Vow ASA (VOW) Earnings Call Transcript & Summary

Welcome to this second half and full year report for Vow. My name is Henrik Badin, I'm the CEO of all. And am I also joined here today with my CFO, Erik Magelssen, for questions. So let me start off. Firstly, about us for new investors, we are a provider of world-leading technology to eliminate pollution, enhance circular economy and to mitigate climate change. We are offering patented unique solutions, that turn waste and biomass into CO2-neutral energy, decarbonized energy, low carbon fuels and biocarbon. We have, over years, proven our ability to continually develop and deliver technology and equipment to complex industry scale solutions and applications. And we are doing that in close co-operations with our customers. We have a strong backlog of orders and a large installed base for leading players in a wide range of industries, that provides recurring business for us. On the right side, you see our brands within the Vow Group. Scanship, who is our sort of company, a vehicle towards the marine industry, specifically the cruise industry. ETIA, and the brands Biogreen and Ascodero are brands towards our land-based activities to date. Some key features. We are a group, we are a technology provider. We have today in the company, a portfolio of patents. We have 117 patents, within 17 patent families. We have 35 proprietary technologies in the group and 25 technology applications that we can claim our IP on. We have, over the years, delivered more than 450 systems, and we have 120 systems in our backlog to be delivered in the coming years. We have -- we are sort of continuously growing the business, and today, we count 181 employees. And we are operating out of -- sort of 6 countries in the group; headquartered in Norway, we have operations in France, Poland, United States, Canada and Italy. So moving on to financial and operational headlines for the second half and the full year. These are the key takeaways. We are delivering a full -- on the full year, we have revenues of NOK 454 million, and this is on par with what we did in 2020. And it -- but showing a significant improvement in the second half of the year. EBITDA for the full year was NOK 43.5 million. Profit before tax was NOK 325 million, and that reflects the value created in the successful demerger of Vow Green Metals. And this is, of course, a onetime effect in our P&L, and it demonstrates when we are doing these type of spin-offs, we see the value creations we are doing. And of course, we have said that before, Erik, that let's make this a recurring activity. For the second half, we have revenues of NOK 253 million, and that's 25% increase compared to last reporting H1 '21. EBITA margin remained at 9.2% level. I will go into the different business segments in the following slides. But concluding this slide with sort of continuously very high order backlog, and it takes us an estimated record of NOK 2.1 billion when we leave the period -- and that is -- that includes NOK 826 million of optional contracts in our cruise newbuild portfolio. So it's a strong foundation in the business, when we are moving forward. Then looking at the key financials, you see the half years, all the way back from the second half in 2019, now in the second half of '21. You see also the business areas divided and breaking up the revenue. You see the cruise project shares, you see the after sales and land based. And you see that the total of NOK 253 million from the -- in the second half of '21, and that's sort of the best second half we've had through this period. We also have to be reminded that since the first half of '20, we have been in the pandemic. But still, we have managed in this period to grow the business, and we have also done that with fairly stable margin. Another important point is that, in this period, we haven't had any contribution on the margins from the aftersales side, neither from land based. So we are satisfied with the performance throughout that period. But of course, now we're gaining speed. On the right side, you see the order backlog buildup, and that's sort of a strong performance in the period. And we have -- even though in 2021, still the cruise industry have been in the aftermath and still in the pandemic situation. We have had sort of a very high order intake, both in cruise and now also in the land-based. But I will go back -- more back into that as we go forward. But what I also would like to highlight is the -- how we are doing in the fourth quarter, and if you see there on -- we are actually increasing our revenue with 60% going from the third to the fourth quarter. And you see how both, we deliver higher top revenue line on the cruise projects. You see after sales now is returning and land-based that we recognized revenue from NOK 52 million in the fourth quarter. So really a significant shift, and we're gaining speed when we're now moving into the -- into 2022. Then looking at the business areas, business segments; cruise newbuild. We continue to deliver a solid performance within the cruise project side. It's on par with what we did last year. For the full year, we have even a stronger EBITDA margin. We, of course, continue to look for opportunities to improve our operational efficiency. And -- but if you look at -- as I mentioned earlier, look at the order intake for the newbuild and retrofit contracts, where we signed up contracts worth NOK 246 million in the second half and for the full year NOK 370 million. And that's sort of a very good performance, even though we have to realize the fact that the cruise industry has been out of service for the most in this period. And this takes us to the share of the revenue within this business segment, it is 65% of the total. So it's sort of the solid base of our business in this period. Looking at after sales; as we have said many times, this is a business area that has been historically 1/3 of our revenue. But of course, as ships have been out of operations, this has been heavily impacted. But of course, you see now we are back in black. We have revenues for the second half, 33.6% in a normal year before pandemic, that would be more than SEK 60 million. And that sort of, I said, historically, 30%, this is 11%. So this is, of course, low, has no contribution to the results. But of course, this is returning now as relatively most of the people are now vaccinated and CDC in the U.S. has no more restrictions on cruise operations, and we see ships are returning into operations. Land based, this is a 51% increase year-on-year. And of course, driven also with a large contract awarded from Vow Green Metals, the NOK 250 million. This is a contract we're delivering equipment on. We will deliver equipment to the first site at Follum this year, a total value of NOK 250 million. Process equipment will be supplied in the second and the third quarter this year. So of course, a dominant part of that revenue will convert into -- or dominant part of the contract will be converted into revenue this year. And you see we are also in the black numbers on the second half for the land side. And of course, what is also we have in the period, reported new contracts, new cooperations with blue chip companies in the space and confirming their climate roadmaps, and they see that Vow technology is relevant for them. Yesterday, we also announced a press release on GRTgaz. I will give sort of more insight on that in the following slide. But land-based today 24% in this period, 24% of our top revenue line. Okay. Let's look forward on our strategy and our forward outlook. I would like to first talk about our drivers. I've been talking about the drivers many times, but of course, circular economies is definitely a driver for Vow and Vow Technology and industry push for decarbonization. And of course, we see the policies and regulations are backing this. We have EU Fit for 55, we have the EU Green Deal that supports this. We have the economic realities for the industries. We see the increased prices on CO2 emissions. And of course, we have the capital moving in this direction. And it's very interesting to see Larry Fink, the CEO of the world's largest asset manager, their investment portfolio is -- today is, I think, 8x the Norwegian Sovereign Wealth Fund. And of course, when he sends out a letter to all his CEOs, saying that decarbonize or die, it means sort of -- the capital is really moving and pushing in this direction. And of course, we also read in the newspaper today, that there our Prime Minister met Larry Fink the other day, and he got some advice on how to move in this direction as well. Okay. The industry response, and then, of course, going back to the fact that we have a lot of blue chip companies in front of us. Of course, coming from the cruise industry, we are well positioned market leader in that space, but now we're moving into new spaces, new markets. And of course, we have spent a lot of time talking about the metallurgic industry, that's a mature market when it comes to the need to replace coke, fossil coke -- fossil virgin coke with biocarbon, but also the metallurgy industry itself is a high-temperature industry, that today are using natural gas in their processes. And the way for them to decarbonize, is to replace that natural gas with climate neutral gas. And of course, we have that technology that combines that, to produce biocarbon, and that is sort of the Vow Green Metal vehicle that we created and of course, ArcelorMittal that we're working with to develop a project in Luxembourg, in Rodange, to help them decarbonize their operations by producing climate-neutral gas. Repsol is a company that we have been working with for a long time. They moved forward in their project by ordering a demonstration plant from us in -- around Christmas. And this is a part of a larger project to scale up in their Bilbao refinery, a way to convert urban waste into climate neutral gas and advanced carbon products. So of course, this is -- by them ordering demonstration plant, we feel that this is moving really in the right direction. Then we have the other parts of the European industry, especially the consumer good industry, we have been now working with a couple of companies. Philip Morris International spoke about that last time. We have with our technology, helped -- enable them to become sort of carbon neutral in their Neuchatel facility in Switzerland, their largest production facility. And we're also working with Circular Carbon, that's a similar build, own, operating vehicle as Vow Green Metals, but this is in the cocoa industry, where they are using the waste from the chocolate production, the cocoa shells and to convert that into gas and use that in their high-temperature processes and then valorize the biocarbon for industry. So it's an interesting way and a great opportunity for us to deliver technologies to these type of ventures going forward. So of course, there is really a push for industry decarbonization, and there's a push to replace virgin fossil coal, and we see industries moving, and of course, we are on that trade together. Looking at the cruise industry before we move more into the [ MSA ]. You see this solid platform we have here, and you see the market footprint we have, of the 58 cruise ships under construction at European yards to hit the water from 2022 until 2027, we are -- and these are ships that has more than 600 passengers on board. There are more ships, but focusing on what the core market for Scanship and Vow is, you see that we have already waste management system. You have 36 out of the 58 and we have 39 of those with advanced wastewater. So now we are looking at market shares well above 60%. So that's sort of demonstrating our strong position in this space. In addition to this, of course, cruise -- the cruise industry have all the ships, and they are refurbishing ships. They are upgrading ships with new advanced technologies, and we are a part of that. And we are now in latest periods, working with 3 retrofit projects with Carnival Corporation, the biggest operator in the cruise industry space. And of course, retrofit is an interesting part of our business, and we see that predictions of a portfolio of potential 30 ships that will be retrofitted, and we are in a very good position to take a large part of that volume going forward. And of course, that will also drive the top revenue line for the business going forward. Looking at the aftersales. Of course, this has been where we have really seen the negative impact in the pandemic. And an interesting chart on the right side there, you can see -- you see the revenue and the margin for us by quarter, and you see the fourth quarter '19 and the first quarter in '20 was pretty -- this was pre-pandemic, and you see where we were per quarter, we were more than NOK 30 million per quarter. And of course, as the cruise industry voluntarily did close down their operations in the second quarter of '20, you see, of course, our sales -- after sales went down. The red box are the number of ships back in operation, and you see how that is now coming back. And for Scanship, it means that 86 ships are now back in operation in our portfolio of ships, so we have more than 130 ships in operations with our technology. So it means that, this is really picking up, and we see clear evidence of that in the fourth quarter. And -- but still, we are way below what the normal situation would be. On top of that, we have increased our installed base with 14%. So when we, in 2019, had a top revenue within after sales of NOK 126 million. We have now 14% more ships in operations with our technology. It means that when all ships are back in operations, there are 14% more ships, and that will further drive our top -- our revenue within that space. Okay. Now looking more into the land-based side. And I talked about sort of the economic realities for industry now, and decarbonize or die. And the fact is, this is an economical risk for operations more and more industries to move in the green direction, to reduce their carbon footprint, to reduce their CO2 emissions. And of course, the instrument to push industry in this direction, is of course, the CO2 allowance prices. And you see how that has developed. And now we're -- in this period, we're around EUR 90 per tonne of CO2 emitted, and these levels were actually expected to appear 8 years from now in 2030. We are here -- we are already there. So this is, I think, that the biggest surprise for industry is that, this cause has been really coming up. And you see that development on the left curve there from 2020 and now in 2022. And another -- just as an example, the price for metallurgical coking coke, you see the -- how that has developed for the industry, not only the development of the coking coal itself, but also the share of the CO2 emissions, they allow us, you need to pay to use the fossil coke. And also on the natural gas side, of course, we all know why the natural gas prices have been skyrocketing in this period. But of course, we signed up contracts with the industry, long before we saw that increase of the CO2 or the natural gas prices. But of course, this is the economic realities for the industry. So they are moving. These are the reasons why they are looking for technologies to replace natural gas and to replace virgin fossil coal, it could be coking coal, it could be other types of fossil-based carbon they are using. And of course, this creates the drive for Vow and Vow Technology. We announced earlier in February, we announced a joint LOI together with Vow Green Metals and an undisclosed large player in the metallurgic industry space. And this just demonstrates that, we're not only talking about Follum and that project, we're talking about now a potential new project, a client that came to us, they saw what we were talking about in Norway, and they said that they want to, within 2025, replace 50,000 tonnes of their fossil coking coal in their production. And just demonstrating what that means for Vow as a technology provider, we saw that the contract we were awarded earlier during the fall of NOK 215 million for a Vow to the Follum project for Vow Green Metals. This contract is 5x larger, in terms of the complexity, in terms of the number of lines. And this is -- for us, we estimate a value of a project like that to be around EUR 85 million to EUR 100 million. And if we would meet the target to have that operational for that client in 2025, it means that 2023 and 2024, we would need to deliver process technology in that size. This is the accelerator we're talking about, how Vow Green Metals will enable the rollout of factories, and we will deliver technology. And that means that, we will get the revenue long before Vow Green Metals gets sort of the revenue from producing biocarbon and producing the gas. And of course, just to demonstrate the economics here, a plant under -- with the prices I showed you on the last slide, a 50,000 tonne biocarbon production would replace fossil coking coal that today are -- the cost is EUR 37 million, and it will produce gas that could potentially replace natural gas worth EUR 32 million. So there are sort of strong numbers, you're making these cases bankable. So we really believe that, we now have made it possible to take a position towards the metallurgic industry, and roll out factories. So this is sort of the -- let's say, to try to give some insight on that LOI that we announced earlier this month. And of course, what we -- I think that we didn't expect that -- previously that the gas side, this is sort of the beauty of this type of technology. We produce biocarbon and reproduce gas. We didn't expect that the market would be so interested in the gas, and this is just showing that the amount of natural gas used for industry in Europe today is around 1,000 terawatt hours of natural gas. And you can see the different segments of European industry. And just to illustrate where we're working, seeing these logos of the companies that we're working with; Repsol within chemical and petrochemical industry, the energy side, is, of course, the biggest consumer of natural gas. Philip Morris and Circular Carbon within the food beverage. And of course, the iron and steel and nonferrous metals, is also sort of where the natural gas is consumed. But what this opens up, is that it secures our revenue stream from the gas, not only for the biocarbon. So it gives us a flexibility, when we talk about rolling out technology towards different industries, because we can combine it. It means that we can -- as an example, Vow Green Metals could build factories, infrastructure to supply natural gas or not -- to supply carbon neutral gas that replaces natural gas, to industry to one industry, and produce biocarbon towards another industry. So this is sort of -- it's a really -- just showing that this is relevant. The gas is relevant, and definitely, it's just making our -- the business models better. And of course, it's also interesting to see the -- what we have done with Philip Morris International. What we have done with Circular Carbon, we are, in a way, producing gas off-grid, using waste streams at these different industries, and they're using that waste streams to produce gas that replaces natural gas. But of course, what if we could start producing gas towards the grid? Some years back -- and of course, the ambitions we got was from a cooperation we've had with GRTgaz. This is the second largest gas distributor in Europe. They came to us some years back, and we established a project we called Synthane. And Synthane was to produce pyrogas or syngas from pyrolysis and to methanize that into CH4 or into methane or climate-neutral methane, for direct gas grid injection. So GRTgaz wants to replace natural gas. They being a large gas grid owner in Europe, they need to -- when they see EU Green Deal, when they see Fit For 55, they need to decarbonize. They need to come up with solutions, how to decarbonize the gas grid. And one way to decarbonize the gas grid, is to use what they call pyrogas, pyrogas from gasification or pyrolysis. And you see on the right side here, they entered into several projects with suppliers, one of those were the Synthane project with ETIA and us. ETIA being the subsidiary of Vow in France. And today, actually, I'm proud to say, out of all these projects, there are only 2 that have demonstrated our technology working, and one of them are Vow. So this is -- and of course, that's what basically GRTgaz announced as a press release in France yesterday, that we are moving forward with the technology, and now to run, test and to produce renewable methane for gas injection. So -- and it really opens up an opportunity. And then if you look at it, within 2030, their ambition is to replace 6 terawatt hour with pyrogas. And if you, in a way, would go back to the project that I talked about in the metallurgic industry space, with 50,000 tons of biocarbon, a plant like that, that would produce biocarbon towards the metallurgic energy, could also -- 30 of these plants could meet sort of the 6 terawatt hour of renewable methane to inject to the grid. And of course, if you look at -- it's actually -- I'm not going to go into that today, but if you look at how much CO2 you're avoiding and replacing towards the metallurgic industry doing that, and how much you're actually avoiding by producing a bar chart as a soil enrichment, and also how much CO2 you're avoiding from not using natural gas. You're talking about, if you would need 6 terawatt hour, you would be avoiding 4.5 million tonnes of CO2. And that would be an investment around NOK 30 billion. And just draw -- compare that -- benchmark that to the Longship project in Norway, where now you're going to use more than NOK 20 billion, and there, we are avoiding around 800,000 tonnes of CO2. So this just demonstrates that pyrolysis is a solution, a relevant solution for decarbonizing industries in Europe. So Vow in the carbon economy, what are we doing? We are, of course, I mean, it said in the newspaper this morning, that we are still sort of a company in the marine industry. It says that, we are a technology provider in the marine market. But we are definitely moving onshore, and we are definitely trying to take a position in the land-based carbon economy. And what we're basically doing, working to decarbonize the industry, and working to recycle carbon, because that's what we basically are doing. We're producing carbon from recycled resources instead of using a fossil -- virgin fossil carbon. And if you look at it, these are relevant for the metallurgic industries that we've been talking about. We're looking at graphite for batteries. We're looking at carbon black for industries, and we're looking at biochar for soil enrichment. So the carbon economy here, with the technology to produce advanced circular carbon material, this is really the future we see, and that's where we're moving. And of course, the [ kindred ], we are also producing climate-neutral gas and that's for on-site off-grid, helping industry to convert waste, but also to now work with renewable methane towards the grid, and also syngas to different types of chemicals. And we have some interesting projects to talk about going forward within that space. So this is really positioning Vow as a company in the new carbon economy. So with this, I would like to conclude; we're gaining speed. 2021 in brief, we delivered a solid operational performance and a significant value creation through the successful launch and spin-off of Vow Green Metals. We recorded a high order backlog and now I'm guiding a bit, provides a good visibility into 2020. And with what the backlog and the pipeline we have, we really estimate now annually to double our revenue in 2022. Cruise is bouncing back, as cruise operators continue to renew and upgrade their fleets and demand for aftersales continue to increase. We now see that -- we expect that the after sales we had back in '20, now we have that business returning in full, and even the potential to go higher, because of more ships. And of course, we need to remain relevant with technology. I am often getting that question, are we -- do we have the right technology? But I'm just thinking we are -- in our business, we are investing every year, to make sure that we have relevant technology. And if you see our R&D expenses every year, you see that we are really doing that, to make sure that we are also relevant going forward, to produce advanced carbon products and climate neutral energy for the industry. So that was what I had on my mind today, what I wanted to tell you, and we're now opening up for some questions. Thank you so much. Håkon from Nordea.

That's correct. Your revenue seems to pick up quite nicely. Can you comment on the margin development in light of increased raw material costs and energy prices?

We have actually -- if you see that we have had pretty stable margins in the project part of our business, cruise project part of our business. We haven't had any contribution from after sales, no contribution in margin from land-based. So -- and it has been sort of with those business areas not contributing, we have had really relatively stable margins within the cruise synergy side. We have, of course, been working with the supply chain. And we haven't -- Erik, you might also comment on that, we feel that we have pretty good control over the situation with the raw materials, et cetera.

Yes. I think that all in all, the contribution margin from Project Cruise is around 33.6% for the year in 2001 (sic) [ 2021 ] in total. And we do see certain higher freight costs and material costs on, let's say, a certain 5 to 6 projects, which are specific. So it's not a big factor for us in this -- more in the second half, than in the first. But there's also a difference between the composition of projects, sister vessels and others. So I think all in all, we looked at it, that it's the freight and the material cost increase compared to earlier prognosis is around NOK 3 million for the half year in total. So...

And I think that an important comment to it is that, when we work with the cruise industry, we have a lot of sister ships. So we have an efficiency improvement ship by ship. So of course, that -- if every project for us would be unique, and of course, that is a different situation. But we have been able to take out synergies when we are -- if you look at, I think Viking Ocean, is that's the 12th vessel we are delivering technology on the same platform, same [ series ] over the years, and of course, that is the strength of that type of business model and that type of market that we are delivering so many of the same ships and we are able to keep the cost -- the control over the cost and demonstrate -- we have demonstrated over time, that our margin have been high and stable.

And just to add on that, we do see with regard to delays in the supply chain. What we see is that there is -- as other companies, there is other electrical components, we do see certain delays for the cabinets that we use. But that -- what we do there, is that we agree with the yards, and we supply the equipment, the basic equipment, which is [indiscernible] supply late to the electrical components. So that means that we can keep the delivery schedule, and we can also invoice according to our plan, and then we -- then those elements are just added on later. So that's where we see the supply chain delays that the rest of the industry is seeing, it's basically on the electrical components. But that hasn't been a big negative factor for us, but -- so we try to work around it.

So overall, no project have been sort of -- no ships have been hold back from the yard, due to late delivery of electrical components, and most of that is easy to take on board, during commissioning. So that's how we are managing.

And then on the renewable natural gas, are there limitations to what kind of waste you can use? I was particularly thinking about the agriculture industry and waste from manure, for instance?

The thermal process of pyrolysis could convert all kind of biogenic materials. It will be dependent on what kind of carbon products you would produce. We see that, that demolition wood, forestry waste is a good feed for producing metallurgic renewable coke. If we would produce biochar for soil enrichment, we would use sort of that type of agricultural waste streams. We could -- it's interesting to see now, because EU is now opening up in a larger scale to use sewage sludge for biochar production and to get the CO2 offset credits, and to -- in larger -- hopefully now, that they are allowed to use that as soil enrichment. So you have -- if you would -- you have different types of industries that have different types of waste streams. It's all about energy, because all these type of waste streams would contain a lot of energy. And they will -- and that energy will either be converted into a carbon product or a gas product or even condensates, and so on. So it's interesting to see how many different business models we're looking at. How many different markets we're in, where we're looking at how to valorize these different types of wastes, all the way from end-of-life tires, that's a very interesting space, and I think that we are one of the few that have now a demonstration plant working in U.K., and we're really looking at that. And that is sort of a large amount of granulate tire and recycled tire that we can produce recycled carbon black. In Europe, now I saw numbers from Vow Green Metals, they said around 52 million tonnes of biomass available for -- from demolition of wood, forestry waste and different types of RDF products that could be moved into producing biocarbon towards the metallurgic industry. So it is many opportunities within this space. And of course, that's the question we often get, when we, let's say, are now looking at producing renewable methane to the grid. Is there waste and biomass available for this type of transition? And we definitely see that, there is a substantial amount we can use here. There are 2 questions in the audience. I think we will take those first. Thomas from SpareBank 1 markets.

Congratulations with a good quarter. Did I understand -- just one quick question on cruise before we move over to land-based operations. That Q4 EBITDA margin of around 18% on cruise projects, that, that will bounce back to above 20% in 2022 or...?

The cruise project was higher.

Yes, but in Q4...

In the Q4...

As I extracted kind of just based on -- because you had a significantly higher margins in Q3?

Yes, I think that what we're looking at is that, for the year, at the EBITDA margin of around 24% for cruise projects, is this the level going forward, something between -- in that area or that will be -- ideally, we would like to get it even higher. But I think that's the more kind of...

You could have some effects of, let's say, as Erik was mentioning that you -- in the entire project portfolio, have different projects with different types of gross margin. And that could be even projects that we have taken at a lower margin, not necessarily an effect of increased cost. But the overall year performance you see, it's on par with last year, but you could have -- in quarters, you could have, for example, more revenue recognized in parts of the project portfolio, that could have a lower margin. And I think that would basically could affect the fourth quarter. And it's not sort of -- it's not a trend that we now would expect the margins to go down, that's not what we're seeing.

Okay. Thank you. And then on the other side, positive side here, the EBITDA margin for land-based operations were already 12.5%. Could you touch a bit upon where you believe those margins will be, when you're kind of delivering on the Vow Green Metals contracting, to even a greater extent?

We expect those to be -- we expect to deliver -- once we get the top revenue line up to carry sort of the fixed cost of that part of the operation. So we expect the EBITDA margin to be solid. And we don't see why the land based side would deliver lower than the cruise industry space. And also looking at the economic realities with increased CO2 prices, the value of the gas, the value of the carbon comes up. And I think that -- it means that we should take out value and margin from that momentum now going forward. We're not moving into land-based markets, where we see -- where we see sort of low margins and very high competition. That's not what we're seeing.

And then just last -- one last question. Can you just touch a bit upon, if you expect to first deliver the whole land-based backlog in 2022, and a bit on the distribution of the Vow Green Metals order throughout the year or first half year?

I said that, we would deliver all the process equipment for Follum in the second and the third quarter this year. So it means that, when -- what we're left with then, is the commissioning and the start-up of such a project. And depending on when the equipment will be put in operation, then we will have the remaining, what is normally 5% to 10% left of the contract.

Yes. The -- so I think that, there will be a certain element in 2023, of course, the revenue recognition from...

From the startup.

Okay.

So that's the -- most of it will be -- we recognize some of it as revenue in the 2021 numbers, but most of it will be in the 2022 numbers.

Okay. And the backlog as a whole, do you expect to kind of turn over the whole backlog on land-based operations? In 2022, the NOK 270 million, NOK 280 million?

On the land based side?

Yes.

A large part of that will come off as revenue.

And I think that the land-based migrants, they have a shorter production delivery cycle than the cruise part, which go 3.5 to 4 years. This is more -- this is like having maybe 1 to 1.5 years. In Vow Green Metals order, of course, bigger [ vessels ] as Henrik said, we will deliver all the equipment during Q2 and Q3 this year.

Over there, from DNB.

Martin from DNB. So first question. Could you elaborate the split of the revenues guidance for '22? So estimate around NOK 900 million. Is that solely based on what is in backlog today, or do you include...

There's a pipeline there as well. And of course, not everything is signed and sealed, definitely. But we do see that in that evaluation or in that estimation, is definitely what we have the insight in on the firm orders and of course now, pipeline on the land-based side.

Is it also possible to get some split of the...

We haven't done that now. We will consider. I think that we are planning also our Capital Market Day during the spring now, and we will give more insight into that. But of course, what we do see is that, the land based side is becoming sort of a large part of our revenue. And the question is, how fast will land-based get to the cruise business level and when we will pass it. Definitely, we do see in the cruise industry, we have sort of a level now we -- what moves that level upwards would be more retrofit contracts. What moves that further upwards would be, not only wastewater purification retrofits, but also within waste-to-energy and waste pyrolization, such as the pyrolysis systems. We have now actually -- now in the first half of this year, we will now deliver to the yard, the first microwave assisted pyrolysis system to one of the largest cruise ships under construction. And this -- I think that is sort of a milestone for us, when we now are delivering that type of technology also on the cruise. And of course, that will create a growth within the cruise industry space. But of course, looking at the land based side -- looking just at Vow Green Metals, how that is an accelerator for us and just a second plant for -- if we can realize that project within the next 2 years, you see how large the land-based side will -- how fast that will pick up in volumes.

And in terms of the Follum plant, could you comment on the expected movements in the working capital, and how we should think about that?

The movement of working capital in that project. It's what I was to say there --it is fully financed.

Yes, I think that we do have a payment -- advance payment from Vow Green Metals, we will see that we normally do on land based. And then I think it will be quite then follow kind of a milestone schedule, for reason being quite similar to the other land based -- but there is a certain advanced payment received already, because it's a very big project and the supply base we have will also have a kind of advanced payment.

Anyway we see now, we are very sufficiently capitalized in the business now to take such orders. We increased our borrowings and our line of credits with DNB. So we are -- the business we see now and to deliver on the order backlog in the pipeline, we are sufficiently capitalized to do that.

And lastly, on the -- so therefore undisclosed project, with potential up to 50,000 tonnes. Can you comment on how it is different in terms of the input, the cost for the feedstock? Is that a big difference compared with the Follum plant, or how should we think about?

Well, I think it's comparable numbers, actually. So of course, what now -- this project is being developed, and of course, a part -- an important milestone here is actually to -- and we're working on that, to create this carbon product that the industry can use. This is a unique metallurgic process, where you need a certain reactivity on the carbon. If it's too reactive, it means that you're not able to get the carbon into the melt, before its sort of burned off as CO2. So that's what we're working together with the client on. And once we have sort of made that together, we -- it's -- the schedule is to start producing in 2024. And this is a very ambitious player in the space. And I can say so much that 50,000 tonnes is not the -- that's not the total consumption. This is a play that uses it substantially more. So 50 is considered a start. Do we have any questions from...

Yes, we still have fairly large...

Online?

We have a large crowd listening and watching and a few questions. Should we start right away with those?

Yes, why not? Why not? We could at least try to answer them.

We will start from the top. With regards to the GRT biogas project, do you think that could turn into a letter of intent or a firm order in 2022?

This is not sort of -- no, I would say that what GRTgaz is -- that corporation is all about demonstrating the production of renewable methane from pyrolysis gas. That will mean that, the part that GRTgaz would contribute in that project, is the grid injection. It means that -- and they are a gas grid provider. So with a successful production of renewable energy, it will allow us to look at offering that as a solution when we, for example, are selling the Vow Technology to our client. It means that GRTgaz will not -- probably not be buying technology from us. That's not what the purpose here is that, the purpose is that this is a -- they will assist with sort of the grid ejection, and they want to offer that as a solution. So working with GRTgaz on this also is a way to, for example, if Vow Green Metals as [indiscernible] or any other type of [ bill on ] operator would then see that, okay, let's build a factory, these type of factors in France along the grid of GRTgaz. GRTgaz, they want to get as much climate neutral gas into that grid. They want to make sure that we can connect to the grid. So it's just that -- it's a way to prove the economical model of who will invest in this technology, because now they say they will, by connecting the methane into the grid, the renewable methane, they have our revenue and they have -- they can sell the gas on a long-term contract. So it's -- that's the type of enabler GRTgaz will be in this case.

Thank you. There is a follow-up on the biogas. How is biogas treated in the European taxonomy? Is it classified as a green solution would you know?

Yes, the gas and the biogas is considered a climate neutral gas, and that offsets and replaces, let's say, fossil gas.

Then there's a question regarding the cruise business, and how the summer season is looking? When do you think margins could return to pre-pandemic levels in the aftersales?

In aftersales? Now we saw that 86 ships are back in operations. It looks good that ships will -- more ships will come into operation. So we can see that, the cruise industry are very sort of optimistic. And if you look at these cruise magazines, the reports, more and more on listing and of course, Norwegian Cruise Line, Carnival, Royal Caribbean are now announcing when they are -- sort of how much ships they are now putting back into service. So with that being said, and we have been seeing, we have -- we truly believe that, that part of our business is returning and with the same sort of margins we had pre-pandemic.

And then there's one final question from the online audience, and that goes to the guidance for 2022. You said we indicated revenues of roughly NOK 900 million. Should we expect similar group EBITDA margins as seen in 2021?

If you look at -- what you have to take into account, that we haven't had any margin contribution from land based and after sales. So it means that when you grow the top revenue line, and then after sales is becoming sort of -- going back to normal and land-based, we are becoming a dominant part of that revenue mix, of course, that will have a positive impact on the margins.

Okay. Thank you. There is no more questions from the audience online.

Thank you so much to the listeners online and to you here in the audience. Thank you so much for the attention.