Earnings call transcript: Cambi ASA sees revenue dip in Q4 2024

Cambi ASA reported its financial results for the fourth quarter of 2024, revealing a decline in revenue compared to the previous year. Despite this, the company maintained a stable EBITDA and improved its gross margin. The stock price experienced a 6.86% drop following the announcement, reflecting investor concerns over the revenue decrease and market conditions. According to InvestingPro data, the company maintains strong financial health with an overall score of 3.38 (rated as "GREAT"), suggesting resilience despite short-term challenges.

Key Takeaways

• Cambi’s Q4 revenue fell by 21% year-over-year.
• Gross margin improved to 58% from 52% last year.
• The company plans to pay a dividend of approximately NOK 75 per share.
• Cambi is exiting the retail soil market to focus on profitability.
• New strategic contracts were secured in India and Spain.

Company Performance

Cambi ASA’s annual revenue surpassed NOK 1 billion for the first time in 2024, marking a significant milestone. However, Q4 revenue was NOK 234 million, 21% lower than the same quarter last year. The company reported a full-year EBITDA of NOK 226 million, mirroring its performance in 2023. The gross margin saw a notable increase to 58%, up from 52% the previous year, indicating improved operational efficiency. InvestingPro analysis shows impressive year-over-year revenue growth of 30.23% and a strong current ratio of 2.48, demonstrating solid operational execution and financial stability. The company’s Fair Value analysis suggests it may be slightly undervalued at current levels.

Financial Highlights

• Revenue: NOK 234 million in Q4, down 21% year-over-year.
• Full Year EBITDA: NOK 226 million, consistent with 2023.
• Gross Margin: 58% in Q4, up from 52% last year.
• Planned Dividend: Approximately NOK 75 per share.

Outlook & Guidance

Cambi anticipates steady activity in its core markets, including Europe, the UK, and North America. The company sees long-term potential in emerging markets like India, where it recently established Cambi India to strengthen its local presence. Cambi is also monitoring the potential impact of US steel tariffs and exploring local manufacturing options to mitigate trade barriers. The company’s market position appears strong, with InvestingPro data showing a remarkable 41.18% price return over the past six months. Subscribers can access 8 additional ProTips and comprehensive financial metrics to better understand Cambi’s growth trajectory and market potential.

Executive Commentary

CEO Per Lillebe highlighted the company’s technological advantages, stating, "Who can say no to a technology that produces more biogas, reduces the need for the adjuster volume to one third, reduce the final volume for disposal by 50%, kill all pathogens, and remove bad odor." He also emphasized India’s potential as a future market, saying, "India has the potential to become an important future market for Cambi."

Risks and Challenges

• Market Volatility: The decline in Q4 revenue and subsequent stock price drop indicate potential market volatility and investor concerns.
• US Steel Tariffs: Potential trade barriers could impact manufacturing costs and operations.
• Emerging Market Risks: Expansion into markets like India comes with challenges, including regulatory and corruption risks.
• Competition: Cambi faces competition from alternative wastewater treatment solutions, which may affect market share.

Cambi ASA remains a leader in thermal hydrolysis technology, with a strong position in volume reduction and biogas production. The company continues to innovate and expand its market presence, despite facing challenges in certain areas.

Full transcript - Cambi ASA (CAMBI) Q4 2024:

Moderator/Presenter, Cambi: Welcome everyone online for this fully digital event. Great to have you with us. It’s now two years since we last invited you to a capital markets update, and it’s been two eventful years. Today, we’ll give you a bit of context in the world of sludge management, how Cambie has performed, and how we are positioned in an attractive market supported by macro trends. The past two years have been exciting to say the least.

When 2021 started off and can’t be listed on Euronext (EPA:ENX) Growth, we all thought that this was going to be a great year. But then global supply chains were disrupted, causing significant issues. And as the world was expecting an improvement in 2022, things just got worse from a supply chain perspective with the very tragic war in Ukraine, which also affected one of our projects under execution in Lviv. So there’s been many things to do and navigate in this environment, but one thing that which hasn’t changed has been that we are in a good space. We are in an industry with fundamentally good growth drivers, and we have seen a strong order backlog buildup since our last capital markets update.

Critical infrastructure projects with a total COMBI contract value of more than 2,000,000,000 NOCC have moved forward. This has started to provide results this year and the scalability of our business has become visible. How we think about the future will hopefully be clear during today’s presentations, where we will also hear from some of my colleagues. You will learn that Combi is a global leader in wastewater sludge treatment solutions with a solid track record, has a proven thermal hydrolysis technology with a unique value proposition, is strongly positioned in an attractive market supported by macro trends, has a scalable platform positioned for future development, and last but not least, our robust financial performance is enabling dividend distribution to our shareholders. But before we start, let’s hear from our founder, chairman, and main shareholder, mister Pierre Lillebeau.

Per Lillebe, CEO, Cambi: Who can say no to a technology that produces more biogas, reduces the need for the adjuster volume to one third, reduce the final volume for disposal by 50%, kill all pathogens, and remove bad odor, and in addition, offers the lowest carbon footprint and lowest total cost. This process is the most responsible and safe choice for any wastewater treatment plant above the size of about 50,000 inhabitants. Our strategy is therefore to reach out to every city of the world and be the technology that other solutions must compare to. One of our lessons learned is to stay focused on what we are good at. If you want to be a world leader within a niche, you need to concentrate to stay ahead of competition.

Remove everything that distracts you. Having said this, we will still be exploring other areas where our technology may be advantageous, like industrial markets. Our main challenge in Kombi is how to reach out to all these cities. This is what is at the top of my head every day. We have mapped at least 3,000 cities in markets where we are active that would benefit from our technology, we’re trying to engage as many as we can to help spread our message, also our shareholders.

As we are servicing some of the biggest cities of the world, we are dependent on being a trusted and a long term supplier of critical infrastructure. Being a listed, financially strong, and transparent company help us achieve that goal.

Moderator/Presenter, Cambi: You just heard from our chairman that Cambys process is the most responsible and safe choice for any wastewater treatment plant. But before we dive further and explain this statement, let’s take one step back and look at the big picture. Volumes of wastewater have been steadily increasing over time with the growing population, improvements in water supply, enhanced living standards and economic growth. Unfortunately, substantial volumes of wastewater continue to be released untreated into the environment, and only 11% of treated wastewater is actually being reused. Each year, three eighty billion cubic meter of municipal wastewater are generated globally with roughly half of the world’s wastewater entering the environment untreated.

The unfortunate reality is that only a very small portion of the total wastewater produced is actually collected and treated, let alone exploited for the recovery of resources. Looking ahead to 02/1950, our planet will be home to nearly 10,000,000,000 people, which is expected to result in a 51% increase in wastewater generated. Therefore, while the issue of wastewater is already pressing, it will only increase in severity going forward. Untreated wastewater poses a significant threat to both human health and the environment. Wastewater is responsible for releasing potent greenhouse gases, including methane contributing approximately 1.6% of global emissions according to the UN.

To illustrate the scale of this, being 1.6% of emissions places wastewater just below the climate harm caused by the entire global aviation industry. Water is not only crucial for all forms of life and the environment, but a limiting factor for development. As only 3% of all the well water on our planet is fresh water and just 1% is available for drinking purposes, it is paramount to maximize the use of wastewater particularly in water scarcity prone areas. Waste is a renewable resource within the hydrological cycle. Once it is used, it can be reused again.

Reusing wastewater is not only economically, but also ecologically necessary. It’s also crucial to recognize that if properly treated, wastewater is not merely a problem to be disposed of, but a unique circular economy opportunity that can help address challenges, including water scarcity, irrigation and biogas production. To unlock the potential of wastewater as a valuable resource, we must manage it in a way that captures resources for sustainable reuse. Created wastewater can offer numerous benefits. It can provide alternative energy sources for up to half a billion people significantly decreasing c o two emissions.

It can increase saltwater to freshwater conversion capacity, 10 times the current capacity, sufficient to irrigate around 40,000,000 hectares, an area larger than Norway.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Good morning and thank you for joining Chemby’s presentation of our fourth quarter results for 2024. My name is Tarkas Tolzescu, Senior Corporate Relations Manager at Global Fertilizer. Over the next half hour or so, our CEO and Lillebe and CFO, Mats Tristan Kjenslam

Per Lillebe, CEO, Cambi: will walk

Moderator/Presenter, Cambi: you through the highlights and analysis of the UN environmental proof.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: We will address any questions under the presentation.

Moderator/Presenter, Cambi: During the presentation,

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: we kindly ask you to submit your questions by following the

Moderator/Presenter, Cambi: QR code that will

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: be displayed on the screen. We answer all the questions that sink into our investor relations email as well until the end of the presentation. Please note that today’s presentation may contain forward looking statements that involve risks and uncertainties, meaning actual outcomes could vary from our expectations. Now, I’m pleased to introduce Kambi’s CEO, Per Lillebe.

Per Lillebe, CEO, Cambi: Good morning, everyone. I’m pleased to present Kambi’s financial performance for the fourth quarter of twenty twenty four. We continue to execute on our ongoing projects and operations, delivering revenue of NOK $234,000,000 in the quarter. Revenue was 21% below the same quarter last year, mainly due to passing fewer project milestones in the Technology segment and lower activity level in Services in the Solutions segment. EBITDA for the quarter was NOK 39,000,000, 1 third lower than in the last quarter of twenty twenty three.

The decrease is mainly due to higher costs combined with a temporarily lower activity level and margins in the Solutions segment. Costs have increased in marketing and sales and project execution capacity as we consider these investments to be profitable due to our scalable business model. Many smaller awards and change orders in both segments brought the total order intake to NOK 143,000,000. The order backlog at the end of twenty twenty four is at about NOK 1,200,000,000.0. The decrease from the end of twenty twenty three is due to high revenue conversion and lower order intake in the technology segment.

Looking at the full year, Kambi achieved a milestone in 2024 with annual revenue surpassing NOK 1,000,000,000 for the first time. EBITDA for the full year came in at NOK $226,000,000, almost the same level as in 2023. Our margins remained robust, while we continue to invest in future growth. We managed to achieve this financial result despite an increase in our cost level. Order intake for 2024 totaled NOK $724,000,000.

Although only at half the level of the order intake of 2023, It comes following only two notable contract awards in each of the two segments and many smaller contracts and change orders. 2024 was a year of good performance and strategic progress in Kambi. We strengthened our organization across project execution, services, marketing and sales to support future growth. Our engineering team has introduced new THP products and configurations, successfully developing complex projects from design to commissioning. We paid NOK 160,000,000 in dividends in 2024 based on a financial year 2023, marking our highest ever annual payout.

Entering 2025 we have good visibility on the current year’s activity level and remain confident in our ability to deliver another profitable year. During the fourth quarter, Kambi secured a new THP contract in Spain. Located in Palma De Mallorca, it will be delivered in partnership with a construction consortium. The THP system will be installed between two digesters increasing biogas production and improving the watering performance. The contract is scheduled for delivery in 2026 with operations expected to commence in 2027.

Kambi entered 2025, securing two new contracts early in the year. During the last days of February 2025, we have entered into an agreement with a consortium to supply a thermal hydrolysis process system for a new wastewater treatment plant in Santiago De Compostela, Spain. This will be our fifth plant in Spain. But one of the most significant developments in our market and is our market entry into India with the first THP project in Mumbai. This marks a breakthrough after sustained investments in the Indian market over several years.

The medium sized project will be delivered at the new Versova wastewater treatment plant for the Mumbai’s public utility company. This project has scheduled delivery in 2027. Combi continued to execute on our project portfolio in the fourth quarter. The TH system in Sofia, Bulgaria was successfully commissioned adding two new THP streams to one of the largest wastewater treatment plants in the region. The project was featured by Euronews last summer highlighting that the site became net energy positive because of our technology, while reducing carbon emissions by 70,000 tons compared to status quo.

In addition, installation was completed for the project in Secunda at the Sasol (NYSE:SSL) site in South Africa. Several other projects are awaiting commissioning once client sites are ready in Kansas City in Missouri, Czech Vouille in Hong Kong, Antwerp in Belgium, Lindestrom in Norway and Safie in Morocco, where we also signed a small additional contract to improve digester mixing. I’m satisfied with the steady execution by our engineering, manufacturing and site teams across many different projects, several of them including turnkey or first of a kind deliveries. We expect to complete delivery for several of these projects in 2025 and look forward to seeing the operational performance of new THP models and configurations. Manufacturing progressed well in the fourth quarter at our workshop in Congleton, UK with THP systems taking shape for five different projects in San Francisco, California, in Singapore, in Perth, Australia and in Wellington, New Zealand.

Meanwhile, our engineers have made progress designing the THP systems for Honolulu in Hawaii, Oscar in Norway and Lviv in Ukraine. The fourth quarter marked the delivery of two THP upgrade projects in the solutions segment. The upgraded THP systems at Ringsend in Dublin and Whittingham in Norwich, UK for Anglian Water where we delivered enhanced processing capacity and higher energy efficiency. The THP system at Whittingham is technically working as planned as and is meeting expectations, but the project is the first in a long time where we miscalculated the costs involved. Financially, it was a minor project, but the margin was eroded.

Generally, our upgrading projects of older plants are among the most complex we do. We are committed to avoid similar situations in the future and to dedicate the necessary attention from our most experienced engineers in all complex upgrade projects. During the quarter, Kambi has finished installation of process gas units at the Gaobaidian Sludge Treatment Center in Beijing, China. With fewer site activities in the winter months, the team focused on preparing for the 2025 maintenance season, securing materials and planning scheduled upgrades. The sales pipeline for new service agreements and upgrades continues to grow positioning Kambi well for future expansion in this segment.

Recycling and operational review, I will talk a bit about that. In Grundweg’s, bulk soil sales reached 48,400 tonnes in the fourth quarter, while full year sales stood at nearly 270,000 tonnes, representing a 14% increase in year on year. Recently, we have decided to terminate operations at our bagging facility. After a strategic review of this part of Grundweg’s business, we have concluded that this is not a core business area for the company. This does not mean that Grundweg’s will stop its production of high quality peat free soil in larger quantities, but our strength and expertise are in bulk sludge and garden waste handling and bulk soil production.

This is where we want to be in the future. Through this initiative, we will reestablish the profitability of Grundwegst. Discussions have been initiated with several interested parties exploring different opportunities for a bagging facility. Grundwegst will serve existing retail customers this season and plans to end production of bagged products in June. India has the potential to become an important future market for Kambi.

With rapid urbanization, a growing population and a strong focus on improving wastewater treatment, demand for advanced sludge management solutions is expected to increase. Kambi has taken steps to establish a long term presence in India. In 2024, we formally established Kambi India, strengthening our local engagement and market positioning. Additionally, we successfully completed a pilot project in collaboration with IIT Roorkee, providing valuable insights and providing improving the effectiveness of our technology in an Indian context. India’s trade relations with Norway under the newly signed free trade agreement between EFTA and India are expected to enhance investments and cooperation infrastructure and environmental solutions.

However, we have enough experience from other markets to acknowledge that this will be a long term and complex journey. India’s wastewater sector still has an annual CapEx, only 10% compared to China and 20% to The U. S. It operates under fragmented regulations with multiple agencies involved and no unified sludge treatment standards. Publicly funded projects dominate, but very often with private operations and partial private funding for fifteen years.

Our priorities in the coming years will be to strengthen relationships with key decision makers, including municipal authorities, funding agencies, and EPC contractors. With Combi India now established and our first project in Mumbai secured, we are committed to navigating this complex market and positioning Cambie as a trusted partner in India’s wastewater transformation. Cambie continues to strengthen our global position as the leading provider of THP technology. We have now 92 reference plants and can service 121,000,000 people in 28 countries. These installations showcase our ability to deliver proven scalable solutions that meet the needs of both large metropolitan areas and smaller municipalities.

While the world economy remains uncertain, Kambi is not necessarily following world economic cycles as asset investment decisions in the public sector tend to follow long term planning rather than shorter term fluctuations. Our diversified presence in multiple markets further stabilizes our business. We consider thermal hydrolysis as a no regret and future proof technology to most types of regulatory changes we may expect. When and where needed, we are prepared to support customers to adapt THP systems to operate optimally in combination with thermal processes like incineration or pyrolysis instead of land application. Looking ahead, Kombi remains well positioned to capitalize on increasing global interest in sustainable wastewater treatment solutions.

Demand for our technology continues to grow supported by tightening environmental regulations, rising energy costs and the push for resource recovery. We expect this momentum to continue. Though the timing on individual projects awards remains difficult to predict. We anticipate steady activity in our core markets including Europe, The UK, and North America. While emerging markets such as India present significant long term potential.

Trade barriers such as US steel tariffs could impact project costs, and geopolitical uncertainties may influence decision making in some regions. However, Kombi is actively assessing mitigation strategies, including local manufacturing options to ensure supply chain stability. Financially, Kambi remains in a strong position with a solid order backlog providing a revenue visibility for the coming year. Kombi plans to pay approximately 80% of its profits for 2024 as dividend, subject to approval at the Annual General Meeting in May 2025. We ensure financial flexibility while maintaining shareholder returns.

We plan to pay the dividend in two rounds and with that I will now hand over to Mats, who will take us through the financial performance and explain our plan for the dividend payment in more detail. Thank you.

Mats Tristan Kjenslam, CFO, Cambi: Good morning, everyone. I’ll now take you through the financials for the fourth quarter and full year of 2024. First, let’s take a look at some financial highlights. It’s been an eventful quarter for Kambi. And on an overall level, we deliver good financial performance with revenue of 234,000,000 and EBITDA of 39,000,000.

We are very pleased to see steady project execution in the technology segment, where we deliver in line with client schedules. For the solutions segment, we report weak profitability this quarter with a negative EBITDA of 15,000,000, which I will explain in more detail shortly. We plan to pay out approximately 80% of net profits for 2024 as a shareholder dividend, which is equivalent to around 0.75 per share. In addition, we made some small adjustments to the definition of our business segments. Let’s first talk about the segment definition.

With the updated definition, THP end of life replacements and sale of entire new THP systems to existing sites is now recorded under the technology segment. These were previously part of the solutions segment. And the change is implemented in this quarter’s report and the order intake, order backlog and segment P and L’s are slightly changed for a period 2022 to 2023. To be more specific, here one project has been moved from solutions to technology. This project is related to our client in Athens, Greece.

They received their first KAMBI THP which was commissioned in 2015. And in 2022, KAMBI received a second order for a same THP from the client as a part of a capacity expansion project. Under the previous definition, all subsequent sales following the initial THP sale belong to the solutions segment. However, the physical equipment sold in a THP replacement or a capacity expansion project, is very similar to the initial equipment sale, suggesting that it is more correct to have it reported under a technology segment. So to summarize, the technology segment comprises now the research, development, sale, manufacturing and delivery of entire THP plants and ancillary equipment to customers around the world, including replacements and sale of entire new THP systems to existing sites.

And the solution segment now comprises all services to the growing installed base of combi THB plants, including maintenance, upgrades, operations, as well as the soil recycling company Gramext. So let’s take a look at some key financials on a consolidated level. As mentioned, we report revenue of $234,000,000 for the quarter, down from $294,000,000 in the same quarter last year. We are pleased to see solid gross margins reported at 58% in the quarter, which is up from 52% in the same quarter last year. EBITDA is reported at 39,000,000 in the quarter, down from the same quarter last year.

The EBITDA margin was 17%, slightly down from 20% in the same quarter last year. And let’s also zoom out and take a look at the bigger picture. Combi

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: has

Mats Tristan Kjenslam, CFO, Cambi: seen a significant growth over the last years, as can be seen on the right side. Revenues were reported at above 1,000,000,000 for the first time in 2024, which marks a special milestone for the company. Revenue has almost tripled since 2020. And gross margins have remained stable and are slightly up from last year. The profitability has increased significantly and EBITDA is reported at $226,000,000 in 2024, a significant jump compared to earlier years and slightly down from NOK $249,000,000 last year.

EBITDA margin is reported as 22% in 2024, down from 26% last year. So let’s take a look at the performance of our business segments. For the technology segment, revenue was reported at SEK 172,000,000 in the quarter, which is lower compared to SEK $221,000,000 in the same quarter last year and slightly lower than the previous quarter. We continue to execute all THP construction contracts according to client schedules. Gross margin was reported at 71%, driven by a net reduction of accrued project contingency costs this quarter.

As a reminder, revenue from construction contracts is recognized according to the percentage of completion method, or progress in each project. The progress is calculated as the best estimate based on the level of incurred cost compared to the total estimate, including contingency. When the construction project is nearing completion, there is generally less risk, because most of the uncertainties and potential issues have already been addressed. So as the project progresses, the risk decreases, allowing for more accurate estimation of total costs, reducing contingency estimates. The level of contingency in each project is evaluated on a quarterly basis and in the fourth quarter there was a positive impact from the release of contingency accruals, reflecting the reduced financial risk on several of our projects.

We are pleased that the technology segment is able to deliver in line or better than our cost estimates. And as we saw on the previous slide, the growth has been significant when looking at the previous years and came primarily in the technology segment as viewed on the right. Revenue in 2024 is reported at $740,000,000 and EBITDA came in just shy of 200,000,000, both in line with levels in 2023. And I would like to remind that the segment in 2023 had a positive impact of plus 10,000,000 related to reversal of project related accruals from 2022, due to a change of accounting principle, where project costs that are part of OpEx will not follow the percentage of completion method. Our reported numbers show that the technology segment has operational leverage, which unlocks profitability when the activity level is high.

And we see steady progress on the portfolio of ongoing construction projects and there are now 14 ongoing projects down from 16 at the end of twenty twenty three. Let’s take a look at the financials for the solutions segment. We see continued increase in demand for site services and upgrades, driven by new THP systems entering into operation and the gradual aging of the older installed base. Q4 is generally a low season for solutions with less soil sales and less services such as annual shutdowns during winter months. In Q4 we report revenues of 62,000,000, down from 74,000,000 in the same quarter last year.

And as I mentioned, we report weak profitability this quarter with a negative EBITDA of 15,000,000. And I will shed some more light on this impact. The negative EBITDA in the quarter was split fiftyfifty between the services and the recycling sub segments. For services, the negative impact is due to unforeseen complexity in the Whittlingham upgrade projects in The UK. This project has a relatively low value.

It was below the market, a stock market announcement threshold of 15,000,000. And the project has now been fully completed, but due to a significant cost overrun, the project margin has been wiped out. And this impact has been fully included in the reported Q4 figures, mainly impacting the gross margin. And as Per mentioned, upgrade projects can be some of our most complex projects. Measures have been taken to secure that this does not happen again for future upgrade projects.

For recycling, the negative EBITDA is a result of expected low sale due to seasonality, combined with elevated operational cost levels mainly due to the soil retail business area. As was mentioned, following a strategic review, we have decided to exit the retail soil market after the 2025 season. And I’d like to provide some more context regarding this. Here we see an overview of the development of our key financials for Gran Mixt. We normally don’t report financials on a sub segment level, but we from time to time go into more detail when it is relevant.

Revenues for Granvex have increased from around SEK 100,000,000 to SEK 140,000,000 between 2020 and 2025, but as can be seen, the EBITDA has seen a gradual reduction from 12,000,000 to negative 5,000,000 in the same period. A key driver for this has been the strategy to enter into the Norwegian retail SAU market, a decision that was made in 2021. Entering this new market has, as anticipated, had a negative impact on profitability, due to additional costs and investments required for market entry, such as infrastructure setup, marketing, personnel and so on. So these new costs, combined with very limited soil sales in the winter months, are a key driver for the weak profitability for Gerundexx in Q4. As mentioned, we have decided to exit the retail soil market and discussions are ongoing with various parties exploring different opportunities for the bagging facility.

Gernext will fulfill its volume commitments for the 2025 season. And following the exit, it’s important to state that the company will continue to sell its sustainable peat free soil, but in bulk and not bags. We are committed to restoring profitability in GrennExT and going forward, the company will return to its focus will return and focus more on its strengths in biosolids handling, in addition to bulk soil production and sales. We’ll provide more information regarding the exit process in due course. Let’s take a look at the order intake.

The reported order intake includes the value of announced contracts in addition to revenue outside the backlog and currency effects on the backlog. Order intake was reported at $143,000,000 in Q4, up from $46,000,000 in Q4 last year. A small THB contract was announced for Palma De Mallorca during the quarter. Several change orders and additional scope requests for ongoing projects were secured, all below the threshold for market announcements. The full year order intake for 2024 is reported at $724,000,000, which is half of the reported all time high order intake in 2023.

We announced two THB construction contracts and two biosolids and garden waste handling contracts in 2024. Nkambi is very well positioned to meet the future demand for wastewater treatment solutions, driven by several macro trends. And as Per talked about, following the end of the year, two THB contracts have already been signed so far in Q1 twenty twenty four, ’1 for India and one for Spain. Let’s take a look at the order backlog. The backlog represents the value of the total amount of work that Cambie has committed to complete in the future.

Cambie maintains a significant backlog of 1,200,000,000.0 at the end of twenty twenty four. At year end, the backlog was split into $1,000,000,000 for the Technology segment and $227,000,000 for the Solutions segment. For the Technology segment, the backlog represents all the remaining work to be carried out for the signed construction contracts. And for the solutions segment, the backlog as of year end 2024 only includes the remaining value of biosolids and garden waste handling contracts for Grenwixt, including extension options. This means that there are no upgrade projects in the backlog.

The backlog provides important visibility for future activity levels, which brings us over to the backlog distribution. The breakdown by year shows that the latest estimate that we have when we expect to convert the backlog into profits. The distribution shows that little more than two thirds of the backlog is expected to be converted in 2025. The backlog into the technology segment is expected to be fully converted by the end of twenty twenty six. Needless to say, this emphasizes the importance of securing additional contracts going forward to maintain our profitability.

And the signing of two THB contracts so far in 2025 provides comfort for the activity level going forward. And on the right we see that two thirds of the reported backlog is in foreign currencies. Let’s take a look at the income statement. I have already mentioned some of the key developments on revenue, but I would like to highlight a few items. As a reminder, the gross margin excludes direct labor costs and direct overhead costs for our manufacturing facility in Congleton, UK.

These costs are reported as part of OpEx. The increase in payroll expenses is primarily driven by headcount increase. This is a result of conscious targeted investments in increasing the sales and project execution capabilities for the company. Between the beginning of twenty twenty three until the end of twenty twenty four, Kambi’s headcount has increased by 25%. The reported payroll in Q4 twenty twenty three is high due to bonus accruals for the entire 2023 that were made in Q4 as a part of introduction of a new company wide remuneration policy.

Going forward, shuts accruals are made on a quarterly basis in 2024. And out of the reported other operating expenses, around 3,000,000 is directly related to the execution of ongoing construction contracts in Q4. Following the next exit to the retail SAU market, we will expect to see a reduction in the cost base. Depreciation of the acquired patent portfolio will be finalized during Q2 twenty twenty five and it will reduce the quarterly depreciation by €4,000,000 Net financial items consist mainly of Agio and bank guarantee costs. The income tax reported in Q4 twenty twenty three was for the full year of 2023.

And as of the second quarter in twenty twenty four, KONBI reports the income tax on a quarterly basis. Let’s move over to the balance sheet. All in all, KOMBI maintains a robust balance sheet. Bank deposits are reported at 155,000,000 in Q4, seeing a gradual reduction over the last quarters. During 2024, we have seen a working capital increase, mainly driven by recognized revenue, which has not been yet received.

Debtors has increased significantly to $433,000,000, up from $244,000,000 in Q4 twenty twenty three. And this is split fiftyfifty between receivables and recognized project revenue, which has not yet been invoiced. We expect to receive several client milestone payments over the next few quarters. Current liabilities include accrued project related costs of 94,000,000, which are not yet payable. Kambi has no long term debt.

Finally, let’s turn our attention to the cash flow statement. Limited cash flow from operating activities driven by less milestone payments from customers received in the quarter. Little investments and no cash flow from financing in the quarter. And for 2024, the cash flow from operations was slightly negative, down from $211,000,000 in 2024. And during the year, dividends of SEK160 million were distributed.

And before moving to the Q and A, a short comment regarding dividends. Kombi plans to pay approximately 80% of its net profits for the financial year 2024 as dividends, which is at the high end of the range previously communicated. This is equivalent to approximately NOK 75. The board will propose a two step dividend payout to the annual general meeting. The first dividend will be 30 per share as a repayment of paid in capital.

The second payment, subject to a separate authorization by the board, is planned for the autumn. As mentioned previously, we expect several payments over the summer and the rationale for splitting the dividends into two payments is to balance shareholder interest with prudent cash management, ensuring the company always maintains adequate liquidity. And with that, let’s move over to the Q and A session. Okay. Have we received any questions, Dragos?

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Yes. We have. And we can still receive questions throughout the session. So please use the QR code and keep sending questions. But we will start now with the first one.

How concerned are you about the corruption risk of doing business in India and how are these risks being mitigated?

Per Lillebe, CEO, Cambi: Yes. What I can say about that is that, Combi has built plants in 28 countries. It is very rare that we have met corruption issues. And you have to remember that Combi is nearly in every case in other countries, we are a sub supplier to main contractors, and that is one of the reasons why we have not been meeting or been involved in any issues around corruption. But of course, we are taking our mitigation actions and we are training people.

We have code of conduct, etcetera. So I feel very comfortable that we will not be the risk of being involved in corruption, I consider to be very, very low. And we are doing all we can with our agents, representatives, employees, etcetera, to avoid the risk of being involved in corruption. So India is, of course, one of the countries where risks may be higher than in other countries, but I do feel comfortable about the situation we are in in India.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you. Next (LON:NXT) question from a private investor. You have mentioned essentially that in previous calls that growth in solutions would help drive growth in the service segment. Looking at this quarter’s results, how should we think about the timing of that transition? Is there a natural lag?

And do you have any sense of the potential conversion rate, either as a percentage of solutions revenue or another metric that could eventually translate into recurring revenue in services?

Mats Tristan Kjenslam, CFO, Cambi: Yeah. I can probably answer that one. I think the question is related to how the technology segment can feed the services subsegment, part of solutions. And I think the simple answer there is that, you know more plants sold will increase the share of services that we can deliver. So that’s the correlation there.

And when it comes to a natural lag, I would say it depends a little bit on what type of services that we deliver. So you could say services they range from annual shutdowns, which I think you know they can begin the first year. We do have some scenarios where clients have just taken the plant and not taken any services at all, but in the scenarios where we do provide services you have the annual shutdowns as I mentioned, You have spare parts. Typically spare parts we can start seeing revenue from that after a year or so and it’s typically consumables that is needed to let the plant run optimally. And then you have upgrades, which I would say is a little bit further down the road.

One of our main selling points is of course that we have a very robust technology, but if there is a business case for an upgrade and we have scenarios where we have sold in upgrades a few years after the initial sale. So there’s a little bit difference on type of service, but I would say from the first year you do see services. And when it comes to a kind of metric that you could follow, it’s the simple metric is of course more plants sold, more services. We have done some historical analysis on how much services you could expect from the initial contract value and I would say the potential lies somewhere between, you know, up to 5%. So anywhere between 05%.

Zero %, of course, if the client doesn’t request our services, but I would say around 2% to 3% could be expected services potential for on average, I would say.

Per Lillebe, CEO, Cambi: In general, if I may add, this will follow our installed base. The more plants we are delivering, the more this business will grow. And the older they get, of course, the more need it will be for upgrading. So what we have seen is that some of our, the first plants we delivered are now being recertified for another twenty years. So that is a long, long time horizon.

Normally, they are sold with a lifetime of twenty years.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you both. Next question is about the order intake. When can you, at the latest, receive a THP order that contributes to your sales for 2026 or for next year?

Mats Tristan Kjenslam, CFO, Cambi: Yeah. So if it should contribute to sales in 2026, I would say, you know, in Q4 twenty twenty six, we have revenue recognition very instantly starting after the contract signature. Typically also have milestone payments at contract signature. So I would say if you receive something in Q4 twenty twenty six,

Per Lillebe, CEO, Cambi: we 2026 sales.

Mats Tristan Kjenslam, CFO, Cambi: Yes, for 2026 sales. It’s

Per Lillebe, CEO, Cambi: Even at the end of twenty twenty six.

Mats Tristan Kjenslam, CFO, Cambi: So I think end of twenty twenty six actually you can contribute. Of course, the earlier the better because we recognize revenue over the execution period, but the latest will be at the end of twenty twenty six.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you for clarifying this. The next question is about the backlog. Order backlog at the start of 2025 was 20% lower than at the start of 2024. Is this reflective of the current market sentiment in your view?

Per Lillebe, CEO, Cambi: There is no change in market sentiment in combi’s markets. Absolutely not. What we have signaled throughout the time here is that it is very hard to predict when Kombi enters into new contracts. They can come in altogether or they will be spread out in time. But what I can say is that we are working all the time on a lot of potential projects, some in various stages, some long term, some closer, but some of them are in contract negotiations, etcetera.

So the market sentiment, as I can see, is absolutely not influenced by this. But again, Kami has to be looked upon in a longer perspective and really difficult to judge from quarter to quarter. This is what I’ve communicated all the time. But what I do see is that there is a I should have wished a higher visibility for ’twenty six. I do see for ’twenty six and also ’twenty five and ’twenty seven a lot of potential contracts that we have on the radar screen where we know customers are interested in entering into supply agreements with Kambi.

So hopefully, the picture will get more clear throughout this year.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you. Now shifting to a question on cost. The cost base for the fourth quarter twenty twenty four seems higher than the past three quarters. Why is that? And should we expect this run rate cost base for the full year 2025?

Mats Tristan Kjenslam, CFO, Cambi: Yes. I think the cost base in Q4, it is a result of, I think I mentioned the headcount increase, you know, now up to 25% over a couple of years. When we add new heads, it will increase the run rate of salary costs so you should increase an increase, you should expect an increase in ’25 and I think the run rate in Q4 twenty twenty four is representative. We also see, you know, once you add new personnel you also add new other expenses. So I think that is representative.

At the same time, we are now exiting the retail soil market, so you would also expect a reduction on both personnel and other operating expenses on that segment to offset kind of the increase that we see on payroll. And I should say we are still hiring, so there are still positions to be hired going forward.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Moving on, a question about the backlog in the Solutions segment. How much of this is tied to 2026?

Mats Tristan Kjenslam, CFO, Cambi: Yeah. So the backlog, I think, $227,000,000 as of year end and the share that is related to 2026 of this is around 22%, I think. So a little less than a quarter.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you, Mats. Next question. How much of your top line did the retail soil sales constitute?

Per Lillebe, CEO, Cambi: Yeah.

Mats Tristan Kjenslam, CFO, Cambi: So the retail soil business was around 10,000,000 on top line in 2024 as a whole. That was the share. And the second part of the question was? There’s

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: also a question about the EBTTA EBITDA contribution from from retail sales.

Mats Tristan Kjenslam, CFO, Cambi: Yeah. And and what I can say is that it was negative EBITDA contribution of that part of business. I think we have anticipated a negative contribution in the period we have wanted to build up this part of the business And of course, now we’re exiting, but I think that’s what I can say on 2024 that it was a negative EBITDA contribution.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Also on the retail exit, from the divestment talks you have initiated so far, does it seem like it is possible to recover the invested capital in the packaging facility?

Mats Tristan Kjenslam, CFO, Cambi: Yes, I think difficult to answer because talks are ongoing. So I would kind of not go into detail here, but there are several interested potential buyers both in Norway and also internationally. So I think what we’ll do here is to inform the market in due course once we have something more firm on this.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: And then following the exit, the next question, what margins can we expect from the Solutions segment?

Mats Tristan Kjenslam, CFO, Cambi: Yes. So good question. The Solutions segment, of course then exists of the services that we provide and also the rest of Grand Next. And so it’s a quite it’s depending on the mix and what I can say is that the part that is remaining, it has a broad spectrum of margins and if you think about gross margins on typically organic resourcing, this is the long term contracts for GRNEXT, it’s a quite low gross margin, I would say it’s in the double digits but it’s quite low, up to delivering upgrade projects, which is margins that are comparable to the technology segment. So I would say it depends on how much upgrades you do or how much typically organic resourcing and consulting and spare parts and so on is somewhere in the middle.

So this would probably kind of even out, but it just shows you that the range of gross margin is quite broad.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you, Mats. We are changing now a little bit to TAC. We have a question from a new shareholder in Cambi, and they’re asking, could you please explain the competition you encounter in the market, who your main competitors are and how Cambie stands out?

Per Lillebe, CEO, Cambi: Within terminal hydrolysis, Cambie is by far the leading supplier of this technology all over the world. We do have some local competitors, but they are very small and not internationally active, mainly linked to some national market. But the main competition for Cambly is actually alternative solutions to terminal hydrolysis. It could be as simple as conventional. It could be drying.

It could be a thermophilic digestion. It could be incineration, for example. And what we have seen, it depends, of course, on drivers in each of these markets, where you can say that if the disposal costs are high, Kombi’s competitiveness is normally extremely strong because it is the volume reduction that is the strongest financial argument for Kambi in addition to the quality of the final product. We do also produce 40% to 50 more biogas than with many other solutions. But it is normally not the biggest driver.

It is the volume reduction. So we have seen in many projects where we are compared to others, if it is compared on equal terms, can be tend to win. And this is why you see that we have this, the long reference list in some of the biggest cities and in many markets of the world where the drivers clearly are pressing for Cambly.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you, Per. Moving on to question about, well, more daily matters. We were mentioning in the presentation about tariffs from the new presidents in The US, on steel among other risk factors. So the question is, the majority of your revenues originates from outside The US. So why are US tariffs US tariffs affecting your business outside The US?

And could these disruptions create also any opportunities? Or is it foremost a challenge?

Per Lillebe, CEO, Cambi: Yeah. How US tariffs will influence our business outside The US is more difficult to predict. But tariffs is, of course, not positive. It is an issue or a problem that we need to solve. But I do think that Kombi is in a better position than many other companies to mitigate these risks simply because we can produce in other countries where tariffs seems to be a trade barrier.

This is what Kombi did in the years before we established and built our production plant or workshop in The UK. We always produced our plants with sub supplier at sub supplier sites and delivered them to the direction site and constructed them there. It will be more costly, but we do think that it could affect our margins. But I do believe in some other countries it will be possible to compensate this by higher prices. So it is not positive, but I do think that Kambi will overcome and we have plans for this and many other markets where we need to do in turn production.

This can be both in India and in The U. S, for example. And if it comes to The U. K, I’m not quite sure. Remember, our production facility is in The U.

K. And I’m not sure whether U. K. Will be will have tariffs on The US yet. I mean, that is still unclear to me whether that will affect us.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: So it’s clearly a very dynamic picture, right, that we will have to adapt to. And there’s more questions on tariffs, and one of them is related to how The US tariffs impact our business in The US, on the projects that we have already contracted. So, specifically, there’s a question about Louisville and Honolulu. How much would that influence? And do we have contractual clauses for being compensated for such additional tariff costs?

No.

Per Lillebe, CEO, Cambi: They we may be affected. It is difficult to predict how much. But we as soon as we know the rules, what the tariffs will be and how they will be calculated, whether they will comprise industrial manufactured products like ours, is not clear yet. But as soon as we know it, we will adapt as much as we can. There are several mitigating actions we can take to reduce the influence of or the effect that the tariffs will have on our profitability.

It may have effect, but I cannot guarantee how it will work out. Would you like to add something?

Mats Tristan Kjenslam, CFO, Cambi: Yeah, maybe I could add that, you know, for the specific projects. Of course, they are ongoing, so the THP there it’s still physically in in Konmelton, so, you know, depending on the timing of such tariffs, you know, one obvious mitigating action is to import it into The US as soon as possible, but that’s as you mentioned it’s still a very unclear picture and we produce as fast as possible and send it to The US as fast as possible. And I think for new projects in The US we also have the Buy America, Build America Act and there we already have plans in how to be compliant with that and that suggests, you know, local, you know, made in The US manufacturing and also a certain percentage of the input materials being from The US. So that is already plans that we have and the import duties or the tariffs is an addition to the Buy America, Build America scenario, I would say.

Per Lillebe, CEO, Cambi: So we do already have plans, at least with one other project that we have in our planned pipeline, to produce that in America, and we have done that before. The plant that we built in Panama City was built in The U. S. So we do have access to workshops that we have been working with to produce our plants there. As I said, the cost will probably be a bit higher, but we hope to compensate that.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you. Shifting again topic a bit, there’s one question about future upgrade projects. How do we assess the risk of higher complexity and cost overruns in conjunction with, for instance, AMP (OTC:AMLTF) eight? And what are we doing to avoid future cost overruns?

Per Lillebe, CEO, Cambi: Yeah. Also a very relevant question. These projects should normally be high margin projects because we sell competence. I can also add that these projects are normally the most complex we do because we it will comprise changes in already existing plants and plants that we built many years ago. So what we have been doing in order to, say, to correct the issues that we met at Whittingham is to make internal changes and changes in our routines and involve the most experienced engineers in Gombe when these projects are both estimated and proposed to the customers.

The question in the project in question here is a relatively small project that actually went a bit under the radar. It’s money wise, it’s lower than what we normally report to the stock market about, but the margin was eroded. The project works well. It has met its expectations and the customer is satisfied. So there is nothing wrong with the technicality, but it was wrongly calculated.

Of course, I cannot guarantee this will not happen in the future, but we are really going to do all we can to avoid this kind of mistakes once again. And normally, I do I’m very optimistic about this business opportunity actually. There is the pipeline is bigger than ever as far as we can see when it comes to upgrades. And the more plants we have built in the past, the more upgrade projects there will be. It can be everything from more energy efficiency, a higher throughput, modernization, replacement of all the tanks, the vessels, etcetera.

So it’s a wide variety of businesses that we need to involve our most experienced engineers, as I mentioned, in all of these projects in the time to come. And those actions will be taken now. Luca, I can assure you about that.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you, Per. We’re soon rounding an hour for our presentation. So we just take one last question. This is, are you planning to do anything to avoid delays in milestone payments if clients are not ready to take delivery of your equipment in due time?

Mats Tristan Kjenslam, CFO, Cambi: I think this is a question about dividend. So the dividend is split into two. And of course, as I mentioned we expect quite a lot of milestone payments now over the next few quarters over the summer and this is the rationale for splitting that dividend into two and we are quite confident that we’ll be able to meet what we have communicated. There’s always some risk I would say, but these are projects where we are very certain about bigger milestone payments that will arrive over summer. So I think all in all we feel confident about what we have communicated.

Tarkas Tolzescu, Senior Corporate Relations Manager, Global Fertilizer: Thank you very much. Thank you, everyone, for following us for an hour now, for sending in very good questions. The presentation has been recorded, will be available later today on our investor portal along with the transcript. We appreciate your time and engagement. And if you have further questions, don’t hesitate to reach out.

We remind you that we do have a silent period, thirty days before, quarterly presentations, but we’re more than one month from that now. Wishing you a great day. Goodbye.

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