Solar Foods Oyj (SFOODS) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Solar Foods Half Year Report 2026 Webcast. My name is Maria Ramo, and I'm here today with our CEO, Rami Jokela; and CFO, Ilkka Saura. Rami will kick things off by going through the significant events of the first half of the year. And after that, Ilkka will go through the financial highlights. In the end of the webcast, we have a Q&A, and you in the audience have the possibility to ask questions through the chat function. But without further ado, Rami, the stage is yours.

Yes. Thank you, Maria. And welcome also on my side. So what is happening in Solar Foods in the first half year? We are implementing our strategy. We are proceeding in a commercialization and industrialization journey. And some of the key highlights. So we have first consumer product launch now in the U.S. market, the biggest health and performance market globally, and that happened in May. We are very excited about that. Later, I will tell more about that. We also have been very successfully implementing our financing. So the first half year, we have got the commitments and more than EUR 100 million, ensuring the funding for our operations and also the Factory 02 plan, what actually we have. What we communicated last year, October that we are using strategic partners for Factory 02. So I'm very happy to announce here as well and report that we have GEA, who is -- which company, the global leading food technology company area as well as Fortum is a leading provider for the renewable energy and decarbonization in the Nordics. Both companies are our strategic partners as well developing Factory 02. We also have done a lot of progress in the Solein ingredient and application development. We have developed more than 18 new product concepts in the health and performance segment, which is a key for our customers based on the customer needs and requirements, together with customers. And also with ready-to-drink, we have developed the UHT-stable product, what I will tell more about very, very soon. So you can see that all elements, commercial funding, also the F02 factory the partnership and the development plans the designs ready for the final invested, the decision direction as well as the product, the application, very, very good development all in all, in all sectors. So before to go to all the details, so I'd like to tell one more time what is our big picture. So we are in the middle of the 3 major megatrends. We are in a unique position having global leading technology platform to connect all these 3 megatrends. And what are those? Protein, which is, of course, the trend and the growth by the health and wellness, but also GLP-1. The Barclays analyst estimated that the global protein market has already reached EUR 1.6 trillion. So it's a huge market and growth for the next 5 years is expected to be 37%. So absolutely enormous growth. So earlier, we talked about the health and wellness as a megatrend, but you can see that protein has come the centerpiece of this megatrend now. The other big megatrend is food sovereignty and the security of supply. By yourself reading the news, what happened now the summertime, for example, in the climate, extreme heat, forest fires, water scarcity and drought -- you can all understand what is the impact of the El Niño. And if you follow what actually European Central Bank is estimating the impact of the price and price increases to the commodities, food commodities is up to the 9%, absolutely big impact actually expected. And then every country is, of course, looking how to ensure that there is a food availability in the country as well the less dependencies of the climate as well to other best countries or supply. Fertilizer volatility has been also unprecedented. And if you take a look actually the last 10 years, fertilizer prices actually doubled. It's a huge impact as well. That's why -- many of the countries, they have set their national agendas to secure the supply and food sovereignty. So China have their 5-year plan. Japan just announced a few weeks back for this -- the new EUR 6.2 billion investment for the new food and the road map for the 2040. Europe have this Biotech Act I. And now they are working with the Biotech Act II, how to secure the food supply in Europe. So you can see that a lot of things are happening. It's a strategic topic as such. And the last big megatrend, what I hear is hydrogen and decarbonization, energy transition, electrification. And if you take a look what was BloombergNEF, the analysis putting together that there's a EUR 2.1 trillion investment -- investment annually, an 8% growth year-on-year. So Solar Foods, we are using hydrogen. We make a hydrogen and protein. And actually, we are helping a lot in the food sovereignty point of view. If you take hydrogen, the most value-added end product, what you can do with the hydrogen actually is a food. And of course, same time, we are giving a very good recipe for the government how to decarbonize as well. You can see we are the centerpiece of that. All right. So let's go to the details what actually are the big significant events for the first half year. All right. I commented already that now we entered the U.S. Health and performance nutrition market and Ambrosia Collective, our customer, who launched the Planta ready-to-mix brand over there. Based on the feedback of the consumers, what we have heard from the Ambrosia Collective, they are very excited, very good feedback. So it's a best seller in the company. And you can think about in 2 months' time actually to achieve that kind of position. And also now they are already planning more flavors. And what we understood that Solein actually helps evolving the Planta brand, which is a big, big topic and confirmation to us that actually we have something unique as an ingredient for our customers. They are also looking for the marketing events, how the Planta brand will go and also social media and the national wide the distribution through the retail chains once those will be available, of course, more to report. Why U.S. market is so important for us? So we have the health and wellness, what we have to talk about. But now the GLP-1 topic actually has arised and protein demand has been increasing perhaps more than what they expected. And protein products actually have moved from typically sports users to mainstream users. And the U.S. market, which is the $10 billion as such only for the health and performance, of course, a key market for us. We are very, very excited. And if you will think about how big milestone this is for the Solar Foods and the whole perhaps industry for the new food. There is a few companies who are on the market in the new food in the U.S. But if you think about its first international new food ingredient company entering the U.S. market, which is outside of the U.S. actually doing that. And having publicly available consumer brand to buy the health and performance segment, that's us -- so it's a major, major milestone for us actually have a first brand available and consumers can enjoy the Solein, the blended products. Very good. We are very happy, and thank you for the Ambrosia Collective leadership, all the full support and a good cooperation here. We have done a lot of work validating and confirming and progressing our value proposition. We have 4 value propositions in Solein. We have a sustainability and decarbonization. So like you know, we have been marketing and saying that we have the most sustainable protein available. And recently, we made a new updated external LCA study, the life cycle assessment study of the CO2. And that's also confirmed, yes, we are the most sustainable protein available. Supply and price is one. Other one is nutrition and of course, is all the applications. I will tell more about those now. So if you take a look at where the whole protein market and supply and price development, the whey protein is the benchmark, whey protein isolate and concentrate. And like we have earlier reported, there is a huge demand coming for the supply. And the whey protein, as it's a byproduct of the cheese production cannot cope with the demand. And that's why there is a supply gap. And that supply gap actually have affected 2 big topics. One is a supply challenge and quality challenges because now what kind of whey you will actually use and you might be make compromises for your customers what they do as well, the price has been going the tripled in the last 2 years. So you can see that this is actually a big, big opportunity to have some alternative very good nutrition high-quality products like a Solein. That's why we said the Solein unlocks growth with a stable and discounted price versus or compared to the whey, and we have scalable supply and steady quality. So this is the discussions what we have with customers. And of course, especially with these big CPG companies and the health and performance companies, this is a big agenda topic for them. So how they can ensure their growth. So we are, of course, ensuring the growth for those companies providing this very high-quality protein. And then if you take a look more detail for the price, and here, we are using the Vesper price development. And if you take a look at almost 3 years, you can see that it has tripled the price in the whey protein isolate, but also whey protein concentrate. And that's also in the U.S. as well in Europe. And you can see that our EUR 17 per kilo, what we have publicly said as a Solein price point, it's a very, very good price for our customers to go for. That's why you can see that we are confirming our value proposition for this kind of price and supply. If we move to the nutrition, and we have been communicating this many times earlier. We have this 80% protein, and this is a very balanced amino acid profile, all 9 essential amino acids, 20% branch amino acids, and 43% essential amino acids. So very comparable if you go towards this kind of whey concentrator, whey isolate. And we have also have fibers, 10% fibers, 40% are beta-glucans. And this could be the next big thing. We already hear some kind of trends that the protein, of course, booming and a megatrend, but fiber could be the next big thing. Good thing is Solein have already both. And we see that this is very good for us. And then if you think about what customers typically are looking for, they are looking for, is it lactose-free, is it soya-free, is it gluten-free? How much is the protein? How much is fiber? Is there some other minerals? How is the taste? And for some customers, also this non-GMO is absolutely key as well. So we see that we have very good product available. That is one of the key value proposition what we have. And of course, give alternative to our customers when like I communicated, the supply and price challenges are happening at the moment. Application area, we have done a lot of work. And this has been because of following our customer needs and requirements, we want that the Solein ingredient and applications will perform the best in our customers' products. So I highlighted a few areas. So we have these protein bars, protein drinks and ready-to-mix. So protein bars, for example, we know that based on feedback that we have a value proposition of what is already the validated mouthfeel has been very good. No graininess, disperses very smoothly as such. And now we have developed one more flavor for that one. Now we have totally 3 flavors. Ready-to-drink where I already said about this UHT treatment, which actually we are able to have a stable product with a broad pH and temperature ranges. And this is absolutely key value for our customers and storing the room temperatures or actually with chilled. So actually still stable all the time and very, very good in that. High solubility as well, and we have 9 new flavors and now total 12. You can see how much we have put efforts to development. Ready-to-mix area, like this Ambrosia Collective came for this area. So we have already outstanding binding properties, excellent texture contribution and also new flavors. Now we have already 10 total flavors, 8 developed in the last 6 months time. We also have been doing ongoing development for the ingredient performance and product optimization. So we have improved the Solein powder solubility handling. And when you have industrial plant, of course, you like to make sure that there is no dust or anything that it goes smooth actually in the process. And of course, the fast dissolution, how quickly this is -- our Solein will work. Also 25% reduction in the iron has been on our topic we have been focused. And we continue, of course, for those developments as well. So a lot of work done. And this all work is towards our customers. So we follow our customer needs. We want that the customer will be successful. We help our knowledge here as well, what we know the Solein. And that's why we do this kind of concept selling models for the different prototypes as well. If we talk about commercial progress. So we have this concept sales model, what was selected in Capital Market Days about 2 years ago. And this is absolutely working. And why it's working so well? So we are able to showcase Solein capabilities in this kind of products like a ready-to-drink or ready-to-mix or protein bar, what I explained to you. But also, we are collecting and learning how the different flavors, different ingredients or different treatments actually works. And our customers, of course, they have their own value proposition, but how they like to position. They have certain ingredient list, how they are going to use it and so on. So we have this kind of application know-how to support our customers. And that has been a big, big focus, and we continue investing for this one because this will be the key to make our customers successful very quickly. And this is very time-consuming when our customers, of course, are doing the application development. So this is absolutely key, one of the key messages we would like to take out of this today's webcast as well. We have been focusing for the agile health and performance companies, smaller companies, which are fast and bringing the products to the market, also focusing for the large health and performance companies and CPG companies. And those are the big volumes, especially Factory 02 and Network Factories laid. And we are turning now. We communicated four letter of intent and memorandum understandings to the firm offtakes. I can report very good continuing progress and discussions back and forth and which stage is application development and what could be the launch plans or limited launch or seasonal launch plans, how to commercialize that one as well. So that I can say now that, yes, progress has been there, more to communicate once we can announce which brands we actually have agreements and something more tangible to say. Solein is commercially available in Singapore and now U.S., like we're very proud of as well. For Europe, we have been continuing our active work, and we expect to get the Europe EFSA opinion very soon. We have answered all the questions. We expect that sooner than later, we get the scientific opinion about the Solein. And of course, we hope to get this positive feedback and then we can start to really make Europe launch plans with our customers who are absolutely waiting to get this Solein to the market as well. Here below, I have shown 5 elements, what typically is a customer journey. First customer, it might take 1 year to 1.5 year, big companies, 2 years or even 3 years. So introduction, product positioning, okay, how this brand or Solein could actually fit with the portfolio of the company, application development with the recipe is developed together with the ingredient list, what our customers have and how it fits actually then their consumer needs and positioning. This typically takes a long time. And that's actually we have seen and we are supporting our customers a lot. And we are investing even more for that one because we can see that this is the area we can accelerate. Commercialization and the launch plans is a key. So which channels our customers are using. And then finally, and what is the consumer story, storyline, storytelling for that. And then, of course, we are supporting our customers for that. So how the Solein and who Solar story could fit their launch plans. And that typically leads now to agreements like Ambrosia Collective was a good example. But this is a lengthy process. And this is -- I can comment if you ask any surprises here that this is perhaps one of the learnings that this application development takes time. All right. I continue here. So -- so our concept sales model, what we selected, it works. We have now clear evidence with Ambrosia Collective, also other customers what we are in the process of launching in the U.S. at the moment and prepairing also in the European Union. And this is are now showing actually Factory 02 volumes and Factory 02 volumes, how we are planning. So we want to have fast-moving health and performance companies, small, midsized companies, get quickly the product to the market first. But at the same time, you can see that we have this leading health and performance companies. Those are perhaps more than EUR 1 billion in revenues and then major CPG companies, which is a multiple billion as a size of the companies. We are securing certain volume already from our Factory 01 with our R&D factory demo plant that we are able to do this testing and limit possible limited launches as well. So that's our tactical way how we do. And of course, when we move to the Factory 02 volumes, clearly, the majority of the volumes come to big companies. And yes, one more time, this concept sales model, what we introduced, it has worked very well. So demonstrating this that we have our own concepts and learnings with the Solein ingredient, how it works and applications to support our customers, absolutely key as such. Then if we talk about our Factory 02, so factory design, we have advanced the final phase in the design together with partners. And now we are -- all the interfaces, timelines, delivery scopes as well actually how this factory will be visualized, but also concretely will be built in the plants as well. So we are now in the final phase towards this final investment decision. With GEA, which is a processing area. So we, of course, doing the design and engineering together, but also negotiating for the supply agreement and the strategic partnership agreement for the network of factories. Energy Services area where Fortum is a cooling, heating, electrical grids and hydrogen, so 4 key areas. So we are proceeding with the engineering at the moment. And of course, the discussions how we can buy the services later for Fortum for the F2 and agreements for that. Real estate area, we are exploring real estate investor options and Vicus Capital Advisors has been our partner for that one to find real estate investor options for that one. So all in all, I have to say I'm very happy. We have very strong partners. We have even more key partners announced than here. So we are ready actually for the F02 indeed. And what you already heard and we will hear more that the financing looks also very good. So now it's more to continue with the commercial side to make this offtake plans and realize those. All right. I will conclude actually here that -- so what we actually have, what we are doing here with FO2 and why actually we have like a Fortum GEA and other big companies interested to collaborate and be a part of that. So what is in the middle, Solar Foods and Solein, this technology platform? We have the world's leading gas fermenters and technology platform to produce the food for human. And actually, we are the only one who have any permissions to sell that any country globally. This is also a platform we are able to produce 10x more efficient than a photosynthesis today. So -- It is a paradigm shift. Food is ready in 3 days. So what we are doing now. We are building a new ecosystem for the food and energy industries together. And that's -- you can see what we have. We have the left-hand side, hydrogen oxygen, where Fortum is our selected intended partner. And then we have a carbon oxide and renewable energy, where we are discussing at the moment who could be actually the companies there. In the middle, in the technology platform, we have Fortum and GEA and Vicus what I explained already. And the right-hand side, we have food companies who we are working on. And then health and performance, we have protein drinks, protein powder and protein bars. But then you can see that Solein is a very versatile ingredient. We can go the dairy replacement, egg replacement, other markets as well later. But we have this kind of step phase plan. So first, health and performance and then expanding more -- all right. That's fair. So all in all, what I can say. So we have something unique here, and we are developing very, very well. But now might be it's the right time to tell us something more about the financial highlights. So Ilkka, what about if you tell where we are in the financial part?

Thank you, Rami. Hi, all. Very pleased to be here today with you and discuss the first half results, report this out has been for a couple of hours. So some of the key figures. So P&L loss -- operating loss at EUR 6.8 million. We ended the period with a very healthy balance sheet, mainly because of the executed funding transactions and the cash flow showing our commitment towards the investment path and commercializing this asset solely through the network of factories and our partners. And as you also might have noted, the P&L was presented in functional format. I'm discussing a couple of key highlights of the P&L. So research and development expenditure at about EUR 6.4 million, sales and marketing at EUR 1.3 million and general admin at EUR 4 million. It has to be noted that the company continues to recognize the capitalized R&D costs through P&L in the R&D expenditure. And with this in mind, the sort of adjusted R&D expenses remained at about EUR 8.4 million at more or less same level as last year, again, underlining the fact that the company invests heavily in the future and the upcoming growth. Sales and marketing, of course, growing from prior year about EUR 500,000 due to the accelerated go-to-market activities, especially in the U.S., but also in the Europe as we are moving towards the anticipated novel food approval in Europe. General and admin included certain nonrecurring items such as the transaction fees of the executed equity transaction in January, among other items. Cash flows, net cash flow at about EUR 19.1 million, positive due to the funding round. Operating cash flow was at EUR 4.5 million and investment cash flow at EUR 400,000, whereas financing remained at very healthy EUR 24 million. It's good to note that company received approximately EUR 8 million to EUR 9 million of grants over the period that is also visible in the reports and the prior reports. These have been recognized in both operating cash flow and investment cash flow. And with this in mind, the cash flow into operations and investment increased about EUR 4 million, mainly because of somewhat material investments to F02 and related working capital and the nonrecurring equity transaction as well as the growth in the sales and marketing expenditure. So this is good to keep in mind. And -- as cash is the king, it's important to note that the cash balances at the end of the period stayed at about EUR 27 million. So very good in that sense. Some of the other key figures, revenue -- reported revenue approximately rounded EUR 100,000, growing from last year, comprised of deliveries to customers in the U.S. and some other parts of the world. Good to also note the decline in the order book, which we have been reporting for quite some time. Some certain customer, a very small health and performance fast-moving company decided to discontinue its operation and start dissolution and that supply agreement has been eliminated from the order book. So one of the key highlights in this report is, of course, the execution of our financial program. So in October last year, we came out with the funding plan on the financing needs with the strategic partners with about EUR 190 million of capital need. In January this year, during the period, company executed very successfully a directed share issuance to certain strategic partners as well as institutional investors, family offices and high-net individuals. And in June, just before the period end closing, we managed to come out with a nice announcement of a funding package with Business Finland comprising of a grant of about EUR 39.6 million and an R&D loan with somewhat interesting terms of about EUR 38.1 million, of which 30% can be paid in advance, and it comes with relatively interesting pricing of 1% in interest and a grace period of 5 years from the initiation of the drawdown. So with this funding package and the equity financing, the message is that, yes, the message and the milestones that we promised to the investors have been executed in a very rigorous way, which we are really, really proud of, of course. And what this actually means is shown here. So we started this year and also while we communicated this funding plan, we had roughly 10% or even single-digit figures secured of this funding package. But now as we came out with this report, we are very glad to tell you that 71% of this package has been secured. So this is a massive milestone for the company itself. And this is, of course, something that we continue to execute in the future, also considering the off-balance sheet items through the build operate maintain partnerships with our partners such as Fortum and others, taking care of about EUR 127 million of capital expenditure. So good news in the funding front. This kind of means that whatever comes to the FID, the company remains somewhat confident that the necessary funding exists whenever we are doing the FID. So great progress indeed. Then I want to discuss with you the restatement of P&L. So as you saw, the company has been evaluating its reporting of financials and has decided to report the P&L in the functional format and not discontinue the by-nature-based format. However, those figures are still reported in the notes of the report and available for investors. And this decision was taken because we want to bring more and more material information to our investors and potential investors about the expenditure of the firm and also the capital allocation as we move on, on the growth strategy. Good to note also that the gross presentation of internally developed capital expenditure has been discontinued. However, the capitalization is recognized in the R&D expenditure and also disclosed in the notes. So with these words, I would like to hand over back to you, Rami, for a wrap-up.

Yes. Thank you. So way forward, what to expect now -- so during this year, we will continue to execute our strategy. We have been doing very, very well in many areas, funding area, commercial area, of course, factory development area, also the partnership area as well as the application development, like I commented a lot and investing heavily for that one. Our target is to be ready for the final investment decision for the Factory 02. Factory 02 will make this company different. This company after this factory is running will be the profitable company and highly profitable based on our plans. So what do we need in order to make it? We need to have a sufficient binding customer agreements. That's what we are working at the moment and good progress over there and visits both parties and meetings, high-level, C-level boardrooms. We are, of course, building company, the partner network even further. We are preparing actually for the Factory 02, but making sure that will happen on offtake and the next customers, especially Europe as well. The design together with partners, which are now selected all for the Factory 02, but we have a solid design plan, schedules, CapEx plans and delivery plans and leadership and governance for that one. And implementing this financing plan, what Ilkka was already commenting and what we are very happy as well, how it's developing has gone, how to finalize and implement that one. Research and development of the Solein, that I used quite a much time already. So but we continue and we continue to invest for that one because we know this will be the gate that even get more offtakes and faster actually for customer commitments. And then there's the 2 major milestones, which are not fully in our hands. So Europe, Novel Food approval, so EFSA opinion, scientific opinion first and later approval. And then, of course, in U.S., what we 1 year ago already applied No Questions Letter for the U.S. Food and Drug Administration FDA. So those are the 7 major elements what we are working on. One more time. We have proceeded very well. And what you -- if you summarize actually the commercial part and get the U.S. market and good feedback, that's a confirmation that the Solein ingredient works and also consumers are available to buy it. That's a major milestone. We are working on with the offtakes and more launches in the U.S. And once we have a Europe approval, certainly here in Europe as well. Funding is a key element. Of course, our offtakers are really eager to see the factories happening. It's also financed. So you can see that we are working with the funding plan looks good, but also all the key partners and those companies who are working with us strategically here, they are well-known global leaders or regional leaders, companies as well. So you can see how important this whole company and next project is for us, but actually many other companies as well who are pioneering to do a very good future with the new technology as well. So thank you, Business Finland. Thank you for the GEA. Thank you for the Fortum. Thank you also for the Ambrosia Collective for the launch. And of course, we have still Ajinomoto and Fazer and many others who are working and what we mentioned all details now because we focused actually what really new development in the first half year. But looks good. We are progressing in this commercialization. We are progressing industrialization, and that will continue. I believe there's a lot of good questions coming to us. So Maria, I hope you will come over here and you take this and prepared to -- let's go for the Q&A part.

Yes. Thank you, Rami. We received plenty of questions. So let's get going. The first question is for you, Rami. Has Ambrosia's Planta product success increased the interest in Solein amongst PCG (sic) [ CPG ] companies? Should we expect this to lead to a pickup in new orders?

Great question. We know that these big CPG companies, health and performance companies, they have been asking us to organize also the unprocessed planta ready-to-mix products for them because they like to taste as well, how it works now and because it's available. And then I know that there was an event in Chicago recently where this is a big, big topic that the new food ingredients coming to the market available for the -- publicly for the consumers. That was -- I know that, that was discussed -- that was really discussed among the party funds in the ICT (sic) [ IFT ] in Chicago as well. So answer is yes.

Thank you. And another one for you. What are currently the main concerns of customers that are currently considering making Solein orders in the United States?

Okay. Difficult question. So I don't know all the plans for our customers or the smaller the companies, they might actually be fast both directions. I know that the bigger companies, health and performance companies and CPG companies, it's a very steady development, what we do, a very clear plan actually, how it works. So I can only comment that we are progressing very well. I'm happy to report more with the company name and what is the achievement at the end, what is coming. But yes, that I can comment. So I'm excited, absolutely. And this is my excitement and the energy is coming when I see the customers, the consumers, they feel there's something unique now. We are helping their value proposition. We are helping to grow the business.

Thank you. Will you make the investment decision for Factory 02 this year?

Yes. We keep our communicated publicity. So based on this information what we have at the moment and our offtake discussions as well expectation for the EFSA opinion. So this is the situation where we are today.

To continue a little bit on that topic, Ilkka, how does the company's recent funding progress the investment decision for Factory 02?