seeing a growing pipeline of this higher value opportunity, we also need to be realistic specifically about the near term. Q4 sales within Addmaster are likely to be below last year, and this is largely because of the ordering pattern from one masterpiece customer. This customer is likely to place a smaller order than previously anticipated. And this is not because we have lost the customer or the application. It's simply that the customer last year purchased a very large quantity at the end of the year and their consumption during 2026 has been considerably lower than expected due to market condition, and it means that their existing inventory actually is going to last much longer. The relationship remains very strong and the long-term opportunity is still there. And they are even talking about potential expansion into adjacent markets and also new geographies. So this is still a very strong potential for growth, but it's just growing at a much slower pace than we had anticipated originally. So it's a short-term headwind, but it's not a change in our view of the underlying opportunity. Our focus remains really at Addmaster on building a strong quality of revenue and long-term vision while we manage the volatility that we see in the market today. So the key takeaways to conclude. The market remains difficult. And as we've already indicated, we do not currently expect a meaningful improvement during the fourth quarter. But I also believe it is important to separate the short-term trading environment from the progress we are making within the business. Diversification within our textile business is moving forward with increasing activity in workwear, fashion and lifestyle. The consumer research reinforces the relevance of our freshness, auto control and cooling technologies and highlights an important opportunity to communicate their value more effectively, which will be a priority for our marketing teams in the coming quarters. The Americas restructuring is complete, and now we have a leaner operating model in place. And Addmaster is making progress towards the Technical Solutions business we want it to be. There is still a great deal of work ahead of us, and I do not underestimate the challenge we face, but the priorities are clear, and we are taking the action required to strengthen the foundation of the group. So whilst the short-term environment remains difficult, we continue to rebuild towards profitable and sustainable growth. And with that, I think we have covered the key developments for the quarter. So thank you for your attention. And Anders and I will now be very happy to take on your questions.

Yes. And I think we received a couple of questions prior to the meeting that was addressed to me and that would also give you a...

Okay.