Welcome back to ABG Investor Day. My name is Adrian Gilani, and I'm an equity research analyst here at ABG. Our next presentation is with I-Tech, and with me today I have the CEO, Philip Chaabane, who will hold the presentation, and after that, if we have time, we'll have some Q&A. With that being said, Philip, I will hand it over to you for your presentation. Okay, thank you so much. I'm very pleased and happy to be here at this Investor Day. We will now listen to the story of I-Tech, which you already from the beginning of this slide can understand is a company operating in the industry of global shipping, and most specifically on the coatings that are underneath the waterline. Please switch slide. I-Tech is a listed company on Nasdaq First North in Stockholm since three years back. It's a biotech company operating in the fine chemical industry, or even in the traditional chemical industry, in terms of being a supplier to the global paint makers, traditional coating manufacturers, i.e., the technology has been a startup for many, many years, but it's now an available and established technology, so to say, and it's surrounded by a lot of extensive patents and regulatory approvals, which is a key thing in this industry. As having said, it's company-oriented into the shipping industry. It's easy to and fair to say it's a global market we're looking towards, and it's a pure export company. We have a lot of proven evidence that the technology makes a difference. We have a take-up among the leading paint makers, but there's still a lot more to do in this area. We're located in Gothenburg, in the premises of AstraZeneca BioVenture Hub, which are purple in this site map of one of the AstraZeneca R&D sites, the biggest one, I think, located in Mölndal again. Next slide. So just to give a glance of where I-Tech is in the value chain here, we outsource production, which is a quite high-tech complex production of APIs, which is then pharmaceutical-grade manufacturing sites, i.e., we use the same kind of suppliers that large pharma manufacturers are using. We control the IPR in this domain, meaning patents, tech pack, and know-how. We then run on agreements with two different suppliers who then ship and pack the material in the type of boxes and containers you have in the middle of the slide for global shipment, meaning we do not really see the material here in Sweden unless we bring it home for inventory purposes. The customers we then supply are exemplified by Hempel, Jotun, and Chugoku Marine Paints, all being leading brand names in the marine coating industry. Global regulations are also key, so we control regulations in all key nations, which are on the map in the central frame of the picture. All green are countries requiring specific registration and are important for shipping. Those in reddish are also important, but mainly for the leisure boat market, and there we have only initiated regulatory approvals in the United States, but not in the others. All the gray areas are possible to operate in for I-Tech, so most of the world is under our domain. Next slide, please. So what are we doing now? Well, first of all, what we do is keeping barnacles away from hulls. They attach easily to any surface that is submerged to any oceanic water, and they then start to create a shell or build a shell, which then becomes a roughness issue on the hull, and then it causes extra drag, and that leads to extra fuel consumption. How we do it is by using a specific molecule called Medetomidine, or Selektope, as we say, that is incorporated in marine coating to actually deter or repel the barnacle larvae from the surface. So a barnacle larvae coming in contact with this molecule gets hyperactive for a certain time, leaves the surface, and moves away. The effect is tremendous. It's high efficacy and high potency relating to this molecule, and you can see the square on the ship, which is then containing Selektope, compared then to the main hull, which is not. The ship has been laying idle for a long time, so this is not as bad as it should be on a normal trading ship, but it exemplifies the tremendous power in this molecule. The molecule goes into the paint, creates this amazing effect on barnacle larvae, which is then a receptor-stimulated effect and not anything else. Next slide, please. The purpose of all this is to reduce fuel bills, and various academic-related research teams have quantified this. In this case, it comes from Schultz in the U.S., linked to the U.S. Navy, who have tried to put the magnitude on the resistance or extra drag that fouling in general causes. As you can see on the left-hand side, the bars are not as high, meaning it's slime and so-called soft fouling we're talking about. Then when you come to the higher bars, it correlates to the presence of calcareous fouling, meaning barnacle fouling. The larger or more extensive the fouling is on the hull surface, the worse the drag gets. You can see it goes up to even 80% extra drag in a very, very worst-case condition. Sometimes this worst-case condition is visible on pleasure boats who lay still all the time. For ships, it's maybe a very extreme case. Meanwhile, then some of the middle bars are more representative and then causes yet a huge impact on the fuel bill and is very likely the difference between profit and loss on the journeys. To give you a glance of the magnitude of fuel used, you can see a VLCC at least at 100 tons of fuel per day, depending on speed they travel. If you add 30% drag to that, which is then 30% higher fuel consumption, it's a significant increase per voyage per day. It is very good advice to use best possible anti-fouling coatings for the revenue of saving fuel. Next slide, please. Apart from the obvious facts that are put on the table, that fouling has a big impact on the fuel consumption. Recently, IMO has signed in for two different indices that will actually force ship owners to be more careful on how ships are operated and designed. We call it a 40% reduction in carbon intensity plan, which consists of two indices, EEXI and CII. Both are telling the ship owner and then the freighter about how efficient the ship is designed, the EEXI, and how efficiently the ship is operated, CII. A good anti-fouling coating will make a big difference on the CII, and as you can see from the graph, there is quite some fuel-saving opportunities relating to the hull. It should be said that industry's general speaking number on the saving potential on transferring the full fleet into the best possible anti-fouling coatings translates into a figure of around $30 billion worth of fuel. That is the journey that has to be done, and Selektope is a technology ingredient to drive, or help at least, to drive the anti-fouling coatings into the direction of saving that kind of money. Hence, it's not possible to neglect the importance of the underwater condition. Next slide. To give you a short overview of the CII, Carbon Intensity Indicator, which is then how well the ship is managed, operated, versus the design optimum point. There will be gradings, as we see in many other products today, on how efficient the ship is compared to then a certain standard classified in the CII. It is then important for a ship owner to have a ship in as efficient class as possible to then get the best possible charter contracts, and this will be the final switch in this industry where efficiency technologies will be well worth investing in, even if you're not owning the ship or if you're owning it and not operating it. Before, there was a difference here where those who owned and operated had a big impact on this and really invested, while the others didn't really take care for the fuel bill and hence didn't invest. This will change, and we will have a great impact in this industry from these kind of indices. Next slide. The market is huge, as you can imagine by seeing photos from various ports such as Singapore or Los Angeles, where a lot of ships constantly are waiting for unloading, offloading. In fact, there's around 54,000 registered vessels, about 2,000 deadweight ton. That is a significant number, and they normally have to go into dry dock every three to five years, depending on how old they are. We think there's an average opportunity of 10,000- 15,000 dockings per year. That includes the smaller ones at 2,000 deadweight tons, should be said. All of those need to get a new coating at new building and at every dry docking opportunity. Output from new building is around 1,500 vessels per year, a normal year. That has been quite much lower the past year. There's another type of ships, which we may classify into so-called industrial ships that are tugboats or supply ships and coastal ferries and so on, who also has an interest in all kinds of efficiency measures, but are a much smaller surface, but they are quite many in number, wherefore that is also of interest for everyone in the coating industry. Finally, there is a huge number of leisure boats for Selektope. This is good information because these lay still at idle most of the time, and that's when fouling occurs. So hopefully, together with the prominent paint makers, we can get a grip on this market, and steps are being taken into the United States and Japan to target specifically this kind of vessels. But nevertheless, the big ships to the left will be the engine of the growth in this company and for any coating manufacturer. Please switch slide. So, how is this industry? Well, from Corona, it was quite bad, obviously, as goods were not shipped the way it was the years before. Things came to a stop, and you probably remember a lot of ships idling all over the place, and we still see effects of containers being on the wrong place in the world and so on. New building was really bad last year and up until recently, but now a shift is being observed. So, the first seven months, new contracts are exceeding the number of new contracts signed for the full year, 2020, as an example, and is expected to rise further. That shows optimistic, and as a contract is signed, one can count on output, i.e., delivery somewhere around 2023, 2024 timeline, depending on capacity. Also, earnings are showing a better trend, certainly for the container business. I have to say that some ship types still suffer a lot and are not represented in this upward trend, but bulks and containers seem to be coming out of the worst phases where containers are really in the upstream of earnings. In terms of charter time and charter time rates, also containers are up, which is aligned with what you hear in global media about containers being in the wrong spot and a lot of congestions on that side. All in all, this shows optimism as some are making money, i.e., loading up for investments in efficiency technologies as per these new requirements on classifying ships into different efficiency indices. So it's good news that they make money again and that new building is coming back. Next slide, please. So where are we in all this? Well, we work through the paint makers who are customers. We work with most of them very actively. I should say there is about five or six who completely dominate the global shipping market. Not to say that is true for the small leisure boats, but for the global shipping. There's another three that are important, certainly in certain regions. So we say normally nine are quite important, nine customers. Most of these we work with and have progressed quite far. As we mentioned in quarter one, we have about six, or we have six large paint makers contributing to our top line, all placing orders to indicate full-scale testing or some sort of pre-launch if they are not already launched. So I-Tech is in a good position in broadening its customer base after many years of work, both on our side and on the customer side. As this is a slow-moving development process, it will still require time before we see the full effect of the ongoing work. Next slide, please. What has happened on the customer product portfolio since last year at the same time, approximately? It has expanded considerably. Almost double as many products are now on market than at the same time last year. Almost all of them come from Chugoku Marine Paints, as you can see here, who are launching and promoting products in all different kinds of vessel segments, including the leisure boats, specifically in Japan in this case. Although products being new, that puts us in a position where we would expect a good basis for continued growth once products get recognized in the market and once we see a full uptake after the COVID, which is still an issue in Japan with local shutdowns and staff issues in yards and other industrial entities. It should be said that other paint makers who I mentioned contributed to the top line in the first quarter are not visible here because they simply are under confidentiality work when it comes to their products. So there's a lot more hypothetical products out there than what we can display. Next slide, please. Just to give you an idea why these products are different when they use Selektope. Selektope-containing products are used to drive up the static performance, extending the idling guarantee. That is the essence of what the technology does, either with copper sulfide hybrids or in standalone or without copper sulfide formulations. Some of these formulations, specifically the one up to the left, up to the right, sorry, is also proven to have a very strong effect on slime and general hull performance, where Selektope is a vital ingredient in this case, replacing copper sulfide, putting this kind of coating into the tier of the absolute best-performing coatings on market. And the first ever of its kind being done full copper-free, still self-polishing. So let's see where that goes. But again, Selektope plays very well with copper sulfide, and the important message is that it drives up performance, certainly in terms of idling days. Next slide, please. So a few words of the quarter. Some positive key events have occurred, although it's a tough business cycle, meaning we're still suffering from customer inventories being a bit high after the pandemic. Big breaks were put on, and we still see effects on that. That's why the revenue decreased by 21% on value and 11% on organic. Consequently, EBITDA for the first time for quite some time now fell on the negative side, -1.2. The EBIT result was - 3, which then is a consequence of implementing the incentive program to staff members mainly. One-time effect there. Apart from the COVID, we also see high raw material costs that are pressuring the margins of our customers and making it more difficult to sell high-end premium products with a margin than maybe the more mainstream products in the middle segment. So maybe that has an effect as well in delaying the return to growth, which we saw up until quarter two, 2020. Also good uptake still on other customers, except the leading one, Chugoku. We think that's very important to see and to hopefully continue to see that in the quarters to come. New products have been launched, which is a key highlight and builds confidence that the underlying baseline is growing so much stronger in believing in a return to strong growth figures. Next slide, please. In numbers, we reached a sales of SEK 12.8 versus SEK 16.2. You saw in the previous slide that decline, but for the first half year, the difference is not that big. So let's see how much we can recap on the second half of this year to maybe hopefully exceed where we were last year. Gross margins is a positive highlight with moving up to 50% compared to somewhat below 50% last year and even that same quarter as well as the full year last year. So let's see if we can keep that on this level, potentially growing with higher volumes in the future even. Other comments on this slide is that operating cash flow is highly negative, mainly due to inventory buildup because of COVID risk mitigation. So we bought out inventory and relocated in the world for supply capabilities to our customers. So that's why we have a negative cash flow here. And I think that's an important message. It's nothing else. It's not an extended burn rate per se, although we are investing a lot more now than before, but the major part of this comes from the inventory buildup. Next slide, please. Just to give you a final show here of products that recently have been applied on ships. So this is a new build series of eight. The first one went into water recently in June, July, using one of the Selektope products highlighted before. Full ship coated with Selektope technology coating, and it's also propelled by methanol engines. So it's an innovative approach and fully in line with what IMO would need to see to classify it as one of the most efficient ships around of its kind. And we're very proud to have Selektope technology on these eight ships. Next slide. So this final slide, just moving back to the discussion of what is driving the industry right now, it's obviously reducing emissions to air, which is obvious knowing that shipping is 2.6% of global CO2, almost equal to the nation of Germany. A lot of fuel to be saved and a lot of goods. 80% of all goods shipped are on a ship at some point, so it's very important that the shipping industry still works and is reducing its environmental footprint because it's completely essential to sustainable transportation also in the future. Another topic we haven't touched is the direct effect of fouling. That is, except for saving fuel, it actually has been determined a possible vector of transferring invasive species. Before, it was ballast water tanks, which is still obviously a concern, although a lot of progress has been made. The next thing is clean hulls. Because if the hull is not clean, it's being fouled, then it has been shown to bring forward new species into different ecosystems. Therefore, some nations, such as California, New Zealand, Australia, and certain countries in Europe, are quite picky on gaining evidence from each ship making a port call that it's free from fouling, or at least it has a low risk of having severe fouling. If they cannot prove that, they will not be able to enter the port, and hence they will have to move out to open ocean and find some sort of cleaning service that takes time and costs a lot of money, so this is actually one of the most interesting driving forces to move the paint segment from low grade, which is quite a big portion of the total sales today, to the premium grade, where I think most of the paint systems will move into very soon. Finally, obviously, there is a need for various types of materials in the coating, but using as few materials as possible to achieve a specific objective is obviously a better choice. So hopefully, we can contribute to reduced metal oxides in these coatings considerably over the years to come. Metal oxides can then be used in much more applicable areas where recycling is possible in contrast to when used on ship sides where it cannot be recycled. That was my final slide. So I thank you for your attention. I look forward to questions. Okay. Thank you, Philip, for your presentation. I'll start right off with some questions here. First of all, you mentioned that the anti-fouling market amounts to roughly $300 million-$500 million. Are there currently other actors with other technologies competing for market shares with you here, or are you the first in this space? First of all, that market figure, $350 million-$500 million, is what we are capable of doing if Selektope was selected into every liter of anti-fouling paint used. The market for anti-fouling as such is somewhere around $2 billion-$3 billion worth. So this was the I-Tech potential. Other ingredients are there as well, and some of them need to be there together with the Selektope technology. But of course, there are other opportunities that are trying to steal this market share or take it bigger. And that could be the silicones, which is non-biocidal anti-fouling coatings. But honestly, biocidal coatings are dominating today and likely will be dominating. And in that space, Selektope fits in basically any combination. So we actually don't see that much of a competition there. We see only opportunities in being combined into coatings to further drive them up in the performance spectrum. Okay. And you mentioned as well that you have a significant uptake among some of the largest paint manufacturers. So could you give us a reasonable guess to how much of their current sold products are containing Selektope, and how high do you think that percentage could potentially go in the medium to long term? Okay. I would say we're just scraping on the surface. Chugoku, who has gone the furthest in using this technology, have a few percent of the products with Selektope. I'm actually not sure how much, but there's still a lot to do. They have more products now, as I showed you, but I haven't seen those yet as these brand new products. But there's certainly a lot of things to do there. For the other paint makers, it's really on the low, low side of the percentages. I think Selektope can be 10%-15% market share in each customer as it hopefully will have a strong position in the premium self-polishing anti-fouling coatings. And that would be a moderate estimation, but that's at least a first target. It will take some years to get there, though, as you can understand. Okay. I'll try to fit in one more question as we have a few minutes left here. If we take a look at the unit economics, how high would you say the cost to produce Selektope-containing paint is compared to normal competitors? And also on the other side of that, how does the pricing differ? So if I understand you right, the first question was how much Selektope paint that could be produced. Was that right? What does your cost of producing look like compared to normal paint? And then on the other hand, the pricing that you can take for that paint as well. Okay. So we don't produce the paint, right? We're producing the ingredient technology Selektope. That is one of a few active ingredients, so-called biocides, used in paints. On our side, there is a certain cost of goods contribution, of course, similar to what other ingredients, certainly copper sulfide, have in the coatings today. So it's similar to that, meaning if you just add it in, there will be a cost increase, and there will subsequently be a possibility to increase sales price because you're actually offering higher static performance. Now, that has been proven to work in a range of products, but it also requires quite some evidence because it's a high, tricky sell when you're up in these cost levels. There are other products on the market where Selektope replaces other agents and makes less impact on the cost of goods. In that case, the gross margins appear, to our best knowledge, actually increase for our customers. And that's where we want to be. And we are investing a lot in trying to help to guide how to increase margins while using Selektope. Okay. Thank you so much again for your presentation and also for your answers. Do you have any final remarks before we round up? No. I'm just happy to be here again and hope to see you live soon. Yeah. Same.