Good day, and thank you for standing by. Welcome to the Vistin Pharma First Quarter 2025 Report Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question-and-answer session. To ask a question during the session, you need to press star one one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star one one again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link anytime during the conference. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Magnus Tolleshaug, CEO. Please go ahead.
Thank you, and welcome to this First Quarter presentation of Vistin Pharma. My name is Magnus Tolleshaug, CEO of the company, and with me today, I have our CFO, Mr. Alexander Karlsen.
Good morning.
I will now go through the highlights of the quarter. The revenue in the quarter ended at NOK 115 million versus NOK 104 million in the first quarter of 2024, an increase of 11%. Our sales volume was up 14% compared to the same quarter last year, and we had an increased operational performance with a higher run rate compared to the first quarter last year. The first quarter ended with an EBITDA of NOK 30 million compared to NOK 20 million in the first quarter of 2024, an increase of 48%. The EBITDA was positively affected by increased sales volume, product mix, and good cost control in the quarter, and we've had a continuous focus on cost improvements, which is starting to show effects in the quarter. 1,350 metric tons of metformin was produced in the first quarter.
The reactor on line one has been replaced during March, according to the maintenance plan, due to the end of its lifespan. This reactor was more than nine years old, so it was time to replace it. Without the reactor replacement and the idle downtime on line one, the run rate equaled about 1,500 metric tons in the quarter. We still see relatively volatile freight lead times from Asia to Europe of raw materials due to the constraints through the Suez Canal and the Red Sea situation. However, we have no impact on the production since we have a safety stock of critical raw materials. Also, currently, we do not see any changes in demand from customers after the US tariff announcements.
Our net cash position of end of March was NOK 13 million, and the board of directors has proposed for the annual general meeting an ordinary dividend of NOK 1.25 per share to be paid in June. Vistin Pharma, we are a pure-play metformin company, supporting patients worldwide in a growing market. Diabetes is really one of the largest health emergencies of the 21st century, and metformin is the gold standard treatment of type 2 diabetes. If you get type 2 diabetes today, you will typically get metformin as a treatment or in combination with other treatments. Being a leading global producer of premium quality metformin, we believe Vistin Pharma is well positioned and has a good growth opportunity.
The global market demand for metformin is expected to continue to grow with about 4-6% on the compound annual growth rate, according to the International Diabetes Federation. If you look into different market reports, this is the trend. Vistin Pharma's global market share today is about 10%, and will also be about 10% when the new capacity expansion is fully utilized. This is because we're growing in a growing market. There is an underlying growth in the demand for metformin. For those who have been following us for some time, you have seen this slide before, but I think it's worthwhile showing it. The International Diabetes Federation is expecting the growth of diabetes patients to grow about 50% from 2019 to 2045, up to 780 million people.
It's really a pandemic, and it's also worthwhile mentioning, I think, that 90% of all diabetes cases are type 2 diabetes. The reason for the growth is typically that more people get type 2 diabetes in the world, and also more people are diagnosed in the low and middle-income countries in the world and put on treatment. This is driving the growth. In the age range of 20 to 79 years old in the world, about one out of 10 people, 10% of the world's population, is living with diabetes. This is a lot, and also three out of four adults with diabetes typically live in low and middle-income countries. This is also where the growth in the world is largest. This is important to understand because metformin is an affordable medication. It has a good efficacy, and it has a well-known safety profile.
For countries in low and middle-income countries where the treatment is typically paid out of pocket instead of being reimbursed, the pricing of medication is important, and metformin today for a patient is typically costing around $45 per month, which is quite affordable. Here we see the global sales map of Vistin Pharma. We typically export 100% export out to the rest of the world, all the way from Japan in the east to the US and LATAM in the west. However, our main volumes are going to typically large pharmaceutical companies in Europe, who then transform our metformin API into drug product and send this all around the world. As far as we know, our metformin is used in at least more than 100 countries today. We've had a long and successful growth track record in Vistin Pharma.
This slide shows the revenue growth from 2010 and up to 2024, and you can see it peaked a bit in 2023. In 2022, we invested about NOK 100 million in a second manufacturing line, and it's nice to see now that this is materializing into sales. With that, I think I will hand over to our CFO, Mr. Alexander Karlsen, who will bring us through the figures.
Thank you, Magnus. Let's start having a more look at the volume. Sales volume of around 1,400 metric tons in the first quarter 2025. We had 1,230 metric tons sales in Q1 last year, so we've seen a nice 14% increase. Revenue ended at NOK 115 million compared to NOK 104 million same quarter last year, which is the second highest revenue in a quarter ever. Basically, all production volume in the first quarter was shipped to customer on release, driven by strong demand. As we have previously communicated, the global metformin prices have declined throughout 2024 due to decreasing material prices. In Q1 now, the sales price is reflecting the current raw material and freight cost, which I would say has been rather stable for the last three to six months. Gross margin 62%, and it's well above our long-term ambition.
Having a look at the EBITDA, which came in at NOK 30 million compared to NOK 20 million same quarter last year, which is a very healthy increase of 48%. The EBITDA in the quarter was positively affected by increased sales volume, as mentioned, a good product mix, and cost control in the quarter. We are especially happy with the EBITDA margin of 26% compared to 20% in the same quarter last year, and this represents good commercial execution in the quarter. The net FX effect on EBITDA versus same quarter last year was insignificant. The euro was slightly positive, and as you know, we have more sales in euros, but this was neutralized by a stronger USD, and we purchase all our raw materials in USD. We see that cost optimization initiatives are starting to pay off the quarter.
The water recycling project is expected to give a positive cost effect in 2025 compared to 2024. We have now also this quarter started a project to see how we can reduce cost on waste. Waste today is the single biggest cost element in the OPEX bucket, so we are eager to see what we can get out of that project in the future. It's also worth emphasizing that the EBITDA in the Q1 last year was affected by a one-time inventory adjustment. Having a more detailed look at the figures, I think we've been through the revenue and EBITDA.
Depreciations came in at close to NOK 4.9 million compared to NOK 4.7 million last year, and the increase is driven by the start of depreciation of the water recycling project and some other small investments. Earnings before interest and taxes came in at NOK 25.3 million compared to NOK 15.8 million same quarter last year.
For net finance, a positive income of NOK 2.5 million driven by unrealized gain on FX hedges for the future cash flow, while we had a negative or finance expense in the same quarter last year driven by unrealized loss on the future FX hedges. Net profit for the period came in at around NOK 21.7 million, a very nice increase compared to NOK 7.7 million same quarter last year. Having a look at the balance sheet, we say rather stable. Total assets of around NOK 242 million, mainly machines, buildings, etc., at our plant at Fikkjebakke. We have now fully utilized the tax asset from energy loss trading, so we are now in a tax position from 2025. Current assets are close to NOK 170 million compared to around NOK 150 million last year.
We have slightly more working capital by the end of March this year, driven by receivables as we have increased our sales and also the decision that we will have more safety stock locally due to all the volatile happenings around in the world. This gives a total assets of around NOK 411.5 million compared to NOK 400 million last year. Looking at the equity and liabilities side of the balance sheet, equity of NOK 330 million compared to close to NOK 200 million last year. We continue to have a strong balance sheet, equity ratio 80%, and that's also after we had big dividend payouts of close to NOK 80 million in 2024. Very limited liabilities, around NOK 70 million long term and NOK 63 million short term, mainly driven by operations. Total liabilities of NOK 80 million end March 2025, close to NOK 103 million end March 2024.
We have no interest-bearing debt and had a net cash position of around NOK 30 million as of end of quarter. We also have credit facility available if needed. This gives a total equity and liabilities of around NOK 411.5 million compared to NOK 400 million at the end of March last year. I think that was all for me, Magnus, so I'll give the word back to you.
Thank you, Alexander. I will now go through the summary of the first quarter. We had another strong quarter with an EBITDA of NOK 30 million. The sales volume increase was 14% compared to the same quarter last year. We've had an increased operational performance with a higher run rate compared to last year. This is due to our ongoing ramp-up activities, and our continued focus on costs is starting to show effect in the quarter, as also Alexander mentioned. Currently, we see no changes in demand from customers after the US tariff announcements. However, as you know, the tariff discussions in the world are a bit volatile these days, so of course, we are continuously monitoring the situation for potential supply chain knock-on effects. We also have very little sales to the US market, and therefore, we expect the tariff impact to be negligible.
The metformin market is expected to continue to grow with a compound annual growth rate of 4-6% annually. We see an attractive growth potential as the remaining manufacturing capacity becomes fully available and optimized. The long-term renewable energy supply agreement, which we signed with Statkraft until 2032, provides predictable power prices irrespective of market volatility and secures 100% green renewable hydropower long term, something that we are very satisfied with. Vistin is strategically well positioned, as many European clients prefer high-quality supplies, near-shore production, and an attractive ESG profile. The board of directors has proposed for the annual general meeting an ordinary dividend of NOK 1.25 per share to be paid in June. I think we're done with the first quarter presentation and are ready for opening up for questions.
Thank you, dear participants. As a reminder, if you wish to ask a question, please press *11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press *11 again. Alternatively, you can submit your questions via the webcast. Once again, if you wish to ask a question over the phone, please press *11. Now we are going to take our first question. The question comes from the line of Filip Einarsson from Red Eye. Your line is open. Please ask your question.
Hello everybody, and thank you for taking my questions. I have a first one. If you could share any insights on how the volume ramp-up from line two is progressing, anything here would be interesting.
Yes, thank you very much for joining the conference call, and thank you for your question. The ramp-up of line two is running going forward. We had a manufacturing production volume in the fourth quarter of 2024 of 1,500 metric tons. We normally do not guide on our ramp-up activities, and the target is 7,000 metric tons. Today, in the fourth quarter, and also, as mentioned today, the run rate of the manufacturing is around 1,500 metric tons in the first quarter of 2024. During 2025, we are continuously working on ramping up the activities needed to get to our goal, of course, but we do not guide on exactly how that will progress.
I would also like to mention that the 7,000 metric tons is theoretical capacity of the machines, and I think it's very seldom that you quarter by quarter always sell 100% of your theoretical capacity.
Right, that's helpful. Thank you. Another one. Given the macroeconomic turmoil, do you see any impact on raw material costs?
We have not seen any effects as of now. I think we have secured raw material supply for at least well into Q4, and I would say at favorable prices. I think where we see more volatility is probably on the FX side as we purchase in USD, but when it comes to the purchase price of raw materials, I feel that we have rather good control for 2025.
Great. The last one. I'm curious on the visibility on demand from customers as well as the visibility on delivery capacity from suppliers in this market. Could you give us any guidance there?
Yes, from our end, we are producing straight after release to the market, so we are selling all the volume that we can produce, so our demand is strong. We also have good visibility into the global market demand. We are monitoring the situation both with reporting and export and import data. We have good visibility. I think the demand in the world is continuously growing with, as mentioned, an underlying 4-6% on an annual basis. Of course, there are a lot of new treatments coming in, and this is normal, I think, in a big indication area like diabetes. There will always be innovation and new drugs coming, but we do not see any impact on the global metformin market because of these new treatments. The underlying growth of metformin is kind of growing faster than the new medication is able to pick up.
I think we don't see any changes in the demand.
Okay, thank you a lot. That was all on my end.
Thank you. Now I would like to hand over to Alexander Karlsen for any written questions.
Yes, thank you. We received a couple of questions, so we'll start from the top. The first one is in relation to the recycling project and potential cost savings. We installed the project in Q4 last year. We have now seen that the cost saving has started to materialize in the first quarter of 2025, and we believe this will pick up during the second quarter. We expect a healthy saving in our OPEX on water costs in 2025 compared to 2024. This is progressing as planned, so this is very good.
Yeah, then there's a question here about if we have any plans for further increasing ownership in CF Pharma this year and if we could elaborate a bit more on that. As you know, we bought 15% of CF Pharma the first quarter of 2024. This gave us a small listening post into the company to evaluate our options, and this also gives us very close access to management of CF Pharma. We are following how they are operating. We are still evaluating our options. That's what we want to say about that at this point, as we don't want to guide. We are looking into how we could potentially utilize the platform because CF Pharma has a European CDMO with about five products on the market and eight products in their pipeline.
They also have a very strong R&D department that can either co-develop molecules for potential our customers in the future or license manufacturing. At this point, we're just evaluating our options, and yeah, that's what we want to say about that at this particular time, I think.
There's also a couple of questions on the production volume. I think Magnus has answered those previously, and there's also a product question when it comes to price, etc. Maybe you answer those, Magnus?
Yes, I think there's a question here, a long question, so I just have to read it. We produce metformin in Kragerø in Norway with many competitors producing in India and China, and I think the question is related to whether we see any opportunities with the US tariffs announcement, how we can potentially grow our US or EMEA market for metformin. I think this is a good question. It's a complex question. If you look at the US market, a lot of metformin, both API and drug product, is coming from India. US is typically buying from India. As you also have seen, the tariffs in India were by the US administration announced to be very high, and then in Norway and Europe, it is lower.
Of course, whether those tariffs will still be around in three weeks' time is very difficult to predict, but we are looking into whether we can see this as an opportunity because if the tariffs are higher in India than in Europe, then also the price difference between Indian product imported to US could be closer to European price material. This could, of course, be an option for being more lucrative to buy European API into the US market rather than Far East material. Also, you will have then closer to US production and maybe more easy transportation lines. This is something we're looking into, but I think it's a bit early to say whether this might be an option or not.
There is a question regarding the cash flow in the Q1. I think the operational cash flow is slightly lower than normal in the first quarter, but that is intentional. It is mainly driven by some more receivables, which comes from more sales, but also by high inventory. That is mainly driven by that we want to have more raw materials locally. It is also that we have more raw materials at sea. I think historically, sailing lead times from Asia have been seven to eight weeks. We are now seeing 13 weeks plus, that meaning that some of the raw materials at sea on the way from Asia to Kragerø have to be prepaid before we receive it. I see this as more of a one-time Q1 effect that we want to have more raw materials.
I think going forward, and historically, we have had very high cash conversion, and we also expect that going forward. There is a question on quarterly maintenance CapEx. I would say that our annual pure maintenance CapEx on the two lines is probably NOK 12 million per year, plus minus. In addition, we do projects like recycling water. We have done the WEOC to reduce emissions. We are, as I mentioned, now looking into reducing waste cost, which will require CapEx to get down the OPEX cost. I would probably say that maintenance plus investments, CapEx on a normal run rate is between NOK 15-18 million per year, but it can, of course, vary from year to year depending on if we have smaller or bigger projects in the pipeline. There is a question on production volume prices. Magnus, you mentioned that.
Yeah, there's a question here: when you increase your production volume, do you see that you need to accept lower prices? Two comments to that. I think, first of all, the metformin prices are typically driven by the raw material prices in the market. If the raw material prices in the market go up, typically also the metformin price goes up, and also vice versa when the raw material prices go down, the prices also go down. Our focus is to maintain a good gross margin of more than 60%. That's one thing. The other thing is that today in the market, you can buy cheap metformin, you can buy expensive metformin, you can buy low-quality metformin, you can buy high-quality metformin. With Vistin Pharma, we are positioned in the premium high-quality segment.
This is because large pharma typically would like to have a low risk of reputational damage by basically purchasing high-quality material. Our strategy as we ramp up our volume is, of course, to try to fill the manufacturing plants as quickly as possible to get benefits from the volume expansion. It is always a question of pricing, how quickly you want to fill the manufacturing plant, of course, with volume. We do see that the lower you go in price, the easier it is to sell, of course, but we do see a good demand for premium quality metformin in the future. It is always a matter of pricing, but we are optimistic that we will fill the plant with a reasonable price.
I think that was all the questions, so I think we're ready to close the conference call.
This concludes today's conference call. Thank you for participating. You may now disconnect. Have a nice day.