INVESTORSMESSAGE FROM CEO
CEO Q3 2021
New sales record and strong overall key figures
Operating net sales for the quarter amounted to MSEK 52.3 (22.9), an increase of 129 % compared to the previous year. Organic growth of 31 % was reported. Gross margin for the period was 64.3 % (70.4 %). Operating EBIT totalled to MSEK 15.7 (2.4), resulting in an operating margin of 30 %. Cash flow was positive at MSEK 8.4 (0.5).
The Polygiene Group continues to demonstrate solid growth despite comparison to a strong third quarter in 2020. Net sales climbed to MSEK 52.3 during the period, a new all-time sales record, breaking the MSEK 50 barrier for the first time ever in a single quarter. Gross margin also strengthened, 61.7 % to 64.3 %, compared to Q2 2021 due to strategic price increases that Addmaster implemented during the middle of the quarter. The operating margin was financially sound at 30 %, resulting from good cost control and business model scalability. Cash flow, at MSEK 8.4 during the period, created the conditions for financial stability and opportunities for continued expansion through strategic investments. The 2022 budget process is underway along with ongoing planning for future strategic growth. Investments will primarily be made in our existing business areas, focusing on cross-sales and brand strengthening, but continued investments in product development and strategic acquisitions are also in the offing.
Organic growth this quarter amounted to 31 %, mainly stemming from previous agreements that have now been converted into orders. Three of our five largest customers are new partners, and we expect several more who are now in the first stages of the customer journey to soon join their ranks. The Japanese partner Takisada has recently presented Polygiene in their stand at the Sustainable Fashion Expo in Tokyo, and their first order is slated for Q1 2022. Business is still affected by external circumstances related to logistics challenges and compounded by regions that remain in lockdown.
Strong momentum continues in the Americas, with sales doubling compared to last year. EMEA is also demonstrating solid growth, spurred by an increase in orders from our largest customer. Last year strong growth was due, in part, to one-off orders for face masks and personal protective equipment; this had a negative effect on APAC, since most of these deals originated in this region. Recovery continues in the Sport and Outdoor segment, which decreased by 25 % in 2020. Growth for this segment in the third quarter was 47 %, signalling the industry is rebounding after a challenging year. The Lifestyle segment, which previously experienced strong growth, is growing with a 16 % increase during the period. As mentioned, 2020 sales of face masks and protective equipment, part of the Lifestyle segment, were to some extent one-off orders. However, interest in Polygiene’s Stays Fresh treatments has never been greater. The main motivators, above all, are the enormous challenges facing the textile industry to become more sustainable, with the 2030 Agenda as the driving factor.
Here Polygiene is a key player offering a solution to a global problem that all those in the industry must address. Extending the lifecycle of products and encouraging all consumers to adopt a more sustainable, conscious lifestyle can make a big difference.
Addmaster, specifically the Biomaster business, continues its strong growth journey, increasing organic growth by 39 % this quarter. Addmaster manages to successfully navigate a challenging world fraught with global shortages of polymers and raw materials. With strategic price increases, we managed to effectively address the increase in raw material costs that hit the company in early June.
This led to a recovery in gross margin, which rose in line with previous levels. Many new customers have joined ranks with existing customers this quarter, demonstrating the breadth of applications areas for Biomaster. Notable groundbreaking applications include anti-microbial treatment of gym equipment, wood wall panels, golf equipment, manufactured beehives, recycled cotton bags and bedding, to name a few. The application areas appear to be unlimited, proving time and again the potential of Biomaster to treat all types of relevant surfaces. Awareness of bacteria and viruses has increased markedly during the pandemic and, as a result, is driving the demand for anti-microbial products.
During the quarter, many Addmaster partners returned to industry exhibitions and trade fairs. At the end of September, many of our partners exhibited at the Interplas Exhibition in Birmingham, providing good exposure of Biomaster technology. We intended to participate in Packaging Innovation in London in September but, due to the uptick in covid cases, the fair is postponed to December.
”Polygiene Group shows its strength every quarter and we show continuous stable growth with good financial control”
Strategic changes to the management team
As of September 1, the Polygiene Group expanded its management team with two key people from Addmaster, a move viewed as vital to the future development of the company. Sandrine Garnier, Managing Director, who is commercially responsible for the entire Addmaster business, is a natural addition to the management team as is Lesley Taylor, who holds the important role as head of Global Regulatory Affairs, an area key to the entire business. At the same time, a major reorganization has taken place to leverage the synergies between the companies, accomplishing the strategic Group integration. A key recruitment this quarter was the appointment of Sean Tindale as the Group’s new Chief Marketing Officer. With his solid background in marketing and brand building, Sean will be a crucial asset in our journey forward.
Now equipped to take the company to the next level, we stand as a solid organization built on strong, commercial regions, run independently with support from key functions with cutting-edge expertise in all areas. Further strengthening within the sales organization may take place next year, since investing in sales-driven resources has been proven profitable.
To sum up the quarter, Polygiene has delivered strong, stable financial results despite continued challenges in raw material supply and logistics. We do not yet anticipate any immediate improvement in the global situation, which will impact our business and many others for the foreseeable future. However, as we move into the last quarter, we do so with resilience. With each passing quarter, the Polygiene Group has demonstrated its strength and resolve delivering continuous and stable growth through sound financial management. Our approach has been to create the right conditions to deliver long-term results, even if it means achieving these results requires more time.
At yearend, we will present our long-term strategy along with measurable goals. We have also initiated a major undertaking relating to our internal sustainability work to make meaningful contributions, going forward, to the U.N. Global Goals and the 2030 Agenda. These lie close to my heart and, increasingly more investors demand that companies in which they invest support Agenda 2030. Owning shares in Polygiene shall be a green investment and a climate-smart decision for potential investors.
I look forward to leading my fantastic team to new successes. Right now, our ambition lies on closing 2021 with continued strong results.