Good day, ladies and gentlemen, welcome to the Vistin Pharma quarterly report Q4 2022. At this time, all participants are in a listen-only mode. If you wish to ask a question, you can press star one one on your telephone or write it on the webcast. I would now like to hand the conference over to CEO , Kjell-Erik Nordby. Please go ahead. Your line is open.
Thank you very much, and welcome to the fourth quarter presentation in Vistin Pharma. I will go straight to the highlights for the quarter. Since this is the last quarter in 2022, we will also give you a preliminary update on the overall 2022 results. In the quarter, we achieved NOK 111 million in revenue compared to NOK 78 million in the same quarter last year. That's a 42% increase. This is the first quarter in Vistin's history that achieved more than NOK 100 million in revenue in one quarter.
The revenue increase or the revenue and other income was driven by the factors that we had more volumes available for sale in the quarter, and we had a higher average sales price. In addition to that, we received 30 million NOK in liquidated damages as part of the finalization of the expansion project and settlement of the contract with our engineering partner. Overall in 2022, we had NOK 305 million in revenue compared to NOK 279 million last year, which is a 9% increase. The EBITDA ended at NOK 23 million, which is a 100% increase from the same quarter last year. That was the EBITDA was positively affected by also the sales volume and the higher sales prices,
In addition to that, to the liquidated damages that was booked in Q4 2022. As we have said throughout 2022, which is not only a situation in Vistin but for all Norwegian companies working in the export sector, had a very challenging year with both fluctuating and also extremely high energy prices. So we are extremely pleased and happy to announce that in December last year, we entered into a long-term renewable energy supply agreement with Statkraft, the biggest energy provider in Norway. That will secure a significant part of our electricity demand on competitive terms from January 1 this year until 2032. That puts us in a much more, a much better competitive position going forward.
In addition to that, the predictability of our costs and energy prices are much, much better. Overall, for 2022, the EBITDA ended at NOK 6 million compared to NOK 44 million in 2021. We have throughout 2022 worked to increase the output from the new manufacturing line, and we are currently producing from the two manufacturing lines in parallel. That is, it's fine-tuning and continued process optimization, which is the key factors to increase the volume. In fourth quarter we had, we produced 1,200 metric tons for Metformin HCl, which is a new quarterly manufacturing record for the plant. We have already hired all the employees that is necessary to produce almost a double volume from the plant.
We can now see the signs of economy of scale effects from the second half of fourth quarter. That starts to materialize. We expect that will continue in 2024 as the volume ramps up. At the end of last year, our annual capacity was about 5,500 tons, and we will continue the process optimization and the fine-tuning work throughout 2023 to further increase the capacity. This is a slide which is quite familiar to you, at least the one that has followed us during the last year and years. It's worth, I think that it's worth to mention that diabetes is still a global epidemic and the number of diabetes patients are growing.
Actually, which is quite astonishing that more than 10% of the world's population in the age group between That's really something to bear in mind. It's more than 240 million people that are living with undiagnosed diabetes. The prevalence of the disease is very, very high. When you have diabetes, 90% of the ones that are suffering from diabetes has diabetes one, which is you can call it a more life lifestyle induced diabetes. You will get Metformin as the first-line treatment. Metformin was introduced in the sixties, and it's a safe product, has relatively few side effects, and it's also a very affordable and cheap treatment.
That's also why it stays as the number one treatment for diabetes. It comes in the tablet form, mostly, and can be combined with insulin also. New generations and life cycle management products are either combo products or even triple products. They all include Metformin as one of the APIs. That means that also that the growth in the Metformin demand is expected to be in the area of 5%-6% annually going forward. It's going to be the gold standard treatment of Type 2 diabetes. We have often been asked whether there are products that will come on the market that will replace Metformin.
We haven't seen that yet, and we don't believe that in the foreseeable future that there will be products, taking the number one position of Metformin. There will of course probably come new treatments on the market, but that will be niche products, and it will be second, third-line treatment because they will be expensive. Metformin, which is very effective and with very few side effects, and it's also a cheap treatment, will from a health economy perspective also continue to be the first-line treatment. All in all, we still believe that we have a bright outlook because the market for Metformin is growing.
It's also therefore that we, a couple of years ago, decided to invest NOK 100 million in doubling the capacity to take advantage of the growth in the Metformin market and also be able to grow with our customer. Other products. This map show that you can see that most of our customers are located in Europe. We have also customers in Japan, in Mexico, and in other areas of the world. However, most, if not all of our customers are multinationals. That means that even though that they may have their headquarter in Europe, the products are sold worldwide. Vistin's APIs are more or less available in tablet forms in more or less all countries in the world.
Okay. Thank you, Fredrik. I'll take this now to review from here. To the left here, we can see the sales volume in the quarter. To the right, we have the production volume. Both show healthy growth and new all-time high for a quarter. If we take a look at the revenue and other income, as Fredrik mentioned, a new all-time high with NOK 111 million in revenue in one quarter at 42% increase. Currency neutralized, the sales increased by 37%. Sales increased even by volume, up 11%, increased sales prices. In addition, the liquidated damages received as part of MEP settlement. We have finalized the discussion with key customers for the sales and volume for 2023. The 2023 sales prices should reflect the current raw material and freight costs.
We also still have quarter pricing with our main customers as there still are volatility around there on the, especially materials, material costs. Moving on to the gross margin. It increased in Q4. However, it's lower than our historical average due to two to three reasons. As mentioned before, there has been significant increase in raw material cost and freight in 2022. We also have a lower yield on line number two than line number one. Obviously, that's rather normal in a ramp-up phase. We are working on increasing the yield output on line three, and we expect that to reach same level as line one by 2023. We also have seen a very strong U.S. dollar versus NOK.
Just in Q4 2022 compared to Q4 2021, the dollar was around 70% stronger than the NOK, we purchased all our raw materials and freight in dollars. We see, however, now positive signs on decreasing freight and raw material costs in 2023. Our present inventory of raw materials has been purchased at rather high prices, we expect that to be consumed by Q1. When we now purchase and receive raw materials for Q2 and onwards that are at reduced prices compared to our current inventory, which should be positive for our margin development, sorry, gross margin development during 2023. We still have an addition for our long-term gross margin at above 60%.
Having a look at the EBITDA, new all-time high, close to NOK 23 million in a quarter, again, driven by increased sales prices, more sales volume, and also the NOK 13 million liquidation damages booked in the quarter. Electricity costs continue to be high. It's close to up by 100% in Q4 2022 versus Q4 2021, even adjusted for reimbursement from It is also affected that it was a rather cold December in 2022, which means that they use more electricity. However, we expect electricity costs to be significantly reduced from Q1 2023 with the new long-term supply agreement with Statkraft. As Kjell-Erik mentioned, we started to see in late Q4 economies of scale with higher volumes, and volumes start to materialize from line number two. For the income statement, we have been through most of the numbers.
Earnings before tax in the quarter ended at NOK 21.7 million. There's an increase in depreciation, which came in at NOK 3.9 million. That's driven that we started to depreciate the MEP investment in Q4. We expect the depreciation to be around that number going forward. The net profit in the quarter came in at NOK 16.9 million. Having a look at the balance sheet, for the assets, increase there in fixed assets driven by the MEP investment. The deferred tax assets is in relation to the realized loss of our energy trading in 2020, which means that we don't pay any tax as of now. Having a look at current assets, there's a big increase in inventory, and that's a mix of significant safety stock due to unpredictability around lead times from freight from Asia.
We see that it's stabilizing. We will bleed out some of that inventory and have still a significantly safety stock, but at a lower level in 2023. The value of the inventory is also affected that there are significantly higher raw material prices. Other receivables increase driven by higher sales, and the total assets for Vistin is around NOK 402 million. Having a look at equity and liabilities, equity rather stable and a strong balance sheet with 68% equity ratio. There's an increase in current liabilities, mostly trade payables, which again is driven that we increase the volume and purchase more raw materials, and also the short-term debt. As discussed on the asset side, we see that the ramp-up plan and the safety stock of raw materials increase our working capital requirements.
We have a revolving credit facility that we use to handle liquidity effects from the investment and the expansion. Equity and liabilities around NOK 402 million in total. I'll give the word back to you then, Kjell-Erik Nordby .
Yes, I will give you a short update on the expansion project. In 2022, in addition to fighting the non-sustainable high energy prices and high raw material prices, our main focus has been to ramp up the production capacity from the second production line. As I mentioned in the highlights, we achieved 1,200 metric tons production volume in the fourth quarter, which is a new record up 10% from the last record. That is actually also taking into account that we had a planned maintenance stop in October that negatively affected volume output by approximately 110 metric tons. That's.
We are very pleased with that, with the ramp-up of the second line in the fourth quarter. The capacity in the plant at the moment is around 5,500 metric tons. We, as I mentioned, we expect that to continue to grow gradually during 2023. We already have an organization in place that are capable of handling the expected 2023 capacity. We don't see that we will have an increase in number of FTEs in order to run the plant at a higher capacity. The project, the formal part of the project, even though that we are still working on the ramp-up and fine-tuning, the formal project was closed in December, and the contract with our engineering partner was settled.
That resulted in the NOK 13 million in liquidated damages that was booked in December. All in all, the project costs ended, is less than NOK 90 million, which is well below the NOK 100 million budget that the expansion project was approved to have. We have one which as a premium supplier, Vistin has one very important KPI, and that is to have a high customer service level. That means delivered on time in full. Due to the very volatile situation from China and India with respect to supply, freight, lead times from order received to order, from order on, orders supplied, then we deliberately build a significant safety stock to avoid getting out of stock.
Now the situation has improved significantly with respect to freight from India and China. We will decrease the safety stock and material inventory in 2023, which has also improved the cash flow. The fourth quarter, in the fourth quarter last year, we still had high working capital requirements because we had this increased raw material stock and also time from production start of the line two to payment from customers. That is also expected to improve from 2023. To sum up the fourth quarter and the situation in Vistin, that the Metformin market is expected to grow at a rate of 5%, 6% annually. That hasn't changed. Metformin will still be the first-line treatment of diabetes 2.
We see there is attractive growth potential to be realized when the additional manufacturing capacity is fully available. That's also why we in our growth strategy decided to invest NOK 100 million to double the capacity to kind of capture the growth in the market. I think that European companies in general and also Vistin, then we are in a better position now than before the COVID-19 and also Ukraine situation, that large pharma companies are looking for lower risk, lowering the risk in their supply chain and favor short-traveled medicine. That is something that I think will have a positive long-term effect on our competitiveness.
Because we are strategically well positioned, in Norway, and we can reach every, more or less every destination in Europe via truck from our manufacturing plant in Kragerø. The expansion project, which is the key to the future growth in the company, is progressing. The long-term renewable energy supply agreement with Statkraft has significantly improved our competitive position going forward. We see a trend that the freight and raw material costs are gradually going down, as Alexander also mentioned, and that is due to the normalization effect, post COVID. Last but not least, that Vistin, we have earlier also said that we have an ambition to pay out approximately 50% of the net annual profit as dividends.
However, the size of the dividend will be dependent on the company's financial capability and capital requirements for future growth. The board will, and we will come back to that when decision has been made with regarding dividend payments. Thank you very much for listening. This is, this was the end of the Q4 presentation in Vistin Pharma. We are open for questions.
Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star one one on your telephone and you'll get right on the box on the webcast.
Yes. I think we have already received some question. To take the first one, have you seen the full effect of the new hires in the payroll expense during Q4? Yes. We don't expect any significant increase in payroll in 2023 compared to 2022. Of course, we see high inflation, so there are some expectation when it comes to the annual salary increase. We don't expect any increase in FTEs in 2023. What can you say about... Sorry, the next question. What can you say about electricity contract with Statkraft? Is it fixed or variable? The same for 10 years. The Statkraft contract is set up that we receive a fixed base load every hour, every day throughout the year. That suits us rather well because we produce 24/7. We have a rather stable electricity consumption.
There are some changes when we do when the reactors are not. We have a fixed price of around 80% of our expected electricity consumption. The fixed base load will increase, or the fixed base load we receive every year will also increase with our production volume. The electricity received from Statkraft will go up in 2023 and up in 2024 based on our expected ramp up plan.
The next question is, when we have reached the 7,000 metric tons annual production, and we have also sold that volume, when that happens, what other projects will then be looked into going forward? That's a little bit too early to say anything about. I think the main objective for us is to increase the capacity in the manufacturing plant and then also sell that additional capacity at competitive prices. That's the main target. When we have achieved that goal, that has put Vistin in a different league, and then we hopefully can come back to what do we want to do next.
I think we just add also, it's not a walk in the park to both produce and sell 7,000 tons. Obviously, we'll work hard to fill the plant as soon as possible, but that's still a lot of work to do there. Next question about the cost of the electricity contract. It is very confidential, but what we can say is it's more favorable than the government fixed contract that is out there. That gives you some baseline to compare. I would say the pricing is rather competitive. Next question, have you been able to sell the increased production capacity in 2023? I think our expectation is that we will have higher production volume and higher sales volume in 2023 compared to 2022.
I think it's a bit too early in the year to be too precise, more precise than that. Do you expect to see linear increase in margin during 2023? I think as mentioned, as we ramp up volume and we keep our salary costs stable, there will for sure be economics of scale there. I think the as I mentioned in the gross margin slide, our margin and gross margin will also be dependent on the development of the raw material costs. As mentioned, we see positive signs there, which will help our margin. The last I would add that we expect to have significantly lower electricity cost in 2023 compared to 2022, which will definitely help our, on our results.
The last question here is that, will you prioritize volume over price in order to fill the additional capacity? How could that kinda impact gross margin? I would say that, Definitely there is a big advantage to fill the additional capacity to achieve the economy of scale effect. We in order to fill the plant or the capacity, the percentage of generic volume will increase because that's necessary on short-term to fill that additional capacity. However, we also still believe that when the capacity, when the plant is fully utilized, the cost of goods will also go down. It's too early to say anything about margin.
Yes, we will kind of bluntly, we'll prioritize volume over price. Of course, that's very generalized to say that. Hopefully we don't need to prioritize between these two variables. Volume is very important for us short-term to fill the additional capacity because that will be very advantageous. We will benefit from that. I think that's all for now.
Yeah. I think we're done today.
Yeah. I think we will then, as I said, thank you for listening, and then we will close the fourth quarter presentation. Thank you.
That concludes the conference call today. Thank you for participating. You may all disconnect.