Vow Green Metals AS

OSE:VGM

Earnings Call Transcript

[Mathias Nilsen Reierth, executive]

Good morning, and welcome to Vow Green Metals Second Half Year Presentation. My name is Mathias Nilsen Reierth and with me today, I have our Chief Executive Officer, Cecilie Jonassen; and also our new colleague, Jan Halvard Aas Møller, our new CFO, who will go through the financials. But first, Cecilie will go through the main developments in the period.

[Cecilie Jonassen, executive]

Good morning. This is what it's all about. We are unlocking this formula by exchanging the black carbon with a green carbon, reducing CO2 emissions in the metallurgical industry, which has now other alternatives. What we're doing is pyrolysis. So we will take wood-based materials, pyrolyze them and make 3 new products: biocarbon for metallurgical industry and also bio-oils that can be used into refineries, asphalt and such, but additionally also bioenergy, replacing natural gas and fossil energy sources.

But back to the main developments. We did produce our first biocarbon last year in November. And we have also progressed in our big project at Follum, where we have now gathered all of the equipment and is ready to take that into building and we also expanded that building. So we are finished with engineering. And of course, we are not just working with one project. We are also progressed with the Viken Park project entering into a pre-study phase.

But of course, partnerships is very valuable for us. And last year, we entered into 3 more ones -- or actually one of them was this year. It's Siva, which will be investing into the infrastructure and the buildings. Additionally, also Vardar will invest NOK 100 million into both the factory but also into Vow Green Metals. And of course, the offtake agreement with Elkem from our first factory at Follum, taking 75% of the capacity of that factory. But to be able to do this, we have been building our organization. Last year, we hired 2 more metallurgical engineers so that we are prepared to deliver into that market. Additionally, we also hired operational personnel for our factory at Follum. And now, since February 1st, also Jan Halvard Aas Møller, is now part of our organization as the new CFO. And he is now going to the financials, and then I will come back with some more updates.

[Jan Halvard Aas Møller, executive]

Thank you, Cecilie. So a brief look at the financials. The EBITDA currently stands at NOK 23.9 million for the financial year 2023, which is an increase from NOK 9.3 million to NOK 14.5 million for the last 6 months of the financial year. This is mainly due to increased employee compensation or employee expenses. As in previous periods, the EBITDA is primarily impacted by employee expenses and other operating expenses. If we look year-on-year, you will notice in the financial statements that the employee expense doesn't increase that much from '22 to '23. This is due to increased capitalization of employee costs. So the total employee costs for the year is NOK 18.1 million in '23 compared to NOK 15.5 million in '22, with an NOK 8.7 million being capitalized in the balance sheet.

If we go to the balance sheet, we can see that the total assets increases quite substantially, which is due to the process equipment at Follum where we've added approximately NOK 51.5 million. Our cash position stands at NOK 41.3 million at year-end. One item that we can address that's not commented on the right side here is the noncurrent liabilities. This is the [indiscernible] alone which Cecilie just referred, which is convertible to equity. All specifications to the financials presented can be found in the financial reports where the notes should explain them in detail. Back to you, Cecilie. Thank you.

[Cecilie Jonassen, executive]

I will give you an update on the progress in the projects that we are running. So our key projects. So the early production line, I already informed you on producing biochar and biocarbon in November. And now in February, we are ramping that up. So we are roaming the equipment and planning for a production increase and also hiring more operators to increase that production rate in the months coming forward. Also at Hønefoss, still building a new plant there. So we finished off the infrastructure work in December. And now we just started our cooperation phase with entrepreneurs and the process suppliers of the equipment, enabling us to reduce the time for the resurrection of the factory and making sure that we are prepared for the execution phase.

And of course, also having partners with the offtake of the biocarbon but also on the bioenergy side is very important for us. And then to Viken Park, so I'll just switch to the next one to give you a bit more depth on that. It is on an industrial park being established in Fredrikstad, Norway. It is going to be the biggest one of our factories, 30,000 tons capacity. But what is really interesting here is that, that industrial park is using pyrolysis as kind of a technology development looking into also other industries using pyrolysis, and the logistics setup is very good, we placed near to the highway, but also close to harbor, where we can transport both feedstock and also export our products.

So we entered into the pre-study phase using the new technology from C.H. Evensen which is owned by Vow also, enabling us to build even bigger plants but still keep a small and tight, like a building and everything, keeping it in, I would say, a very efficient setup. And what we will do, and we see that in our next projects, is that we're going to use that setup over and over again. So -- and of course, not to miss that. What is special when we come into an industrial park like this where there is no original offtakers of the energy, we actually now are cooperating with a company called Carbon Centric, which is a carbon capture company, that will capture the CO2 emissions -- our biogenic CO2 emissions from making heat, and they will actually also then have the excess heat and excess energy from our operations into their operations, making this really a net zero and also net zero to negative operation.

Well, I'll go back to Follum and talk a bit more partnerships, talking about Carbon Centric and a partnership at Viken Park. But of course, having Siva invested in us and will have a sale-leaseback for the building and the infrastructure at our Follum plant in Hønefoss was really important for us. And of course, Siva, they have their industrial specialists looking into both the biomass handling but also into the biocarbon market, understanding metallurgical industry. So that is really a quality for us, having done that process with them.

Additionally, also saying that the energy companies looking into something that is a bit different from what they've done up until now with wind and solar and, of course, hydropower; looking into the possibilities to use our excess energy into their local heating but also, of course, expanding into a new business area for them. So going back to the market, there was a significant shift in November last year when Outokumpu, the biggest stainless steel producer in Europe invested in our competitor, Envigas. Envigas is using the same pyrolysis equipment that we are doing. And that was, of course, important for us saying that we have chosen the same core technology as them.

But additionally, then also Elkem entered into an agreement with us now in January, and we see that there are several new companies approaching us but also approaching our competitors. And to be able to deliver this at speed, we will also then keep on standardizing as I explained in the Viken Park project. We are actually putting a bit more effort into that than what we normally would do for the next projects, putting a special standardization step, really reevaluating all the flows in the factory. And to be able to do that, we need that competence. So we've hired our own engineers, of course, being able to understand the product, but also understand what we really do is a lot of biomass handling.

But not just by mass handling and product handling and product, of course, performance, what is also important is having that project competence. So we also have project engineers in our organization to follow up the coming projects. And we've been maturing this pipeline of projects for the last couple of months, focusing on more of the maturing than gathering leads because we see that there are a lot of leads out there. And especially going into a couple of them, industrial parks, we can park one of them, but there is also others looking at a concept that will work.

We are working with a pulp and paper company that will replace their natural gas with pyrolysis gas and produce their necessary energy and heat energy from the same -- for their process with pyrolysis gas. And also sawmills, more than one, that are looking to use their excess or their byproducts into something new and not transporting out of site, but also additionally getting the excess energy. And of course, district heating which we are already doing at Follum. And we presented this model half a year ago and showing what -- how we will do the value creation in Vow Green Metals, focusing on 2 different parts.

Of course, project organization, organizing new projects and execute them, getting that competence and wrapping it all up. But additionally, after that, securing that there are offtake agreements that we're making, qualify products and also having the process engineers making sure that we are performing at a high level. But why are we doing this? Why is biocarbon important? Why not other projects based on bio? Well, we are very different. We actually are outperforming the fossil alternatives. That is something that is -- it's not that common, I'd say.

So having that efficiency actually exceeding 100%, going to 130% offset of fossil CO2 is really something that is special for our products. So to be able to do this, we have some clear ambitions for 2024. Ramping up production is really key, commercializing both biocarbon and biocarbon for new metallurgical verticals, but also bio-oil will be one of our key focuses and additionally, of course, advancing our key projects and maturing the leads in our project portfolio.

Well, thank you very much.