INVESTORSMESSAGE FROM CEO
CEO Q2 2020
ViralOff® success, record number of new agreements
Net sales for the quarter amounted to MSEK 17.3 (12.6), an increase of 37.4% compared to the same period last year. Operating profit before tax improved significantly over 2019, amounting to MSEK -1.1 (-5.4). Cash flow remained unchanged at MSEK +/- 0 (-1.7) during the period.
Businesses worldwide have been facing major challenges due to Covid-19. However, the global pandemic has instead enabled Polygiene to introduce a completely new offering, a new anti-viral technology. A strategic product launched in a timely manner, ViralOff made its debuted in early April and had a significant impacting the entire second quarter of 2020. Demand has been overwhelming. To maintain a high level of service and to handle the many inquiries, we quickly strengthened the sales organization by adding another resource. After less than three months on the market, ViralOff accounted for 28% of total sales this quarter, a fantastic achievement considering the long industry sales cycles. Time from initial contact to signed agreement has been drastically cut as interested customers were in touch with us daily. This signaled that a great deal of work had been done in advance, leading to a direct increase in sales. Moreover, these new customers wanted to launch new anti-viral products immediately, accelerating the sales cycle.
Due to lockdown across many areas of the world with large surplus stocks, many companies unfortunately have canceled their autumn collections slated for production in the second quarter. As a result, we have experienced a temporary sales downturn for our largest product area, Polygiene Stays Fresh Technology. However, sales of this anti-bacterial treatment recovered during the third quarter. Interest in Odor Crunch has also rebounded after the spring, during which focus was almost exclusively on ViralOff.
Net sales increased by a total of 37.4%, demonstrating the strength of Polygiene’s product portfolio. Our existing business experienced only an 8.5% loss, which I am very pleased with as it is significantly better than many others affected in our industry. The increase in turnover will end up stratight to the bottom line, which proves the scalability of our business model. Cost savings including reduced travel costs and canceled trade fairs are, to some, extent, a direct result of Covid-19 and have also contributed to the improved results of MSEK -1.1 (-5.4). A weaker USD unfortunately had a negative impact on operating profit, MSEK -1.2. If we exclude the effects of foreign currency fluctuations, operating profit would be positive.
ViralOff takes a clear position and market share globally
ViralOff has expanded its scope from initially treating protective clothing, face masks and other hospital products to much broader areas of use. Agreements signed during the quarter (see pages 5-6) demonstrate the huge demand for anti-viral technology for everything from everyday clothing, home textiles and bags to floors, sprays and packaging materials. The possibilities are endless, and I see a very strong future ahead for ViralOff, even after the ongoing pandemic comes to an end.
The level of awareness of the importance of anti-microbial technologies has risen sharply since the outbreak of Covid-19. Forecasts indicate that the market for this type of textile treatment will double, from USD 10.5 billion (2019) to USD 20.5 billion by 2026.* As the leading brand of Stays Fresh technologies, Polygiene has great potential to claim a larger share of this market as our vision of a more sustainable textile industry is now a global issue. Our brand guarantees our partners quality and security, which is becoming increasingly important as laws and regulations regarding the use of chemicals become more difficult to navigate. The market potential is huge, considering that just 0.5% of forecast value of the antimicrobial textile market in 2026 corresponds to SEK 1 billion.
The agreements signed this quarter will begin to show effect in the third quarter, but their full effect will be become evident in 2021. Because Polygiene is completely dependent on the production plans of our partners, it is only once their production begins that sales are visible in our reports. However, it should be noted that the gap in time between when a contract is signed and when production begins is much shorter than normal, given the current global situation and the Covid-19 pandemic.
A restruction of the management team
Due to the increased demand for antiviral technology, Polygiene is strengthening and restructuring its´ corporate management team. Andreas Holm, recruited as a resource to assist with the launch of ViralOff, will assume the position of Chief Commercial Officer as of September 1. Andreas brings with him a wealth of experience in managing sales operations from his previous position at Thule and will focus on accelerating sales as well as setting up global structures and processes to facilitate commercial activities in the regions. Both are crucial for continued growth and expansion.
Daniel Röme, former board member and acting Chief Technology Officer (CTO), will turn his focus entirely to product development and innovation. This is a priority for the future of Polygiene and why we are allocating more resources here. Effective September 18, Dane Momcilovic will assume the role of permanent CTO, driving the technical team forward and focusing on streamlining processes in this area. Prior to joining Polygiene, Dane served as Group R&D manager at Diab and has solid CTO experience.
Both Andreas and Dane will be based at the head office in Malmö, which is advantageous as the company enters a new phase. The result of the reorganization will be a tighter, leaner management team that can effectively drive both strategy and development projects in close collaboration with the regions.
After a few years of working intensively with change management, I feel confident that Polygiene now has all the right conditions in place to take a giant step forward. With a highly competent organization, a relevant product portfolio for our times, a strong brand and confidence brimming, we are ready to take Polygiene into the future.
I am looking forward to a busy fall, with all the new opportunities we have in the pipeline. I hope to be able to share more news soon about new orders and exciting collaborations ahead. I would like to thank our shareholders for their continued trust and to take this opportunity to welcome all new shareholders to Polygiene.
*Global Market Insights, “Antimicrobial Textiles Market”, April 2020.