Welcome, everyone, and thank you for joining us for our fourth quarter presentation. My name is Tor Olav Gabrielsen. I'm the Executive Chairman of M Vest Water. I will start the presentation, and later our CFO, Mr. Morten Hilton Thomassen, will conclude by presenting the financial figures and key takeaways from today. I will also remind you that this meeting is being recorded, and a replay will be available on our website later today. One last reminder: keep in mind that this presentation contains forward-looking information based on management assumptions and analysis. A full disclaimer is included at the end of this presentation. This is the agenda for today. We start with an overview of the most recent highlights, followed by a short introduction to our company before we give you a status on our business activities and plans.
If you have any questions, please use the chat function in Zoom, and we will answer as best as we can during the Q&A session at the end of the presentation. We are pleased to share that M Vest Water doubled its revenues in 2024 compared to 2023. The share of annual recurring revenue is increasing, and in the fourth quarter, 90% of our revenue came from chemical sales. In December, we won our first contract in the dredging industry and entered into a long-term frame agreement with VEBIRO, a major German dredging contractor. The primary driver for this collaboration is to fully replace 100% of the widely used microplastic-based and harmful synthetic chemicals with our eco-friendly NORWAFLOC products.
In the aquaculture segment, our partner Downstream Marine awarded us another equipment contract, which will be delivered to a salmon slaughterhouse currently under construction and expected to be operational by the end of this year. Finally, we are very pleased with the progress we are making in the Middle East oil and gas market. Last week, we entered into an exclusive agent agreement with the Invest Support Company for market penetration in Qatar, Bahrain, Oman, Dubai, and the Emirates. ISC is connected to our second partner in the area, Energy Support Trading. This partnership has accelerated our market entry in the Middle East, allowing us to directly submit tenders to all the major operators and EPC contractors in the region. We have already built up a solid tender portfolio together with EST, and with the recent expansion of our collaboration, we expect the portfolio to strengthen further.
M Vest Water is a developer of green and biodegradable products for water and wastewater treatment, helping industries solving water pollution challenges. Our two main products are the NORWAFLOC, a green and biodegradable chemical, and NORWAPOL, a high-performance filtration technology. In addition to these products, we provide equipment and solutions offering both chemical and technical expertise to our clients. We have established facilities in Norway and Germany, and we also operate in the U.S. and the Middle East through partnerships and agent agreements. Our current baseline represents a robust and strong platform perfectly positioned for growth in the global markets and creation of shareholder returns. With a solid foundation in place, we are strategically equipped to seize emerging opportunities within a mega trend of clean water as both a resource and a commodity. We have maintained a strong focus on building expertise in water purification and sludge dewatering.
We have a solid commercial platform supported by an established footprint in Germany with dredging, sand and gravel, and municipal markets, a large and growing tender portfolio in the Middle East oil and gas markets, and we are a provider of the best available technology to the aquaculture industry. We have a patented, unique, and proven technology. We have a scalable, capital-light business model with a high earning potential. Last but not least, the markets we operate in are huge and global, constantly seeking new and greener solutions due to regulatory pressures and an improved cost-benefit in sustainable investments. This strong starting point not only supports our expansion initiatives but also ensures we remain focused on maximizing shareholder returns. By leveraging our strengths and maintaining disciplined execution, we are confident in our ability to deliver consistent long-term value for all stakeholders.
M Vest Water's mission is to innovate eco-friendly water treatment solutions to minimize hazardous chemical impact and to support a circular economy. More than 80% of the world's wastewater flows back into environments without any water treatment, and about 1-3 million tons of nano and microplastics are released into nature yearly. M Vest Water's contribution is to offer eco-friendly water treatment solutions, replacing microplastic-based chemicals and enabling the sustainable reuse of valuable sludge. The global water treatment chemical market is expected to reach $50 billion by the end of 2028. M Vest Water targets multi-billion dollar industries that are global, in high demand, and are experiencing a solid annual growth. Our main targeted industries are oil and gas, aquaculture, municipal wastewater, and dredging.
The common denominator for all these industries is that they consume large amounts of water and require water purification to reduce emissions to nature, as well as sludge treatment to ensure reuse and prevent further littering. The world is facing a water crisis where climate change, urbanization, and increasing competition for water sources are worsening each passing year. For large and emerging markets such as oil and gas, dredging action is needed, both from regulatory bodies and individual market players. For the oil and gas industry, M Vest Water's technology addresses two critical issues: depletion of water reserves and the issue of contamination. Most of the world's groundwater reservoirs are on track to run dry, and synthetic chemicals continue to be widely used. In Germany, regulatory changes state zero tolerance for synthetic chemicals.
M Vest Water, together with VEBIRO, is proud to be the first supplier to introduce 100% natural products to the dredging industry. In 2024, especially during the third and fourth quarters, increasing our tender portfolio and securing contracts has been a top priority. As a result, our tender portfolio has shown a steady growth, and most importantly, the number of sales and signed contracts has increased. It is rewarding to see how our efforts to convert leads and opportunities into tenders and contracts have paid off. Moving into 2025, growing our tender portfolio will stay on top of our priority list, and over the next upcoming quarters, we expect an increasing number of them materializing into contracts and paying customers.
The fact that our business favors the evolving regulatory environment adds to our expectations, as we experience an upward trend in the incoming requests and opportunities across all our key segments. Now, let's move on to the business updates, starting with the developments in the aquaculture industry. Today, the status is that we supply three salmon slaughterhouses with our NORWAFLOC products. So far, we have sold equipment to five plants, with the latest being installed in the second quarter of this year. The Norwegian market, consisting of 45 factories, is awaiting the government's response to individual discharge exemption applications. Over the next two years, we expect the government, Statsforvalterne, to finalize the processing of all the applications. M Vest Water's expectation is that none of the medium and large-sized factories will receive a permanent exemption. However, it is likely that an implementation period will be granted.
We also predict that by the end of 2026, additional salmon slaughterhouses will implement chemical treatment to comply with the EU discharge regulations. During this period, M Vest Water will focus heavily on maintaining our leading technological position in this market. Looking further ahead, over a three- to four-year horizon, we anticipate that all factories will be required to implement chemical treatment. We are aiming for a 70% market share. Furthermore, our ambitions are to explore opportunities for growth both geographically and in new business segments such as fishmeal factories, land-based, and sea farming. With our recent milestone in Germany, we can finally announce that our green chemicals now allow for the complete substitution of synthetic chemicals. The contract award from VEBIRO positions us as the first supplier to offer 100% natural products to the dredging market.
This is a standard requirement in German municipal tenders and one that, to our knowledge, no other supplier has been able to fulfill until now. In 2025, our number one priority is to implement our solutions together with VEBIRO. Secondly, we aim for our first contract in the large-scale dredging segment and a contract within sand and gravel washing. In the longer run, our ambition is to explore opportunities geographically across several applications. However, we recognize the importance of taking one step at a time. In the oil and gas segment, we are entering 2025 with supplying two Norwegian wastewater treatment plants, a technology qualification for produced water in the U.S., and a positive momentum in the Middle East market, where we will deliver our first supply of NORWAFLOC this year.
The important agent agreement with Energy Support Trading has accelerated the qualification process, allowing us to submit tenders directly to the major operators in Saudi Arabia and Kuwait. Finally, our latest announcement: the signing of a long-term agent agreement with the Invest Support Company in Qatar, Bahrain, Oman, Dubai, and the Emirates. Both our partners represent a large range of internationally reputed principals with direct access to major national and international oil and gas operators in the Middle East. Moving forward, our focus will be 100% on produced water. We are targeting one or more full-scale pilots in the GCC area, and we are aiming for winning our first long-term contract in the Middle East and the U.S. The next step will be to build an even stronger tender portfolio, preparing us for continued growth over the next three to five years.
I will now hand it over to Morten, who will give you a financial update and provide you with key takeaways from the presentation before the Q&A session. Thank you.
Thank you Tor Olav. I'm pleased to announce a doubling of our revenues in 2024. Compared to NOK 11 million in 2023, our revenues reached NOK 22.7 million in 2024. The main driver behind the doubling is the implementation of chemical treatment at three salmon slaughterhouses in 2024. This positions us well as we enter 2025 with a significantly higher baseline of recurring revenue. Overall, we see an improvement in the quarterly key figures. Most importantly, our profit margins are increasing in parallel with the increase in annual recurring revenues. In the fourth quarter, recurring revenues accounted for 90% of our total revenues compared to 31% in the same quarter last year.
This, in turn, has a positive effect on our cash flow, showing a slight improvement. The conversion of our tenders into firm orders will determine the necessary working capital. We have secured credit facilities to support our current working capital needs based on the anticipated conversion rate of our tender portfolio. With the dredging contract award in Germany and the tender portfolio in the Middle East, we have an exciting year ahead of us. Closing off today's presentation, I would like to summarize the key takeaways. We doubled our revenues in 2024. Our sales of green chemicals have increased significantly, and we are entering 2025 with a solid baseline of annual recurring revenues, which also provides us with better gross margins. Financially, aquaculture has been our most important business area in 2024. In the coming period, we also expect significant contributions from dredging and oil and gas.
The contract award from VEBIRO is a key commercial milestone for M Vest Water. The implementation process of NORWAFLOC at the client's dredging units has already started and represents a crucial step forward for our business in Germany. Finally, we want to highlight the positive momentum we are experiencing in the Middle East oil and gas sector. The partnership with Energy Support Trading has accelerated the qualification process, enabling us to build a solid tender portfolio in Saudi Arabia and Kuwait. Adding to the momentum is our latest announcement: an agent agreement with Invest Support Company. This agreement expands our reach to additional countries and enables us to submit tenders directly to a broad range of Middle Eastern operators and EPC contractors. We expect this to materialize in 2025 and 2026. With this, we are at the end of our presentation, and we'll move on to the Q&A session.
Yes, so welcome to the Q&A session. My name is Nils Olav Furre Thommesen . I will moderate the Q&A session. I'm representing Fearnley Securities , and I would like to remind you before we kick off the session that you can all ask questions by using the Q&A function at the bottom of your screen. I think, to start off, you know, you're talking about significant contributions from dredging and oil and gas into 2025. Is it possible to quantify this in terms of volumes or revenues or sort of what we can expect in terms of growth from both these segments?
As we have, thank you and welcome to everybody, and I appreciate you all being here. Thank you for your question.
As we announced earlier, the VEBIRO contract, I think we mentioned, for some of the sites, the initial sites in Germany, we estimated, as a starting point, I think it was, 25-100+ million NOK. That is only for VEBIRO. We have also signed an agreement with VEBIRO West, which has a large-scale operation, especially in sand and gravel in the rest of Scandinavia and Europe. We expect that to materialize into that numbers when it comes to the VEBIRO contract containing only for dredging. In addition, we have sand and gravel, which will add on top of those numbers.
We are also in contact, or we have processors, tender processors with large-scale dredging operators, which is not shallow dredging, which is VEBIRO concentrating on, but we have large-scale operators, and that will add, hopefully, a very large, will be a good contribution to those numbers in addition. When it comes to oil and gas, it's especially in the Middle East, we are talking about quite huge volumes of produced water. I think the technical department here estimated that for one field in the Middle East that contains just as much produced water as the whole NCS, what they are producing on the fields on the Norwegian continental shelves. It is quite huge volumes, which means quite huge volumes for potential sale of our NORWAFLOC.
Without giving too much, but, some of the fields we are looking at could potentially, in operation, be from NOK 30 million+ in recurring sales if implemented. We have several tenders out right now. Right, that's a good caller. Another question on your cash balance. It's quite low at NOK 1.2 million. Cash burn in outgoing quarter was more than NOK 4 million. What's your plans to secure liquidity for 2025? We are quite comfortable with the current situation, as Morten said earlier. We are going into 2025 with a strong projected sales and order pipeline consisting of chemical sales over NORWAFLOC with a very high gross margin. That adds to the improvement of our cash flow and the cash burn. In addition to that, we have secured credit facilities to support our current working capital needs.
Based on the anticipated conversion rate of our tender portfolio, and as we increase our sales and tenders, our credit facilities can also be adjusted to that growth to secure that growth. We are quite confident that we will, yeah, go through this period, as of now, but this can always be subject to change in terms of the conversion rate of our tender portfolio. We have a very lean and capitalized model, and our operations are not dependent on capital-intensive investments. When we start to convert tenders into firm orders and sales, building up inventory and ramping up production will mainly drive our short-term financing requirements. There we are in good dialogue with banks and lenders.
Okay, thank you for that. Then a question on the revenue base as we go into 2025. Is the revenue base approximately 5 million each quarter?
Yeah, I can answer that. As Tor mentioned, we're not doing any guiding right now, but with the sort of order resource that we bring into 2025, I would say that will be in the correct range. There is also a seasonality due to the consumption profile from our clients that could, of course, give some deviation between the different quarters.
Okay, thank you. And then a question on the fourth quarter and sales. Did you only record sales of NORWAFLOC in fourth quarter? I guess the question is then, was there some equipment sales in there?
Yeah.
Also.
The answer is, more or less yes.
Oh, yep, that's loud and clear.
I guess, another question a bit longer term, but, you know, phasing out of, phasing out microplastics from, you know, everything that it's used for today is obviously a huge task. Have you seen more on the regulatory side, over the past 12 months, particularly then in the EU, which you talked quite a bit about, previously?
Yeah, we see in the EU, we see, the regulatory side being pushed forward a little bit, and we see that the, the players are a little bit more proactive now than before. We also see that in the aquaculture industry. As I told you in the presentation, a lot of these salmon slaughterhouses are waiting for their response from the government, but, more and more of them, our experience, we have an increasing number of incoming requests, even though, the exemptions haven't been cleared with the government yet.
They are still quite proactive. It seems like, yeah, the climate is changing a little bit. Instead of waiting, our potential clients are a little bit more proactive. We also see some kind of tightening from the regulators. We also see that in the Middle East, especially, where there are huge concerns about the groundwater. That's the regulatory drive in oil and gas in the Middle East: the contamination of groundwater. Another more commercial driver in the Middle East is actually the enhanced oil recovery when they use some of the produced water to inject into the wells. If that water is too contaminated with particles, that deteriorates their operation. It's actually also from a cost-benefit perspective that they're looking at our solutions right now.
Yeah, that's interesting. Last question.
Before that, I can just remind you, if you have another question for M Vest Water, you can use the Q&A function at the bottom of your screen to submit the question. The gross margin in the fourth quarter was close to 60%. Are you seeing any inflationary pressure on your cost base, or should we expect high margins going forward as well?
I think the margins obviously vary a little bit across our key segments. It's large volumes of, for instance, in the oil and gas industries, our margins are a little bit different or a little bit lower than in other areas where they consume less water and we consume also less of our NORWAFLOC. Going forward from the current base, we do not see any kind of changes, no huge changes in that gross margin.
We will maybe in the longer term, we will be able to improve some of it because we also increase our volume with our vendors so we can buy the raw materials a little bit, at a discount to that. Yeah, let's say we always aim to improve our gross margins, and, so, but that will be in, not not the large, yeah, deviations from what we are reporting today.
Okay, thank you. With that, there are no further questions. I think I'll leave it to you, Tor Olav, for some closing remarks.
I would just like to thank you all for following our company. If some of you have any questions, you are, after the presentation, you are, you can contact me or Mr. Morten Hilton, and we can give you our presentation, and you can also come up here and our premises in Bergen and visit us, and we will give you a detailed tour of the facilities.
Sorry, there was actually a question that was submitted in the last second. If it's okay, then we'll take that as well.
Yeah, yeah, sure.
Yeah. Are your technologies able to desalinate water? So make drinking water out of seawater?
That is not, that is not what this technology is mainly developed for. There are currently, there are other technologies that could be better suited for that use. That is not an area which is in our core core area of what we are looking for. Obviously, it can be, our treatment can be a part of it in desalinating water, for instance, to clean out other kind of particles in it. That is not mainly our target area for it.
All right. Thank you. Thank you so much, Tor Olav. Thank you, Morten, for the presentation. Yeah, thank you everyone for participating on the quarterly result presentation for M Vest Water.
Thank you very much.
Have a nice day. Bye.
Thank you.