Good morning, everybody, and welcome to the Solar Foods Half Year 2024 Presentation. My name is Laura Sinisalo, and I am here today with Solar Foods CEO, Pasi Vainikka, and CFO, Ilkka Saura. Today's agenda is that first we go through the first half 2024 operational highlights, then moving on to financial review, and finally, look more closely to the events after the review period. At the latter part of the presentation, we have a Q&A section, and you have a possibility to ask questions through chat throughout the presentation, which we will then select and answer at the section. But now let's begin, and I welcome Pasi Vainikka, and, basically, the stage is yours.
Thank you so much, Laura. Solar Foods team has been executing with a very intensive pace during the first half year and reached significant milestones. We tried to condense it basically in this sentence: Solar Foods produces a completely new harvest for the humankind. It means that in the past six years, during the existence of the company, basically, as a company, we've been trying to reach three things. First, prove that our new harvest is safe, and we have regulatory approvals for this completely new food to the world. Second, to prove how this ingredient works in different food applications. What do our customers say, and what is the taste? What is the texture? How are you supposed to eat this new ingredient, new harvest?
The third one is to prove the technology scales, because scaling only takes us to the volume and ultimately revenue and profitability that we want to reach as a company. During the first half, the main milestone, what we reached from these three, safety, food properties, and scaling, is the last one. We started to operate our first factory, that we call Factory 01, our demonstration facility, that proves the technology scales. And actually, to the left in this picture, you will see the main fermenter from that facility. It's the size of a bus, 20 cubic meter fermenter, where we produce, per day, the same amount of protein as if you would have 50,000 laying hen producing protein in the form of an egg, from one tank.
The picture to the right shows a picture from our kitchen, where we host our guests and customers to demonstrate how the ingredient, what we produce across the wall, is supposed to be eaten, and what kind of food products, and basically, there our technology becomes very personal because food is almost an intimate thing. Everyone has an opinion of that. At that moment, when you have Solein on dish, in a form of ice cream, for example, it becomes very personal and interesting. In addition to scaling the technology and proving that the technology scales, during the first half, we obtained significant new grants and also capital, grants through the hydrogen IPCEI project.
To remind, important projects of common European interest, IPCEI in hydrogen are those spearhead projects of the European Union, representing the whole spearhead technology in the field in question. In this case, IPCEI hydrogen is the umbrella where from we have significant notification for a grant, and through that tool, we were able to actually receive significant amount of new money on our bank account. Then we also, as a first private company, obtained from Nasdaq, our Green Equity Designation. This is a tool how we want to raise our flag, that there is interesting business opportunity here for those who are looking to something maybe transformational to invest to.
What is interesting and also learning for me personally with this company during the past six years is that when a company goes forward and you talk to investor, the audience, when you grow, the company changes all the time. And so it is the case now with Solar Foods becoming public in September. There is a completely new investor audience that we need to get familiar to on both sides. One way to communicate what we do, tell in a more and more precise manner our key numbers regarding sustainability, that can happen through the Green designation. And fourth, to the right, our new products. During the first half, we had a new product launch together with Fazer in Singapore, where Solein was acting as a fortifier in the snack bar.
In the first six years of the company, we reached the three milestones that I referred to the very beginning. We consider this as a mission completed for our first strategy period, and now begins a new era. We'll review our strategy during the autumn, and we'll tell about it still this year, the new renewed strategy. And that begins a new strategy period for the company, where we have proven the initials of the technology so far, and now it's time to scale the technology, become commercial. This picture is actually to show the scaling opportunity in two resolution.
To the left, actually, we show a picture where we have simulated all over the world with 50km squared nodes, basically based on solar and wind data, what the Solein production cost could be based on 100% renewable power. This will be actually available through a scientific publication quite soon. So we can actually freely relocate the factories all around the world, turn literally deserts into fields. To the right, we see a more technical picture of the scaling, where we are there now in 2024. In this picture, with Factory 01, we have proven in the smallest possible scale that the technology scales.
Now, in the coming strategy period towards 2030, it is time to scale to larger and profitable factories, increasing the number of fermenters and the scale overall, in production. Then financials, over to you, Ilkka.
Hello, everyone. Ilkka Saura, CFO of the company. A couple of highlights from the financial point of view from the first half of the year. Solar Foods in numbers, in brief, three kind of takeaways from this slide. First of all, funding, then investments, and IPR. We ended the period with a cash balance of EUR 24.2 million, which provides us a safe runway for at least 12 months with the existing cash and the existing working capital. We do have a funding base of close to EUR 106 million, based on raised equity loans and IPCEI funding.
There is still a component to be raised and to be granted by IPCEI, amounting to EUR 76.4 million. About the investments, like Pasi said, Factory 01, one of the key milestones of the company so far, a total investment up to EUR 40 million. Looking forward to the Factory 02, we expect the CapEx total investment to range from EUR 150-420 million. A little bit depending on the location and the amount of fermenters and the size of the facility. Factory 01, as such, the planned production capacity is at 160 tons.
We are on the path of getting there in the near future, and expect to also commercialize the product based on this production from the Factory 01. Factory 02 to reach the capacity of 50 to 100 x the Factory 01's capacity. And a little bit about the IPR. We do have 160 patent applications out there in the world, and the key already granted patent in the EU around the production organism has been granted and will last until 2039 . Little bit about the first half in numbers. First of all, operating loss at EUR 4.4 million, slight increase to the previous period.
Loss for the total period, EUR 5.7 million, compared to the prior year's EUR 4 million. The change to the previously estimated loss for the period comes from accounting entries related to accruals of grant income and capitalization of development expenditure during H1 2024 . Company's balance sheet amounted to EUR 56.6 million, and the equity, EUR 28.2 million. I want to emphasize the net debt position of negative amount, basically net cash EUR 3.3 million in the end of the period, whereas in the prior period it was EUR 20.6 million. This gives us a nice net gearing ratio of - 12%, whereas it was 97% in the prior period.
Equity ratio, fivefold increase to 51% from 11%. Operating cash flow positive EUR 4.2 million due to the raised relatively significant grants. Cash flow from investing activities, EUR 4.5 million in net. The gross investments in the intangible and tangible assets were approximately EUR 6.1 million, whereas the financing, EUR 8.1 million. And on top of that, we have also strengthened the team a lot. Across the teams, we have made lots of new hires, like Pasi will be mentioning and will be mentioned in the report. 40 people, so increase of 9 from the beginning of the period.
And already, as an addition to the previously mentioned, the in this table, but to highlight the basic and diluted loss per share, EUR - 0.24 per euro during the period. A little bit about shareholder information. So we entered the market with a shareholder base of 2,300, approximately, shareholders. And now as we speak, as at last Friday, I checked the figure, it, it's 3,300. So we're very positively looking at the expansion of the shareholder base, which is clear strength for the company going forward.
Thank you, Ilkka. The first half of this year ends our first strategy period, reaching once again those three important milestones, the last one being scaling of the technology. To empower our next strategy period towards 2030, we listed the company after the first half in September. That is a tool for us to industrialize the technology platform, what we have developed. It's a significant event, of course, after the first half. Second, from the right is the US so-called regulatory approval, in other words, Self-Affirmed GRAS. So recognizing the ingredient is safe through the US approach and system.
We have the opportunity now to launch Solein to the market in the US, which basically opens us a significant, if not the biggest, market in the world for Solein application. It's a significant milestone, the first significant regulatory approval in its way after Singapore. We were competing in NASA's Deep Space Food Challenge for developing an application for deep space missions, producing food during the transit or at the destination to Mars, and at Mars. We were competing in this competition for three years, and we pulled out from there as a winner in the international category. This makes it possible for us to attract a completely new audience, basically those. These days, primarily private contractors who are taking humankind permanently to the Moon and to Mars.
We are scaling up the technology with Factory 01, and we can scale down. Winning this competition gives us a platform and visibility to enter the space cluster with our technology. To the left is the launch of new product with Japanese company Ajinomoto in Singapore, which was a significant step in the collaboration with Ajinomoto, and we look forward to the next steps. Thank you so much, and then we go to Q&A.
Great. Thank you, Pasi and Ilkka. We will continue with you with the Q&A, and to remind everybody in the audience, you are welcome to ask questions in the chat, but we will start with couple of questions that we have been frequently asked during the past couple of weeks first, just to address them, so let's start with the first question: What is a pre-revenue company? What is meant by runway?
Over to you, Ilkka, mate.
Thank you. Thank you. So pre-revenue company basically is a firm which is in a stage in which it doesn't create revenue, and we consider ourselves to be in this stage of development. However, want to emphasize the key milestones achieved during the IPO and post period. Self-affirmed GRAS status in the US, one of the key milestones for us on our path to enter the US market, which has actually already noted in our company description as part of the listing that the company aims to enter the US markets by the end of this year and starting to generate revenue in that market. And then to the cash runway, so that is basically a time window, a length of a time period during the company can operate with its existing cash and working capital.
Thank you, Ilkka. Then another question from the most frequently asked questions: When does the company estimate it will be a profitable company?
So company, as also noted in the company description before as part of the listing, we told that the company expects to be profitable once the full capacity of these new investments in the of these new factories are being achieved. So that's when we are going to be profitable.
How does the company plan to scale production to be commercial and to be commercially profitable?
Well, there are two elements. One is technical, and the second is financial. So I believe I already referred to the technology quite a lot in my talk, so how to prove the technology scales that will then make actually de-risk the investment for what we call Factory 02, the first large-scale facility, how to de-risk that and make it bankable. So there are technical things. We think technically we have Factory 01 running, so that's already quite advanced. Financial is different. That requires other things beyond technical. So you need to have the technology de-risked, of course, but then again you need some sort of offtake agreements for quite a large amount of protein annually, for the coming factory, so you need offtakes and customers.
And through that, then you also, that relieves, another, other sources of financing, debt financing, maybe also different types of grants, for the factory investment once you have the offtakes. And then comes the moment when we start to calculate backwards, what is it that you need to have, to have those offtakes? So our customers, firstly, of course, need regulatory approvals in significant markets, so US are, of course, very important for us. Then our customers need to execute, test marketing campaigns, test launches for their foreseen products on that market, which we can now serve, actually, from the production of Factory 01.
So b efore that, you of course need to do some R&D with these companies, enter into Material Transfer Agreement, and all that, and create that path for the offtakes. Basically, here we are now with the regulatory approval, getting to the US market, first test campaigns coming, and now we start to take the steps towards Factory 02, and build up all the elements so that it will be ultimately bankable.
Thank you, Pasi. What are the company's key challenges in bringing Solein to the market?
This is actually often asked, and I disappoint the audience by just replying that it's time. So, to us, it's self-evident that there is a need for this technology. Unfortunately for the planet, when time runs, the more it actually plays on our side. So, more and more the environmental condition of the environment worsens, that in a way better for us. More constraints are built around, for example, utilization of fertile land, and of course, we are built for that type of situation. Sorry, then I forgot your question, actually.
What are the company's key challenges in bringing Solein to the market?
So we are built for that moment. And with the regulatory approvals, with the technology scaling, it requires time and capital. It's not very quick to do. So after six years, we are now here with a significant factory capability, but still it was six years. And now we need to get the regulatory approvals globally to get to test market in every market. US, of course, very good at this stage. So I'm trying to describe the time coefficient of a company like this to understand that we are playing a game where we see an opportunity a bit more forward to the future compared to what we could achieve now immediately.
Thank you. Then I've got a couple of questions regarding the product. What is Solein, and how can it be used?
Solein is the most environmentally friendly food you can have. We, It's a high protein content with dietary fiber, iron, B12 vitamin, a very nutritious food, food ingredient. We produce this food ingredient with a specific technology called hydrogen fermentation, which enables us to produce food without use of fertile land, disconnecting food production from land use and all the constraints. So using this technology, producing food with this type of nutritional composition, we are here to replace, in the longer run, animal-like nutrition with our food ingredient. It's a single cell. Is a cooked potato or a peeled potato, is it processed, or is fried potato, is it then processed, or is potato processed when it is add to ready meals, and what actually made it a process?
It's very—it's a moving target. I need to self-define what I mean by processed food if to answer that question, so I'd like to hear that first. But not going to that now, but why I asked is that if I understand first what processed is, then I could use comparisons that might be fair. So I used a comparison here. We use in downstream, after we take the harvest from our fermenter, our organism go through the same step as ordinary milk in supermarket goes.
There's a pasteurization step, there's a centrifuge to remove the most of the water, and homogenization, and then you dry it like you dry milk, dry like you make dried milk powder. So you do have these steps, but we don't think it actually alters properties of our product. It is still in its natural form, so therefore, we don't consider it actually processed at all. But yes, we do remove water for example.
All right. How you can strengthen and expand your patent portfolio to protect Solein production methods and applications in various industries globally, and what are the key steps for it?
Yeah, we have two important, or three levels of IP. One is those secrets and tricks, for example, how our operational staff at Factory 01 starts cultivation, all these things, how you run devices, in which process conditions, and so on. That's one, trade secrets. Much has to do with what we have in the biology team for developing new organisms, screening for new organisms, and then how do you actually cultivate? So trade secret is one layer. The second is, of course, usual suspect, patents, which we have Ilkka referred to those also.
And those keep on coming, that's second. But we have a third layer, which is the regulatory approval. My learning so far with the company and with the as a former scientist, having had that hat for a moment, is that it's patents can be developed, but regulatory, obtaining regulatory approval for a product that you have grown in a specific way, it requires a multidisciplinary scientific job to be done, and every part of the chain need to work perfectly to obtain a regulatory approval and get product to the market. One needs to remember that the regulatory approval, in our case, is per strain, and we have a patent for the strain what we are using now. It's kind of a belt and a button, IP for us.
Thank you. And then there's a question: I was inspired to find out more about Solein by reading George Monbiot's Regenesis, so I'm very excited by the possibility of buying Solein in raw form and cooking and eating it at home. The last two years have been frustrating. Can you say when Solein will be available for retail purchases? Soon, I hope.
In which country would be my next question. So, the regulatory approval basically is something what you need in every country where you want to go and let Solein or any new food to the market. So it depends from which country the question comes, the timeline depends upon that. So we'll see. Depending upon the country, we know that US approval process as a whole seem to open the regulatory approval process in many countries where actually they may not have a regulatory process at all for novel foods. So it very much depends upon which country we are talking to.
How you can monetize byproducts, waste, or secondary applications of Solein production to maximize revenues and profits for Solar Foods Oyj?
What we have started with is we don't actually fractionate our product, so it's the whole cell, what is in our product, including dietary fiber, proteins, lipid fats, carbohydrates, and so on. That's our choice. Today there can be fractions and fractionation in the future of the current strains or the new strains we have coming. That requires that to make that case profitable, you would need to have a market and a price point and offtake for each of the fraction. Which is then again, when you begin, then you would require different market segments, applications, price points, and hit them all at the same time. Therefore, we go with a wholesale product now. But that is something to come.
And then, of course, going to modify our organisms to produce very specific proteins, very targeted, that might be having a very high price point, low concentration in the cells, but very high price point, then they are very unique cases. Also, what we are looking into during our new strategy process during autumn.
Can I, Laura, add?
Absolutely.
Also, another not so biological side product is heat. Of course, this bioprocess creates a lot of heat, which we are collecting through the processing, and especially as we plan for the next factory, this opportunity to sell the heat to the district heating network is certainly something that we look very close to.
But that's actually a very good question. There could be also one question, if not then later on, that why do you capture CO2 from the air, and why do you plan and so on? Is it so immensely expensive, and so on. Now that you brought up heat, yes, actually simplify quite a lot, but still, if you look at the energy flow of Solein production is close to data center, in the sense that we are cooling the fermenters, we are cooling the hydrogen generation unit, and so on. So there is a heat sales opportunity in cold climates.
In hotter climates, in remote locations, we can use this heat to recover our CO2 sorbents, with which we capture CO2 from the air. So with this energy balance, actually, the energy penalty for capturing CO2 from the air is surprisingly low to us. So that's interesting by-product heat, as you mentioned. Thanks, Ilkka.
How do you ensure that this does not remain an additional nutrient, but becomes one global source of protein alongside all other sources?
Okay, the silver bullet question.
Mm.
Now, there are three layers you could look into. So, the inclusion rate in different foods depends upon in which country and culture you are, because the culture and heritage defines how the dishes look compared to Asian street kitchen to a burger patties. It couldn't be more different how the dish is compiled and understood. So we need to look at what's the inclusion rate and role, for example, in noodle hot pots or similar, which is different to meat alternatives. So it can be actually the main source in specific applications. But we need to go this, and by this, category by category. The second layer is that we have now one strain that we call Solein.
Solein equals to one strain that we call in-house SOF1. But there are other numbers coming up. So with different types of properties, then we can actually reach new food categories and segments without even going to modify the organism.
Thank you. How you can improve supply chain management to reduce costs and ensure consistent material flow for global markets?
We, of course, the kind of key supply elements and raw materials are hydrogen, CO2, nitrogen, and then some of the nutrients. So from the scaling point of view and a supply chain point of view, this is relatively light in terms of the scaling. Of course, we look very closely to what is happening in the hydrogen space. That plays a key role in the decision on where this factory will be placed. CO2, we have plans on capturing it from the air, but also buying it from the markets. But I would say that from the supply chain point of view, this is relatively flexible.
Thank you, Ilkka. Let's take a couple of more questions. Two more, let's say. What collaborative research opportunities exist to explore new applications of Solein across the different industries to real scale up business in future?
Do you like that?
Different industries. I'm not sure if I completely understand the question, but I take the freedom to interpret it in a way that different industries means that still we are within. Well, one is that if you are in food space so there are different players in different parts of the value chain. So it's very different if you talk to those who are actually trading ingredients for those companies who produce consumer goods or if you're talking to those who are actually producing consumer goods.
So they look at this technology and opportunity quite differently and might have a different kind of take on it and role, whether we go for selling an ingredient to one and selling actually technology to the other. So that's within food, and then there are different customers per food category even. So if we, for example, go to the different markets or to the same market with several customers, they're actually. They might not be competing because the categories are so different. So there could be, for example, ice cream application, and then a meat alternative or a pasta application.
Basically, Solein still exists on the same market, but the companies are so different, their business so different, that they are not inherently competing. So that's an additional opportunity for us. So that's one of the different types of companies within food. The second is that if we're not in food, so that's also an opportunity for us. S omething we will touch during the strategy process. So what would be those specific, let's say, ingredients that you could produce outside the mainstream protein business, whether it has personal performance or even a medical or material application. But that opens a completely new avenue for the company, which requires new resources, but still you could find their attractive price points and volumes, for example, in materials and medical.
Thank you. I suppose this last question is to you, Pasi. Pasi, sorry, Ilkka.
No problem.
Thinking about the market more broadly, what does Pasi find the most exciting about cellular agriculture? We can ask this, of course, from you as well, but maybe to you.
What's best here is, and with the team, what we have and what we have achieved and the status where we are, again, for a scientific mind also who likes to kind of vision for the future, is that what we are doing here. We are having very bold statements bringing new harvest for the humankind, de-linking from the use of fertile land, but it's funny because it's true. When people see it, it sounds like magic, but what's the best part, and best for me, is that when people come to see factory, go to the kitchen that I show the picture of. And there is a three-course menu around Solein, so it actually becomes real. That's it. It's funny because it's real.
I can also have my little take on this.
Please
On cell like business and cell like market. I think we are on the verge of something new. The whole industry is in a relatively premature phase. There are lots of very interesting companies with a huge mission to revolutionize the food production in this world. The geopolitics are there, the market trends are there. We are going to reach 10 billion by 2050, and then on top of that, consumer behavior is changing. With the climate change is ongoing, we have to be on the path of getting in, or to the levels of the Paris Agreement.
So, given the premature phase of the market, and this huge opportunity, I do see it as very exciting market in which consolidation might also take place. One of the reasons for this listing, and also mentioned in the company description, might be strategic M&A, so we are looking also this as an opportunity, so really exciting times ahead.
Indeed. Indeed. Thank you very much, Ilkka and Pasi, and.
Thank you
Thank you, first and foremost, for the audience, for the questions. We are gonna be ending here today, but we want to welcome you to the Solar Foods Capital Markets Day. So please save the date, which is December 10th, 2024. So hope to see you again then. But thank you again, and have a very nice day!