Earnings call transcript: I-Tech Q4 2024 financial surge boosts stock

I-Tech’s recent earnings call for Q4 2024 revealed significant financial growth, with a notable 50% increase in sales and an impressive 94% rise in operating profit. The company’s stock price surged 25.78% following the announcement, reflecting strong investor confidence. According to InvestingPro data, I-Tech maintains excellent financial health with an overall score of 3.8 out of 5. The proposed dividend of 1.75 SEK per share further underscores the company’s robust performance, representing a yield of 1.17%.

Key Takeaways

• I-Tech reported a 50% increase in sales for 2024.
• Operating profit surged by 94%, reaching 45.5 million SEK.
• The company’s stock price jumped 25.78% after the earnings call.
• A dividend of 1.75 SEK per share was proposed.
• I-Tech’s antifouling technology targets a $300-500 million market opportunity.

Company Performance

I-Tech demonstrated remarkable growth in 2024, driven by a 50% increase in sales and a substantial rise in operating profit. The company’s focus on innovation, particularly in its Selecto marine coating technology, has positioned it well within the global maritime shipping market. With a strong presence in Northeast Asia, I-Tech continues to capture market share, particularly in Korea, Japan, and China.

Financial Highlights

• Total (EPA:TTEF) sales: Nearly 180 million SEK, up 50% year-over-year.
• Operating profit: 45.5 million SEK, a 94% increase.
• Gross margin: 53%, with a slight increase in Q4.
• EBITDA margin: 30%.
• Proposed dividend: 1.75 SEK per share, representing 53% of net profit.

Market Reaction

Following the earnings announcement, I-Tech’s stock price surged by 25.78%, reflecting strong investor sentiment. The stock’s performance was bolstered by the company’s impressive financial results and positive outlook for 2025. InvestingPro analysis indicates the stock is currently trading near its 52-week high, with a remarkable 51.66% return over the past six months. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. Subscribers can access 8 additional ProTips and comprehensive valuation metrics on the platform.

Outlook & Guidance

Looking ahead, I-Tech remains optimistic about 2025, anticipating new customer product launches and continued progress in EU regulatory approvals. InvestingPro data shows analysts expect revenue growth of 35% for the current fiscal year, supported by the company’s strong market position and expansion plans. The company’s healthy financial position is evident in its current ratio of 6.48, indicating ample liquidity to fund growth initiatives. I-Tech is exploring complementary technologies and adjacent marine markets, aiming to expand its market reach and enhance its competitive position. For detailed growth projections and comprehensive analysis, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Markus Jansson, CEO, emphasized the company’s growth potential, stating, "We are a growth company and we are in a very interesting phase at the moment." CFO Magnus Henel highlighted the leverage in I-Tech’s business model, while Jansson pointed out the significant opportunities in China.

Risks and Challenges

• Regulatory approvals: Ongoing processes in the EU and Asia may impact timelines.
• Market penetration: Expanding beyond the current 3,000 ships in the global fleet presents challenges.
• Competitive landscape: Targeting the top coating companies requires strategic positioning.
• Currency fluctuations: Could affect financial performance given the company’s global operations.
• Supply chain dependencies: Outsourced production model may lead to vulnerabilities.

Q&A

During the earnings call, analysts inquired about I-Tech’s market presence in the US, which remains limited. The company also addressed the growth of its main customer, CMT, and ongoing regulatory approvals in Asian markets. Investments in business development and the costs associated with the EU regulatory process were also discussed.

Full transcript - I-Tech (ITECH) Q4 2024:

Martin, Webcast Moderator: Hello, and welcome to today’s webcast presentation with iTech, where we have the CEO, Markus Jansson, and the CFO and director of operations, Magnus Henel, presenting. After the presentation, there will be a q and a. So if you have any questions, please feel free to use the form located to the right. And with that said, please go ahead with your presentation.

Markus Jansson, CEO, iTech: Thank you very much, Martin. And, it’s a sunny and crisp winter morning here in Mundal today. And Magnus and I, we look forward to present to you the highlights from the year end report that was published earlier today. So, the first first feature we have for you is this development of the sales and the profitability of the company. And as we are, choose to title the year end report, it was a top top line sales sprint in the last quarter that crowned this successful year and we will come back to to the details on this in the presentation.

But as you see, iTeQ is a growth company and we are in a very interesting phase at the moment. Of course, great accomplishments start with great people and this is actually the entirety of the company. So, I think today is consisting of 16 highly professional team members with, I would say, a very good diversity both in terms of gender, ethnicity, languages, and of course, competencies and key skills. You can see here we have a strong R and D team, a strong marketing and sales team, and also then a support team, you could say backing this up with regulatory affairs and production and synthesis and operations management. So, if there are new people in the audience today, just a short recap then of what iFIX is focusing on.

So, we are in the maritime shipping industry and we have developed solutions to prevent fouling or growth of species on the underwater part of ships. And we are with our solutions then targeting a subset of selected challenges that the merit that is facing the maritime industry. If we start with a big and very important one is the emissions to air. So, the shipping industry is representing about 3% of the world’s release of c o two gases to the atmosphere. And there is a strong drive, you could say, between from nations and also the international bodies to reduce the carbon emissions from shipping.

There is a number of initiatives that is launched in that direction. And we will come back to that. But fouling then or growth of species underwater is a major drag for the ships trying to run through water. Right? And it’s something that would increase the speed, sorry, increase the fuel consumption if you want to maintain the same speed of your ship.

Another important topic is the transfer of invasive species where traditional or historically marine shipping has played a key role. Essentially, that is the transfer of different species from different places around the world to local coastal areas. Right? With the risk, of course, of damaging the natural diversity that is present sort of in the local, environments. So and here, you could say ballast water and the growth on the ship’s hull have been the key, for this historically.

Another important challenge is the emissions to water of various chemical substances. And, of course, then biocides is a part of that, you could say. And that’s a challenge that we want to minimize, of course. So, Selecto, which is the main product of iTekton is a Swedish invention from Gothenburg University and from Chalmers. And it’s essentially then a substance that targets mainly heart fouling, but what we call barnacles.

So it is a substance that doesn’t kill or harm the organisms, but it actually repels them from settling on the surface. So that has a clear advantage than in terms of reducing the drag and thereby the fuel consumptions of the ship. It is also then a key to have a clean harbor, right, if you want to protect the marine ecosystems from invasive species. And at the same time, Selecto is very, very much more effective and efficient than previous technologies. So the dosage that you need in a paint formulation to reach the desired effect is very low compared to traditional technologies.

So it also represents a really a huge step forward in terms of reduced emissions to our oceans. And this passion, you could say, for sustainability is a really a key part of the DNA of Selecto and of iPEC as a whole. And today, we will actually be presenting to you some really fresh data from an in docking study that we have recently performed in collaboration with the SAFENA group. So the SAFENA groups, one of their businesses is actually coating consultancy where they are supporting ship owners when they bring their ships into dry dock to have them repainted and refitted. They are there to advise in what type of coating system to select and what type of coating systems to also apply how and where, etcetera.

And you can say that they target really the top quartile of of ship owners that are really interested in performance. Right? So you could say that the the data set that we are showing here is also, you could say, among the best cases in the global shipping fleet today because it is from customers that actually care about the performance, of their ships. So, previously, iTech have demonstrated a number of successful cases on a ship level, etcetera, where you can see the effect of SelectTalk. And now today, then we are showing some of the first data on the fleet level.

So owners and a fleet level. And and this is really exciting. So what we have here is the data. It’s a seven sixty one, inspected ships. So, of course, a small subset of the about 20,000 dry dockings that are happening every year.

And this is over a period of time as well, we should say. So it’s probably around five to seven years. And since, SelecTO has not been around on the market for more than approximately two drydocking cycles, but we are now able then to find also ships that have been coated with SelecTO and that’s the data we show here today. So if if you start on the left side, this is, you could say, an overview picture of the result of the whole population of around 700 ships there. And you see two, two bars here.

One is the flat bottom, so that is the bottom of the ship, the the underside. And then you have the vertical side step. And and these are two areas that potentially are problematic, when you want to avoid falling. Right? And, essentially, what the data say here, more than 33% of all the, of the inspected ships have have more than 10% of animal or barnacle falling.

Right? And this is really an unacceptable result in terms of fuel consumption because this would sort of result in more than 40% additional fuel use to keep the same speed through water. Also, you could say the yellow bar is is not the completely perfect result and only 20% approximately of the fleet have a very good performance and prevention of particles. Out of these seven sixty one observations, we have found then 12 ships that actually have been using Selecto during this period. And that is the data that is represented to the right here.

And you can see there are clear, improvements. Right? So the the the number of ships that has absolutely no barnacles has increased more than 50%. And also in general, there is a lower, prevalence of barnacle falling. There is one, you would say, observation here, which is orange, which would then signal that you have more than 10% barnacle falling on the ship’s hull.

But if you go in and study every report in more detail, you can see that at least some of this falling comes actually from a coating breakdown. That is the picture you can see on the far right side here of the bow of the ship, which has been the where the coating has been damaged by by the anchor. And, of course, Selecto does nothing there to prevent the for us and of course a strong proof that we will use going forward as well to the relevance of the technology of Selecto and we’re really happy to be able to share that today. If we look at the market then, around 1,800 new ships were built during last year and we have approximately 20,000 dry dockings happening each year where the ship comes in for maintenance and usually for a recoat of especially the antifouling coating and underwater. The majority of the market for us both for new ships and for dry docks are in Asia where China is the leading country but also then followed by Japan and Korea.

These are the key markets for us to target. We estimate that the antifouling technology market opportunity for iTech is in sort of a gross level around $300,000,000 to $500,000,000 So a lot of growth to go forward still. So I think today then, we have a unique technology, intellectual property and formulation and process know how, how to produce and formulate the product. So it is one of our key strengths. We are targeting, you could say, the top coating companies of the world that represents sort of more than 90% of all the antifouling coatings and that is essentially nine companies where we have a contact and ongoing dialogue with all of them.

So, the company is asset light in a sense that we are outsourcing production then and focusing mainly on the science and the formulation development and the sales and marketing of it. We today estimate that our penetration is around 3,000 ships out of a global fleet of 110,000 ships. So much more to do. Alright. That was short, about iTech.

So I will hand over now to Magnus to take you through sort of more detailed highlights of 2024. So please go ahead, Magnus.

Magnus Henel, CFO/Interim CEO, iTech: Thank you very much. And as Marcus said in the beginning, we’re very happy to stand here in front of you and present this report. And when we look on sort of the highlights of the Q4 report, we see that we had a very good growth in Q4, but overall also in 2024, we had almost 50% sales growth, which is a very good accomplishment. One of the more important stuff is that our diversification continues. Today or last year, we had 33% of the sales from other than our main customer, Shubhuko.

Previous year, it was 80%. And I think both the development of going into the further customer base, but also it’s worth noting that Shubhuko had a 20% increase of sales also last year. So it’s not that this customer is declining. Every every customer is growing, but the new customers are growing a little bit more, so to speak. And and that that is quite reasonable.

They’re coming into the market. They’re they’re growing their product portfolio, etcetera. And taking these very nice revenues and the gross margin of the company which I will come back to, will show a very nice also operating profit, which is growing by 94% up to SEK 45,500,000.0. So taking the entire year into account, taking the position of the company, the board has decided also this year to propose an ordinary dividend as well as an extra dividend. They are increasing the ordinary dividend from €75 per share to 1 krona and remain with an extra dividend as previous year.

So all in all, this gives a dividend to the shareholders of 1.75 corresponding to roughly 53% of the net profit for the year. And going a little bit more into detail, what does this mean? Of course, we have another record year. It’s both record quarter, but also overall a record year with almost 180,000,000 in sales. We have a very nice, still, gross margin of 53%.

It’s worth noting also here that that it’s slightly increased during Q4. Also come back again, but this is an effect of the investments we’ve done in enhancing production and also in order to reduce the production cost. And that will continue over time. It will not be a step change, but we will we do see that we will be able to increase with additional percentages over the coming periods. And we talk a lot about our extra cost.

But of course, we have significant operating cost in the company as well. But I think you all know that we have a business model with a lot of leverage in it. And now for the first time, we actually achieved 30% EBITDA margin despite all these extra costs on the EDU situation. So that is also indeed very good to see. And the cash conversion continues.

We had we were building quite a lot of net working capital over the year, and that is due to prepayments from production as we have been discussing in previous calls, but also that an effect of a significant increase in sales during the last quarter. And coming back to the geographical spread, we clearly see that it is Northeast Asia. Just as Marcus said before, Northeast Asia is where we really drive the sales. We we we increased this total sales to Asia to 97% this year. It’s almost 3% in Europe, and it’s so little to the rest of the world so far that it actually doesn’t show in the graph.

And when we look into the distribution of these 97%, we see that Korea today, which is the main market to go to in in the beginning for all our customers. Shubuko started there. The other customers are starting there as well. But that is sort of the main main market to start in, and that today represents 50% of our total sales. And Japan is very strong still.

It’s 30% and China up to 13% and hopefully, we can grow that even further over the coming periods. And then the rest of Asia is growing towards Singapore, a small 4%. But it’s a really nice picture showing not showing the growth, but it is showing the importance of Asia for our products and how well they accept it over there. So it’s been an eventful year. Sometimes you see that in the office and you think, well, nothing is happening, but a lot is happening.

And on the operations side, where we have going into new supply agreements and we have new products launched by our customers, we on the leadership, it happened a lot. We we had our previous CEO, he resigned and went went up to being a chairman of the board. Previous this year, I took over as interim CEO. And before we’re coming in, we’re here with Marcus, who will lead us in the future. And we also increased the additional capabilities in the team, so to speak.

And, yeah, Marcus, you can have the happy announcement on the right.

Markus Jansson, CEO, iTech: Yeah, exactly. No, it has been an eventful year since I started as well, right? Although, I was only here for part of the 2024. And also sort of that was crowned, I think, with the award that we got from the dog industry sort of naming I take one of the Cassell companies for 2024, which we duly celebrated, you could say, in the end of the century, which was very nice. Also, one of the key themes this year has been the renewal of the approval of use of Select Top on the EU market.

And as the predecessor Philip then announced here a year ago, it was a bumpy road ahead. And we see that has really been a bumpy road and we will continue for a good part at least of this year as well. So we will come into that a little bit more in detail, but we won’t take the whole background. So if you’re really interested in that, I would really recommend our Q2 and Q3 announcements last year if you want to dwell into the background of where we are. So I will more focus on the here and now you oh, sorry, the here and now as we say.

So what happened then in November was that we closed what was called the public consultation phase of this regulatory process. So, this is a standardized process that YECCA and the European Commission is following when they are reassessing approvals of the use of different substances for biocides, etcetera. And it’s worth to mention then that all biocides, that are used in Europe are under severe regulatory pressure. So, I think it’s only one of the substances you could say under scrutiny by our regulators. So in the public consultation then, all, you know, the general public and all stakeholders had the opportunity to send in input.

You could say arguments for why Selector should be on market and and argumentations for sort of the case that was presented by ECHA. And, it was, you could say, a very good response, I think, from, you know, the maritime industry as such. We had various organizations, ship owners, shipyards and of course also our customers, the paint companies submitting comments during the public consultation. I will come back to that in the next slide to give you sort of the highlight and the summary of what we know was sent in as input in this process. But essentially, where we are now is that the EU commission with the DG something, they would take a look at all this material that came in in the public consultation, synthesize this and then come back with sort of a discussion and recommendation for the standing committee on biocidal products.

And this will happen now in March to the best of our English. Originally, we thought that the voting would take place in June, but due to this process, we now estimate that most likely the voting and the final decisions will be in q three this year. So we are talking anyhow about the second half twenty twenty five when we hope to get sort of more of a final decision regarding the renewal of ITEC’s news in the EU region. So coming in then to the the input in the public consultation that we know of, we can summarize it sort of in in three main buckets here. We start with sort of the industry perspective where a lot of the stakeholders, you could say shipyards, ship owners and paint companies all pointed out that this decision would actually weaken EU competitiveness.

It is a global issue since shipping is a global business. Right? Then although you could say, you could say that part of the building and servicing of ship is an Asian business, a lot of the industry and and sort of the owners are still sitting in Europe. And of course, we still have a lot of ships running in Europe. And this would put severe restrictions on the shipyards and the ship owners and actually have making it a tough time for them then to be competitive if they cannot use state of the art technology to reduce for instance fuel consumption.

Another thing is the potential negative impact on the environment of a non renewable for SelecTOpe. And essentially here, what the stakeholders emphasize is there is really a scarcity of viable alternatives. There are not many products that are registered in Europe for use as biocides for marine paints. And the ones that are there, you could say that you could really question their viability as suitable alternatives. And now since the E.

U. And the I. M. O. Is driving for really reducing the greenhouse gas emissions of shipping, this would severely hamper that since selictorb is and has proven now to be your key technology in helping to to battle and reduce the emissions from shipping industry.

And also not to forget then the invasive species element to this as well since Selecto is so effective to prevent hard fouling and barnacles from settling on the ships. The last point here was actually a socioeconomic study and this is actually also a standard part of this process. Right? And so this is an independent study but it has been financed with it from iTech. But we have no influence on the conclusions or the results of this study.

It was performed by Ricardo, which is a renowned specialist for making impacts assessment of EU policy and regulations. And essentially, to cut the long story short here, their 100 page report came to the conclusion there would be no benefit at all to society of not renewing, SelecTOX approval, but there would be substantial costs. You could say both monetary and environmental costs of a nonrenewal. So, all in all then, we feel sort of strengthened by a lot of the good support and, of course, hope that this will also shine through when we approach a decision point in this process during the year. So that on that, also, we want to mention again the business development pipeline.

Right? We started to touch upon that in quarter three. And here we now, I can report that we have actually built a nice opportunity pipeline. Of course, we’re looking to fill it with more ideas, but we are working now structured and with a clear plan of strengthening iTech going forward with new complementing products and potentially targeting adjacent marine markets there mainly. So complementing technologies is typically other active ingredients or biocides that could sort of complement the product offer we have today to our paint companies.

Then adjacent markets are other marine markets that that source of also could be interesting except the underbody part of ships. And we’re also looking into additional business models, but of course, with this focus. All right. And we come to the outlook part and before we kick off the Q and A session. And we do see that the favorable market conditions continue and we anticipate new customer product launches also during 2025.

So overall, we have a positive sentiment and view of this year as well. As mentioned then this EU process will continue to absorb attention and resources for the better part of this year with hopefully then a conclusion sometime in Q3. And also as Magnus mentioned then operational improvements have started to kick in, but I don’t know if you want to say

Magnus Henel, CFO/Interim CEO, iTech: a few more words on that. No. That that is, of course, a continuous work that that we are doing, but but as we have informed earlier already the year before in this year, we’ve made some investments in going to new producers, looking into to enhance our synthesis, etcetera. And that work is going well, and hopefully we’ll be able to show that also on the

Markus Jansson, CEO, iTech: finance side moving forward. Yeah. So that sort of concludes the highlight presentation and we are eager then to accept and answer your questions.

Martin, Webcast Moderator: Thank you very much, Markus and Magnus, for that presentation. And let’s dive into the q and a section here. Starting off with the first question. If The US implements its threats of imports duties against the EU, how can it affect ITEX expansion in the short and also long term?

Markus Jansson, CEO, iTech: Yeah. In the short term, of course, it would have no impact. Right? As you saw in the sales bit that my initial, unfortunately, we don’t have any sales to The US today. As we mentioned in the report, we are in the regulatory process to register Selector on The U.

S. Market. However, it’s very difficult for us to give a clear timeline here because it really depends on the authorities and the EPA on The U. S. Side.

So, we know that we will be conducting additional testing and hopefully submit and update the dossier to them during this year, 2025. But it may take up to two years as far as we understand to get an approval of The U. S. Market. So, by that time, of course, if there is import duty, it may have an impact on the business, but it depends also, I would say, on the relative competitive position of Selectope versus the solutions that then would be available on The US market.

We, of course, would have an option to start production locally in The US market if we wanted to. So as a way to mitigate that if it would be a serious barrier.

Martin, Webcast Moderator: It is promising to see that your customer base has diversified with CMT now constituting around two thirds of your sales. However, can we still assume that CMT sales have increased in terms of absolute numbers or are they somewhat flat?

Magnus Henel, CFO/Interim CEO, iTech: Well, I think we already gave the answer to that question. As I said during the presentation, the sales of CMP increased by more than 20% also during 2024. So no, they haven’t flattened out. Of course, we can’t anticipate 40%, fifty % growth every year on those, but they are in a positive momentum as well. And as

Markus Jansson, CEO, iTech: I said, during ’24, they grow within more than 20%. Very significant additional potential still with CMP. And

Martin, Webcast Moderator: during the quarter, you grew your total share of sales in Asia to 97%. Do you foresee this, share staying this high?

Magnus Henel, CFO/Interim CEO, iTech: Well, we we don’t have any any strong indications that that Asia will decline. Of course, when you’re up to the level of 97% for the full year, I would say. Then, of course, the way down is a little bit easier than way up because we should take it even more. But we have ongoing customers in Europe as well and with good traction on the market, but we have even better traction on the Asian market, so to speak.

Markus Jansson, CEO, iTech: I think it also will depend how the EU process pans out. Right? If there wouldn’t be a positive, sort of result of that this year, of course, there would be a basis for continuous growth also in Europe. Right? If not, then that may have to wait a little bit, right, to finally conclude sort of what is the potential for the EU market going forward.

Martin, Webcast Moderator: Can we get an indication of how much the external costs were linked to that regulatory process And were these in line with other quarters or higher? And what can we expect going forward?

Magnus Henel, CFO/Interim CEO, iTech: Well, I think for the last part of the question, we should expect that they will continue. We’ll put in efforts in doing it. It was a slight increase during the Q4, roughly SEK 2,000,000 compared to in average 1.5 during the previous quarters. But it’s not really huge change, but a a slight increase for for for the q four.

Martin, Webcast Moderator: What were the what what was the board’s argument as to why not proposing a dividend on hundred percent of net profits given that you already hold a significant cash net cash position?

Markus Jansson, CEO, iTech: Well, we are also looking to invest for the future. So I think that that is one of the key arguments as well.

Martin, Webcast Moderator: And very impressive growth in the quarter. Are you seeing any inventory built up at a customer level? Or what’s your view on that?

Magnus Henel, CFO/Interim CEO, iTech: That that is really a hard part to to say. Of course, there can be some inventory build up end of the year, but, also, the the the main reason for for the growth was was the eagerness from the customers to have the deliveries. So I I wouldn’t assume that that that is a huge buildup. But we would as we have been discussing over and over on the quarterly calls that it will have ups and downs in the quarters over the year. But as Marcus said, we still see a very positive momentum on our customers.

Markus Jansson, CEO, iTech: I mean, as an example, you can see that q q two twenty twenty four was higher than q three. Right? And then we can bounce back with a higher q four. So you will definitely have the the quarterly variations. Yeah.

And of course, their stock build up and inventory management is part of the reason of that on our customers.

Martin, Webcast Moderator: You mentioned that a portfolio of opportunities have been identified. Without being specific, of course, can you reason as to what type of opportunities you are looking towards and how they could be expected to affect the organization?

Markus Jansson, CEO, iTech: Yeah. I mean, the real low hanging fruit, so to speak, would be if we could find complimentary active ingredients that would sort of further strengthen the value proposition that we have to the existing customers today, which we believe there is. Right? And there is something that we are exploring along those lines. Right?

So that is, of course, a key focus. Right? Something where we can tap into significant additional opportunities short term. Right? But there is also then, of course, various a little bit more longer term initiatives.

And we also need to keep an eye on the future and the horizon to see other upcoming technologies. Right? Whether that would be bioscience or other complementary things that could help service our customers better.

Martin, Webcast Moderator: Can part of the exceptionally strong sales growth in q four be explained by any kind of one off or start up volume demand from a new customer or product?

Magnus Henel, CFO/Interim CEO, iTech: Well, I think we responded to that question also before. But, we can say that it’s no start up of new customers that affecting us like this. But but we have elaborated a little bit about potential effects from from stock buildups and stuff like that. I think that is good answer to that.

Martin, Webcast Moderator: And what can you say about the seasonality of sales in this product segment? In a steady state? Is it expected for sales to be lumpy over the calendar year or is it primary other factors?

Markus Jansson, CEO, iTech: Well, it’s really hard to say, right, since we are in a growth phase as well with the company. So we are very far from a mature, sort of stage of the business. Right? There are, of course, seasonalities and variations in the ship maintenance business as such. New build has been the key market for where where ITEC started, which is maybe a little bit more steady over the year but of course services and servicing ships also depend on things like seasons and climates and so on.

Right. So it’s really hard to say how it affects but we know that there are quarterly variations in the demand. And that has to do with with with the varying demand that our customers had, but also then inventory management considerations.

Martin, Webcast Moderator: Can you talk a little bit about the regulatory approval process in Northeast Asia? You mentioned that Selecto is already approved for usage. And is this a time limit approval or how does this approval work in practice?

Markus Jansson, CEO, iTech: Yes. It has to be renewed in most markets at a certain time. I cannot recall exactly for Korea now, but I think it’s in one period. Twenty eight, twenty nine exactly there is a renewal. So, I mean, we would have to continuously invest, you could say, in in regulatory compliance and sort of staying ahead and and in tune with the authorities on a global scale.

Right? And it does vary, for instance, how the different regulatory bodies in the countries view different issues and challenges with chemical substances and with biopsides. But we have no indication so far we would have faced similar challenges in the Asian markets as we are facing in Europe, for instance.

Martin, Webcast Moderator: And about the EU process, you have presented a lot of positive feedback about the public consultation. Was there any negative feedback?

Markus Jansson, CEO, iTech: Not really to our knowledge. However, you as you know, the public consultation, you could submit your comments either publicly or you could submit them confidentially. So we have been able to, of course, take part of the things that have been sort of publicly submitted, but also then, where customers and partners has potentially shared with us what they had sort of submitted. But to our knowledge and awareness, we have not seen any negative.

Martin, Webcast Moderator: Have you given or can you give some kind of rough estimate as to the amount of economic resources that the EU process is currently consuming from iTech?

Magnus Henel, CFO/Interim CEO, iTech: Well, I think I already answered that question as well. We we had external costs during during the final quarter of roughly SEK 2,000,000 and roughly been averaged 1,500,000.0 during the other quarters. So, and of course, that it also takes time from the organization, from me, Marcus, but mainly Sisi. So but in pure external cost, those are the numbers.

Martin, Webcast Moderator: And you communicated a supply and license last week. How much have you have have that customer contributed to sales prior to the agreement?

Markus Jansson, CEO, iTech: Well, we we cannot comment on that specifically since, the customer has asked also for to to remain anonymous at this stage.

Martin, Webcast Moderator: And your gross margin improved in q four. Do you have any guidance of how many percentage points it can improve from here?

Magnus Henel, CFO/Interim CEO, iTech: No. We we, of course, we have a view of it, but we don’t have any guidance. It will increase few more percentages over time, but it’s also, as I said, it will come over time. So but no real guidance on where we will end up.

Martin, Webcast Moderator: Thank you. And can you give us some more color on what an adjacent area could be? Are you looking for acquisitions or continue to grow in adjacent areas organically?

Markus Jansson, CEO, iTech: Both, I would say. But adjacent areas, we mean more, sort of other markets within the marine technology sphere. Right? So now, ITEX business is very focused on the antifouling coatings of ships. Right?

There are other sort of, oceanic installations and other marine applications with this which is adjacent. But I will not comment sort of specifically in detail what the projects are.

Martin, Webcast Moderator: Do you feel that, your odds for a derogated approval is better now after the public consultation phase?

Markus Jansson, CEO, iTech: Well, at least we feel strengthened, I would say, by the support of the maritime industry. Right? And I think what we found also encouraging is that sort of the key arguments that that we brought forward to the process, right, of of sort of both on the scientific side, you could say, on on the classification of selectropas and ED, but also this analysis of alternatives that the competent authority of Norway conducted. Right? That that is is a really, yeah, it’s not correct.

Right? And then that was echoed again and again, you could say, from the support that was submitted by other stakeholders. So we sort of got confirmation, I would say, in our views of of the process as such and the conclusions that ECHA has made so far.

Martin, Webcast Moderator: Thank you. And on the customer pie chart you just showed, does the figure rank their importance by volume?

Magnus Henel, CFO/Interim CEO, iTech: You

Markus Jansson, CEO, iTech: should see that that’s a market share of the paint companies. Right? That that is actually something we show mainly for illustrative purposes. So to assess exactly the the shifting market shares of the global antifouling paint manufacturers is a really difficult task. Right?

But we are mentioning these top nine companies as really the ones with the biggest share. And you would say out of those, there’s probably four as a really significant share of the global market. But, we are not giving sort of any additional detail there on the relative sizes of our customers.

Martin, Webcast Moderator: Okay. Thank you. And SG and A cost excluded depreciation was 41,000,000 in 2024. Can you give us an idea of the expected developments here for 2025? Do you expect to make any major increases in your SG and A cost base?

Magnus Henel, CFO/Interim CEO, iTech: When when we look into the development of the company, of course, we will increase cost over time. We will continue to strengthen the organization. We’ll make efforts in other areas. I don’t have any major shifts that we are planning right now that that should increase it significantly. But there will be an increase also next year.

I’m pretty sure about that. Then, of course, coming into the business development work and there is, of course, a potential that that we will increase the cost over time in that area, both in identification, assessment of opportunities, etcetera, but also driving the opportunities moving forward.

Martin, Webcast Moderator: And do you expect to have a fairly good idea on the outcome in the EU ED process after the discussion in March?

Markus Jansson, CEO, iTech: It’s really difficult to say. At best case, we will have an indication. Right? But nothing is final until you have a voting taken place. Right?

And and sort of and and the decision. Right? And that, of course, can still be challenged. So, of course, it will be a final in this process that we’re in now, but the final say, of course, in EU going forward will not be settled, by the closure of this process.

Martin, Webcast Moderator: Okay. And we take one final question here. Good growth in China in the quarter, albeit from low levels. What do the prospects in the Chinese market look like going forward?

Markus Jansson, CEO, iTech: Well, the potential is really big in China and and really huge. And we could say that, that the the use of select tope in new build is not as, sort of, let’s say, as as needed in the Chinese market as it is in the Korean market. Many of the Chinese shipyards are actually situated in River Deltas where you could say the growth from articles is not such a big problem as it is in Korea and Japan, etcetera. That is specifically on the new build. Right?

Which has been the historical first penetration of of iTech, right, and and Selecto in the Korean and Japanese market. However, of course, the relevance for the dry docking and maintenance market is as big for the Chinese market, and there is huge potential here, and, of course, a focus area for us going forward.

Martin, Webcast Moderator: Okay. Thank you very much, Marcus and Magnus, for presenting today. And a big thank you to everyone who followed this presentation with iTech. And I wish you all a great rest of the day. And thank you very much.

Markus Jansson, CEO, iTech: Thank you very much. Thank you.

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