Hello and welcome to today's webcast with I-Tech, where CEO Philip Chaabane will present the company's Q2 report. My name is Ludwig Sjöström and I work with Finwire, and after the presentation, there will be a Q&A. If you have any questions, you can ask them in the form to the right. With that said, I hand over the word to you, Philip.
Thank you so much. Very welcome to our Q2 webcast. We released a report this morning, and we're very happy to walk you through the main contents of this report. Starting off with a slide of introducing the presentation, where we would obviously focus on the strong business progress that we now have reported with sales and profitability going in the right direction. We also have appointed a new board member through the general annual meeting earlier on. We also are on the move later on in starting next year, actually, into new facilities. Focus will obviously be on the business side here. For you who may not know us, first of all, very welcome then to get introduced. We are a biotech company.
We're located in Gothenburg area, actually in the premises of AstraZeneca's R&D center in Mölndal, just south of Gothenburg. We're listed on the Nasdaq First North Growth Market since 2018. Our purpose is to supply technology that goes into marine coatings to save fuel and emissions, both to air and hopefully also to sea, by reducing biofouling or the risk of catching biofouling on the hull. The technology is called Selektope, and it's available to the global market within shipping, and it's used by most of the dominant marine paint makers out there in the world. In this industry, approvals is everything. We have secured such needed approvals. One of very few who actually have such approvals, where I think we're around 7 or 8 companies or technologies that have approvals to be in this industry altogether.
There's not that much to choose from if you're a paint maker. The market is obviously global, as shipping is global. We're exporting everything to mainly Asia, as you will see later on. We've been around some time as a startup company and later on matured into a more industrial exporting biotech-chemical company. The technology has then been proven effective over quite some years now with more than 700 vessels using antifouling coatings with Selektope inside. We'll show you a bit more on that. That's the highlights of the company. More into the product. The technology is actually a chemical molecule that we call Selektope. It's very selective in its mode of action towards the barnacle larvae.
In any ocean around the world, the barnacles pose a problem to any surface as they like to attach and build shells, as you can see from the center picture. That's not always a problem if it's a static interface. If it's a interface that is intended to move like a ship or a boat or anything like that, or a cable, then this creates a lot of extra drag. Therefore, it's of extraordinary importance to do everything to avoid the settlement of these. Our molecule is very unique in the sense that it actually repels them from a surface. It's like putting two magnets together with the wrong side. They simply cannot attach, and they swim away from and leave the surface. The molecule that we use is illustrated in the center.
Apart from being very unique in its mode of action, where we use biotechnology learnings to create this, it should also be said that the molecule itself is used in tremendously low concentration. It's about 0.1% compared to 45% of other similar alternatives that also resist fouling on hulls. It can sharply reduce the biocide loading on the ship hull, as well as it can boost existing formulations, since it's used in so small concentrations. This is the uniqueness. The effect is tremendous. It's a very powerful molecule. You see a surface here with clean areas where they have painted with Selektope-containing antifouling coating and then regular high-level traditional antifouling coating below where you see significant attachments.
It should be noted that this is an extreme case. It's not what would happen in everyday operations. In longer static periods in warm parts of the world, this problem may actually occur. Therefore, the need for a very powerful and a flexible alternative, which is what Selektope offers. All right. That's the essence of what we do. As we may know, the emissions to air is a critical aspect of everything in basically every industry at the moment. Reducing the CO2 footprint is so important and also for the shipping industry, which is responsible for somewhere 2.3%-2.6%, some may even say 3% of the global. It's essential to say then that shipping is a very.
More shipping actually improves the total CO2 footprint in contrast to other transportation means. Saving potential, I should say, is about 100 million tons of CO2 only on coatings. The total amount is much larger, including other technologies. We are here to actually try to help solve this problem. Meaning reducing the CO2 footprint. But not only that, it's also to protect the marine ecosystems. A hull attached with a lot of fouling of different kinds is also a vehicle for transportation of invasive species or alien species, at least some of them may be invasive. That poses another problem to the ecosystems. In many ports, a ship has to prove clean hulls, or else it will not be accepted.
This is a trend that's growing stronger and stronger every day and every month, and it's starting off in highly regulated countries like Australia and New Zealand. Also this pushes the need for high-level antifouling coatings, so-called premium antifouling coatings. In terms of what you use in a coating, whatever is in there has to be approved by all the leading authorities, which is the case all the active agents that are available today. The next step is try to reduce the amounts of these, as many of them could be used better in other areas or in other industries. Selektope plays a role here in trying to reduce the amounts and stabilize maybe even cost, but significantly reduce the biocidal loading at least.
That would be the next big thing in the industry. Of course, this has to happen without reducing the performance of the coatings, rather even trying to increase them. All right, that's the reason to be and what we're waking up to do every year, every day. Now into the quarter. Having briefed the company on what we do, we are now happy to present the figures of the second quarter. Undoubtedly, a very strong quarter, even with the record numbers being shown, displayed on the second quarter in terms of net sales. Gross margins also boosted up to a historically new level. Positive EBITDA, positive EBIT, a good strong operating cash flow puts us in a very good mood today.
Actually first time we show this kind of strong results all the way through. On top, we have a very strong balance sheet with a good cash position. We're very good. We're happy about this. I'll come back to the half year comparisons later on, but also for this half year, it looks very good indeed, boosted by the second quarter performance. Some information in the background is that the customer mix has been favorable to us. We try to strive to reduce dependency on one, at least, the total dominance of one customer and have a much more broader spread of the technology, and we're happy that this quarter shows some effects of that.
We also see some indications that industry is now really getting close to the transition of starting to use efficiency indices, which means attention has to be paid to all kind of technology that saves fuel to the ship, coatings being one of those. The results of this quarter is a small indication that we're going in that direction with this technology, and that's a very important sign. We also had increased sales to the Korean newbuilding yards in this quarter, which is a country that is really strong in newbuilding at the moment, taking market shares even. That's good. That's the quarter. I'll come back to some drivers behind in the next few slides.
Before that, let's look into the first half results and just to give you a comparison for how we have been performing over this first six months of a year back in the past. Looking at 2019 all the way up to today's results, we see that we have now a new level of net sales being reported. As I said, a very strong gross margin development from 2019. These two are probably the main difference, which then obviously results in a good EBITDA and EBIT results. Happy that they are all on the positive side for, I think, the first time ever, actually. It should be noted that January to June, so 2020 was a really good year.
Now actually all the way through the COVID period and everything else, we're now seeing a trend back in that direction, even improving a bit. The 12 months rolling curves look a lot more compelling now than what we have been able to show the past three, four, five quarters. I think that that is basically giving you a view that we see a new trend here, and hopefully we can see that continuing on moving forward. Volumes during the quarter were mainly into the newbuilding area and the dry docking area. There are two areas you operate in. It's difficult for us to understand exactly where each kilo goes that we sell. We do sell kilos of powder.
What we do see is that, Korea and Japan is, from a historical perspective, dominating, the shipment destinations. That doesn't mean that we know that it's going into a new building or dry docking or even to what paint maker or even. Korea is an important, new building market, and basically, they don't do much other than a new building. For that, dark blue area, we can quite, we can be quite sure that that's for volumes going into outfitting and new building programs. For the Japanese block, the orange, it's a much more mixed, scenario, as they have both strong repair yards and new building yards.
This gives an indication that we're quite strong in the newbuilding area and that the Japanese product portfolio that was expanded over COVID with our technologies starting to pay off. There are other movements as well here and there, and those all not positive at this moment, like China that is shrinking, as you can see. Like, that is due to previous inventory issues and then a lot of COVID issues and lockdowns of different kinds, and now lately energy supply issues, which is setting a pressure on not only yards, but the electricity availability to the paint manufacturing sites. We expect China to be challenging moving forward as well.
Although that's a huge potential once it starts to operate and function normally as they are strong in newbuilding and on dry docking. That gives a little bit better understanding of where we ship our goods. As I mentioned, one of the big drivers, I have talked about this in the previous quarters, is the transition in the industry to a much more performance-driven CO2 industry, whereas the measurements and the continuous improvements of reduced emissions is everything. They will also be publicly available, at least to all the parties involved in the industry, meaning that the charterer can easily see and if a ship is an A or an E ship in terms of carbon intensity, this will be put in place 2023.
Just to expand a little bit on that, this is a graph from Jotun. It was published in Hellenic Shipping News and many other marine coating journals, where they give a very clear and comprehensive view of what's ahead for the industry. If you look at the 2022 level here, a ship comes in, probably has, depending on what coating it has, of course, but could have a rather unfavorable CO2 profile due to fouling. Before dry docking, the black circle is on the higher end, meaning lots of problems, meaning excessive fuel consumption and emissions. By then recoating it and refreshing the service with antifouling coating, there is a gain, automatic gain.
To reach all the way through, other technical upgrades needs to be done as well, and that is not only related to coatings, that's all the different areas of a ship that makes an impact on the efficiency. This drives innovation in general terms in the industry, which is very positive. Okay, let's say that a lot of investments are made, and you manage to bring the condition down to an A level, which is the best possible level you can be in, the most efficient ship to date. Start operating over five years, which is a dry docking interval. Here you can see the three different lines, which are three different types of coatings.
The red one should represent the market average, and the green one at the bottom, the best possible ultra-premium antifouling coating, which in cases may also be assisted by proactive cleaning, so-called grooming. It's clear that the wrong selection of antifouling coating will erase any investments in other technologies and put the ship back to the level E, where it came in before dry docking. It's very important for the industry to start to look way beyond the next month, so to say. Decisions now will impact the performance five years from now.
This is a big shift in industry, that all the big paint makers are very clever in using and are pushing their R&D activities in the direction of helping the ship owner to make sure that hull condition remains as flat as possible over this time, so other investments get the full return of money, so to say. Selektope is part of the premium and also premium group of antifouling coatings. We are really excited to see how our technology can start to contribute into this and hopefully be part of this green line, even the blue line is okay. This is what the industry is talking a lot about at the moment.
Looking to the opportunities and challenges that we see, trying to give you a clear picture as possible of what we think about the situation as is right now, quarter by quarter. We do obviously think the carbon intensity indicator is very, very important. It will drive the whole industry from being quite heavy on economy-grade paints to a clear dominance of premium and ultra-premium coatings. That's a big shift in industry, and the incentives are now much different than before, which then creates this shift, and the CII is behind all that. We also see a growing customer base both in the quarter, but also, as you have heard before, since 1.5-2 years, it's been growing. That's obviously good.
As it starts to take off in many more accounts, that will create a nice effect in the results, in the P&L. We have enhanced activity with our customers' R&Ds. We see more activity there. We see a more intense interaction, partially because of their own strong work, but also because I-Tech has invested more in R&D, has more information to tell and is hence a more integrated part of the discussion than before. This is all very good and creates a good opportunity moving forward as the technology needs go into more and new formulations to really leverage on the top sales, on top line. We have challenges as always. Raw material prices is one. We talked about that quite some time.
Specifically on chemicals like solvents and so on, it's really not so easy to deal with at the moment. I must also say that there is experience from different coating manufacturers and also other chemical companies that the availability of raw materials is also a problem, meaning that the production system is not so easy to put together for a paint maker because there may be missing compounds out there in the world that puts pressure on delivering paint at all or other chemicals to other industries. This industry is really under some pressure here in terms of the supply chain.
We have on top of that heat waves that creates challenge within the logistical system as we know from floods being dried up and so on, but also creating a lack of energy, unable to cool energy plants and so on, and also drives the use of cooling systems, which increases electricity demand. All of this are clearly on the challenge side. Let's see where that goes moving forward. For you who are new, I can tell you that our production is in India, it's not in Europe, so we're not affected by that, but there are certainly other challenges out there.
I should also say that the standing challenge for us and everybody in the industry is the long cycle times to get anything changed in this industry. Long development times, and then very long proof of concept times. That's nothing new. That's what we've heard and what you probably know from before. Always a bit frustrating, but you know, a clear challenge all the time that we're trying to work with. I have one more slide, and that's just to set the scene on the opportunity that we are continuously striving to capture on terms of revenue. If Selektope could be part of every liter of antifouling coating out there, that would be a $350 million-$500 million sales potential. All oceans do have barnacle problems.
All antifouling coatings uses some sort of mechanism to prevent barnacles, and we know that there's only three agents altogether out there that has a clear demonstrated effect against barnacle foulings, and we are one of those. There's good chances to start to grow much bigger into this market step by step, although it takes time, I have to repeat. All right, the focus for us is and our customers is mainly the ships that consume a lot of fuel, and they're responsible for a lot of emissions there, and that's the ocean-going deep sea ships of significant magnitude and size, which you can see from the picture here, big tankers, big container ships, LNG ships and so on. Those are quite many, all in all, some 50,000.
All of them not, maybe not as big as this one, but still a significant number, and they have to dry dock every five years normally, which means there's 10,000-15,000 dry dockings per year going on. Each of those includes new coating application, which gives a nice opportunity to get the technology on. On top of that, there is so-called industrial boats of various sizes that includes offshore vessels for oil industry and tugboats as this one on the picture, and many other ferries and other coastal vessels. There are also quite many and gives us another 10,000 opportunities per year to get the paint on, so to say.
On top, besides all that, there's the pleasure side, the privately owned yachts that are obviously a big interest for us as they are static most of the time and are exposed to very high risk of fouling as they're not moving that much. This is a much more tricky market, though, from a regulatory standpoint. We are selectively focusing on United States and certain parts of Asia, Japan being already a public market for pleasure boats with Selektope, so to say, where the product is sold and used. U.S., we're in the regulatory phase, and it will take a few years to get through there. Step by step, we will get into that segment as well.
By those words, I'm looking forward to questions, and thank you for listening.
Thank you so much for the presentation, Philip. We will now move on to the first question here. Could you say anything regarding the customer mix in the quarter among your smaller accounts? Any customer that has been especially active?
Well, we have had a bit higher activity in the companies that are headquartered in Asia. That's about as much as I can say. That's been the biggest movement compared to quarter last year is those kind of paint makers. I cannot tell you which one specifically. We're not allowed to do that, but that's where we have seen the most positive signals this quarter.
Yes. We saw a recovery in newbuilding and a higher activity during the quarter, also. What can you say regarding the outlook? Will the activity continue to be high for the rest of the year?
Difficult to say if it's building inventory in a new building segment for upcoming projects or not. We believe that there's more projects coming in, certainly larger ships being built also for next year. Hopefully, we will see continued increased demand there. As I said, more attention is paid to antifouling coatings in general, which means the outfitting layer, which is the protection during the building phase, has to be very strong, or else it will foul and then start to clean, and then it start to impact the performance of the underlying coating. I think, yes, we will for natural reasons start to, you know, continue to see increases in that market. We have much more to do there. Yes, we believe that.
You no longer speak about headwinds in your comment versus how you did in Q1, where you noted headwinds. Why is that? Have you seen any improvement in the macro demand?
Well, we think the quarter shows some interesting activity in terms of leveraging on the previous product launches from Chugoku. We see other movements in other Asian-based paint makers, but also actually in European or Western-based paint makers. There's, you know, bits and pieces lining up to a more positive outlook, and not the least, getting closer to this implementation of CII, of course. I also was quite clear on the presentation, there are challenges, certainly related to the supply chain that is not maybe a problem for I-Tech at the moment, knock on wood.
Certainly, we have clear evidence that ships come into dry dock today, and there may not be paint available for them because the logistical systems or the availability of certain compounds is not there. That will be a bumpy road still. If that affects us or not, I cannot tell. Yeah, we're getting into a bit more positive mode there.
Thanks. The time to develop paint together with your customer, has it changed in the recent year, or has it remained constant?
I think it's been improved because we have so much more knowledge now than before. We have invested deliberately or by defaulting to that kind of knowledge. We recruited people and built up the lab. Yes, we believe we can shorten that time. It's obviously a long, you know. We're looking at improving an already very long cycle. I can understand frustration will probably still remain. From our perspective, yes, we think we can help shorten this and that we see that.
Yes. Moving on to the last question here. What are you looking forward to the most the second half of 2022?
We look forward to see the continued uptake and of this premium, ultra-premium coatings and an industry that's ready to invest. That's on the upside, of course. We will pay, as every industry, lots of attention to where energy prices will bring our customers and where it may affect our production and how availability of materials will impact delivery and so on. We're getting into a zone where we're more focusing on the positive sides of, you know, customers driving into higher valued antifouling coatings, and that will affect us positively.
Thank you so much for the presentation, Philip, and thanks I-Tech. We wanna thank all you watchers out there for watching, and have a pleasant weekend.
Thank you, and thank you for listening.