Markus Jönsson is my name. I'm the new CEO to I-Tech. I joined in September last year. We will come back to what I-Tech is, but you can see now we are changing course and we're heading out to sea for a little period of time here, and we will talk about maritime shipping. That's the market that we are acting in. And I-Tech is based here in the North Tower of the GoCo building, and we have been on Nasdaq First North since 2018. All right, we start with the what if. What if one third of our global shipping fleet were using 36% more fuel than needed even for one day? What would that mean in terms of cost and emissions? And this is actually not made up. This is probably the hard facts.
You can always argue then for how many days are they wasting this much fuel? This is the topic that we in I-Tech are trying to address them with our solutions. If we look at some of the maritime shipping challenges, the emissions of CO2 and the climate neutrality is something that the IMO is working very hard on. Global shipping is one of the few modes of transport that actually has a global UN organization really working to regulate it on a global scale. Another important topic for them is the protection of local ecosystems. Transfer of invasive species that has been a hot topic and continues to be a hot topic as well. It's not only the emissions to the air, but also the transfer of invasive species and the emissions to water.
Essentially what the ships are emitting to water as well in terms of chemicals and other substances as well. Key importance. These are some of the three that actually we in I-Tech are working very closely with. Just briefly looking at the IMO targets then. They are targeting net zero emissions by 2050, and there are some sort of tangible milestones on the way. They are working, I would say, quite hard with the certification of ships in terms of energy efficiency, CII index you may have heard of, et cetera. But it's essentially a little bit like we see electronics that has an A, B, and C, and D rating, right? It's similar for ships in how much energy they are using for their transport work, et cetera, which we will see then driving energy efficiency in the business.
If you look also in a recent IMO report, they are sort of outlining the ways to tackle efficiency gains. I mean, the long-term goal is of course to shift fuel to renewable fuels. That is the ultimate goal to reach climate neutrality, but there are a lot of things to do on the way. Optimize propulsion, improve hull design, but also better biofouling management. And what do I mean with that then? Well, the problem for the ship is that as soon as they are put into water, organisms start to attach to the ship's hull and they start growing there unless you do take active measures to prevent that. And as soon as you have microorganisms, life adhering to the ship, that increases the resistance to water, so the friction a lot. And that's when you have the increased fuel use.
So that's coming back to the 36% that I was talking about in the beginning. And really by using solutions that are available today, you could actually target then 25% of that total CO2 emissions that the global fleet is emitting today for sure. So if we look at the market that we are operating then, it is shipbuilding and ship maintenance. So in 2024, there were around 2,000 new big commercial ships built and about 20,000 ships that went into dry dock. So they have to go in for regular and scheduled maintenance, typically every 50 years, so 60-month period. And that's usually when they replace then the protective coating that is also underwater. So that is sort of the market. And then you need antifouling coating for that. And what I-Tech is doing then is we're producing additives for antifouling coating that helps to prevent biofouling.
And we estimate the market potential to be somewhere around $300-500 million for additives for antifouling paints. So we're only speaking about these additives. If we look at where the ships are built, you could see. It's a little bit hard to see maybe. Oops, sorry, but the blue part in the bottom here is China, as really dominating. So 60% almost of new ships are built in China, but also still Japan and Korea are important. And for Europe, it's mainly complex and expensive cruise ships that are being built here. But still, Europe has a thriving shipyard industry still, but for highly specialized vessels. Dry dockings also here. China is even more dominating, but also other Asian countries. And Turkey is actually important here alongside Europe.
But you could say that there is a tendency at least to service the boats a little bit closer to the home market where ships are operating. So at least you see there Europe and Turkey is increasing in importance. So that is the market opportunity. The team at I-Tech, you see actually the whole company here. We are 16 individuals today focusing on innovation, sales and marketing, and of course of operations and running the business, et cetera. But we are a quite asset-light company, so we have outsourced our production. For the number of employees that are linked to R&D, you see that is very important to us. And that's something that I-Tech has done well, I think over the last years is really investing in R&D and formulation development. And that is mainly for getting close to your customers, which are the global paint companies.
And we will come back to that. But essentially to be able to speak eye to eye to the technical teams that the customer that are developing these antifouling coatings, you need to have a high degree of technical proficiency. You need to know what you're talking about in terms of formulation. That's why you see we have a really strong R&D team compared to the number of employees. We have quite good diverse teams in terms of languages and culture and so on. So having fun at work is of course important to us as well. If we look at our solution then, it is actually an innovation that stems out of the University of Gothenburg. And it has about 25 years ago, they were looking for new sustainable solutions for preventing biofouling on ships.
And that's when they discovered then this molecule called medetomidine that then became our product, which is called Selektope. And medetomidine is coming from pharma, so it's used as a sedative for animals and humans today. It's a quite popular sedative. And of course we as mammals then we react to this molecule by falling asleep, essentially becoming unconscious. But for the barnacles that we are targeting here, barnacle is the main organism then. They actually have the opposite response. They become hyperactive. But this is a non-lethal and sort of temporary effect on the barnacle larvae, but it makes it impossible for them to settle on the surface where medetomidine is being sort of released from the surface. You see an example on the ship's bottom here. I will come back and show you a clearer picture later on.
So very unique mode of action and it's super efficient at low concentration, which then enables that you can create better coating products. You can, for instance, formulate them really low biocide coating formulations, for instance, replacing if you want traditional copper-based systems. But it really gives you formulation flexibility. And now you could say commercial sales started around 2014. So we are now, you could say, two dry docking cycles after that. So the product is proving itself and we see it's being applied then to more than 3,000 vessels out of a global fleet of about 110 vessels. So there you can see our current penetration. We have products available from six out of the nine global paint companies. It's a very consolidated market. So essentially for us, 10 customers represents almost a complete addressable market, which is good.
We know all the customers and we are working with them essentially to develop products together. Why are barnacles such a challenge? Well, as I said in the beginning, they have a huge impact on friction and resistance on the ship. Actually as little as 10% of these barnacles, they really impact the resistance of the ship as it's trying to sail smoothly through the water. It is thriving in most marine environments. It's not only in biohotspots with very hot water and so on, but even here on the West Coast, right? We have a lot of barnacles. They actually act then by super gluing themselves onto the surface, which makes them really difficult to remove. It's very hard to address this with in-water cleaning. Essentially, a diver has to go down and try to scrape it off.
And as he does, if he would do that, he would also damage the paint doing that, right? So essentially the best strategy is to avoid them at all from settling on the ship's hull. And you can see our solution then is helping to give the ship a static barnacle protection. So barnacles typically settle when the ship is idle or sailing very slowly below six knots. That's when barnacles can settle on the ship's hull. But you don't know when your ship is having an idle period. Maybe you're waiting to dock into the port or you're waiting in the port, et cetera. So you can see this as an insurance as well. Even if you have high activity ships that sail like a ferry, et cetera, right?
It may be still at night or it may have periods where it's still where you can then be exposed to barnacles settling on the hull. So as I said then, what does bad look like? Actually, you see that in the picture here. As little as 10% of the barnacles result in significant added resistance. So it's not these nightmare pictures that you have seen where the ship is completely covered with green stuff underwater. No, it actually starts to have a real impact only at 10% surface coverage. So it is important to try to minimize this as little as possible. We of course have had several case studies where you even have demonstrated ship by ship the advantage of Selektope. So with significant fuel savings. We also conducted the recent dry-docking study.
So we were looking at 760 ships as they came in for dry docking and sort of what were the conditions of the hull, et cetera. And there was also a ship population there that had used products with Selektope and it was significantly better barnacle resistance or less barnacles on the ships with Selektope. So it is amazingly effective at low concentrations. So I-Tech today then, as I mentioned, you know we have 10 target customers. We are in with six of them today with products, but there is still a lot of room to grow. Even with our biggest customer, we still have plenty of room to grow. It's a unique technology and it's IP protected. Although the original patent to use it as an antifouling additive has expired, we have a lot of formulation patents and production patents, et cetera, protecting the position of I-Tech.
It's an asset-light sense that we are working with skillful production partners that are helping us to produce. And we focus then on the sales and marketing and distribution and promotion, of course, of I-Tech and Selektope. And as I said then, market penetration is still very low. So 3,000 ships out of 110,000 ships. So a lot more to be done for growth for I-Tech. And if we look at the results, how it has developed then, there was the IPO back in 2018 when we ended up on the Nasdaq First North where we received then SEK 40 million . At that time, you know revenue was around SEK 30 million . You know profit was negative, cash flow was negative.
But since then, the company has had really a tremendous journey with a small exception, of course, of the corona years when it was a little bit sort of slowed down in general in the business. But all in all, you see a CAGR of 36% then since the IPO. Today in 2024, we have a revenue of about SEK 180 million, gross margin 53%, and then an operating profit of SEK 45 million. Now free cash is SEK 100 million and we are planning a dividend of SEK 1.75 per share for the annual meeting. So that is sort of the status on the financial performance. And you see operating costs then have been sort of on a declining trend, right? And something that we see also can potentially continue then with our scalable model. All right.
So a general outlook on the business, we see that we have favorable market conditions in the sense that IMO is really driving energy efficiency. To invest in more energy efficient solutions is easily paying for itself, you could say. Even though sort of our product is expensive as an additive, the value that it brings to a ship owner or a charterer is many times bigger than that. So essentially in fuel savings. Fuel is a sort of, besides staff and people, right? It's the biggest cost for the operators of the ship, right? We see also that our focus on regulatory processes, they continue to absorb attention and resources. So essentially our, you know, to be compliant and to be available in the market, it takes a significant investment.
You could almost compare it to pharma in terms of the dossiers that you have to submit and the time it takes to actually get regulatory approval and reapproval. We are also targeting, as we are growing now, continuous operational improvements as well, so the fact that we are growing in volume means that we also have more freedom to handle our supply base in a better way, and also then we're looking into business development, and of course our sweet spot is complementing technologies. What else could we offer to the global paint companies that are making antifouling solutions that we are looking into? That could be additional active ingredients, that could be other performance additives that you need in your antifouling coating for it to really perform.
There are also some interesting adjacent markets to antifouling coating where sort of our knowledge of biofouling management and so on can be really useful, and we're also looking at step-outs more from sort of, you could say, business model, but the target markets are still more or less the same, but maybe with a different focus in the value chain, but these are essentially the three areas that we're looking into now, and we have, I would say then, a nice balanced business development pipeline now and working really actively with them and hope to be able to announce things during this year if it all pans out well, so that was in brief I-Tech, and I'm happy to receive your questions.
Thank you very much. Thank you very much. If you have any questions to Markus, please raise your hand and I will, yeah, we'll start off.
All right. I don't have a ship, but I have a little boat that I will paint in a month or so. Will this be too expensive or why aren't you on the private market?
Yeah, we are in the private yacht market in some markets. The problem is a little bit regulation here. So, you know, Europe tries to have a regional legislation also for the leisure boat market, but in reality, we actually have a lot of sub-regulations, et cetera. So it's smaller fragmented markets and it's difficult for us, you could say, to be available everywhere in leisure boats, right?
Okay, so it's different. France has a regulation and Sweden one, even though we are part of the EU. Is that what you mean?
Even though we are part of the EU, we strive for the same legislation.
Actually, for leisure boats, we haven't been able to agree. So there's sort of, yeah, legacy legislation that is driving that. So you have to go to Greece, for instance, if you want to find a product to paint with Selektope, unfortunately.
Too bad. I'm hoping to skip that once in a while.
Yeah.
How often you need to paint a ship to get rid of these barnacles?
Well, it depends on what solutions you have, right? If you have a Selektope solution, it would last you for 60 months. But it's actually, it's the certification of the ship. So it's typically 60-month period if you're talking about commercial vessels.
You can also do a shorter scheme of three years instead of five years, but most, I would say the majority of the ship owners choose a 60-month period to repaint it, which is very difficult for, sorry, different from the leisure boat market where you have to do every year, essentially, right? Yeah.
Thank you. Just to follow up on this gentleman's question, why would you not be accepted? I mean, you're not a biocide, so you should be more environmentally friendly and shouldn't have a problem with that, you would have thought. What is a biocide, I will ask then?
Biocide is mainly a regulatory framework. If I sell you something to control an organism, it is by definition a biocide. So even though it's much more environmentally friendly, it's non-lethal and temporary, it's still a biocide, right? So you're still in that.
And that means you fall under, for EU, it's called Biocidal Products Regulation, right? Where you have to register the active substance and you have to register the product for an intended use. So it is two-stage registration and quite time-consuming and costly.
I have a question. Who is actually your client? Is it the shipping company or the paint companies?
The paint companies. The paint companies.
Okay.
But of course, we try to market ourselves also to the ship owners, especially, I mean, I-Tech has been a startup company, right? Known to no one. So it has been important, of course, to address both the client, but also the user, which is the ship owner. But to some extent, it can also be the charterer, right? So it's a little bit complex in shipping. Someone may own a boat, right?
But they would rent it out to someone who's operating it. So if I have to pay for the maintenance, you know, I want to keep the cost down, right? If I'm running the ship, I want to have an efficient system. So there are many different vested interests in shipping.
Yeah, okay. And you work with all the leading paint companies or? Yeah.
Yeah.
And as a follow-up to that, in terms of your revenue and your asset-based model, is it then much more of a licensing type agreement?
Yeah, licensing in part, but that is mainly to our IP, right? And right, and the trademark, et cetera. But of course, we sell them the product as well then, right? Yeah.
But then you're supplying outside?
Yeah, OEMs, yeah.
Previously, a problem with the EU with the biocide. How has that developed or have you got the decision?
It's still ongoing. We're talking about the renewed license in Europe, right? So Selektope is on the market in Europe today and we have, of course, applied for a new license. And here there is back and forth and we are still under discussion with the EU. And of course, you know, this can have impact to our business, but I want to say also that Europe represents 3% of our sales. Asia is 97% of our sales. So just also to put things in perspective.
Well, yeah, one question. I wanted to ask the same question about moving forward to geographical expansion. But I also wanted to say I know you've been in post just for a few months and I'm very impressed by your thinking. Thank you. And then geographical expansion, what do you see that?
As you saw in the slides, you know, shipbuilding, ship maintenance is mainly an Asian affair if you talk about volume, right, and today, Korea and Japan are sort of our biggest markets. China is important, but here is a huge unlocked potential as well, so Asia in general is important to us. Another segment that we have talked about also is the leisure boat market, but in the U.S. And here we are awaiting to get sort of approval then from the EPA to use Selektope on the American or the U.S. market. Do you see what kind of threats do you see for your, what kind of, is it competition or lack of knowledge or regulation? One thing is, of course, we talked about the regulatory, right, and a reapproval in the EU.
If we would not get a reapproval, of course, it would tarnish, you could say, the brand in a little bit in a sense, right? It may not impact sales short term, but definitely medium and long term, it could have an impact. Threats, I mean, we don't have direct competition today. As I mentioned, we have a quite strong IP portfolio. There is, of course, indirect competition, other types of product solutions that do a similar job, but we think, you know, from a cost efficiency standpoint, we are really in a good position. But of course, you could say a number of years down the road, we cannot exclude that there could be direct competition for the solution.
We saw in your graph that your operating costs have gone down quite a lot. Going forward, is that stable or what kind of investments do you see going forward?
We'll aim to improve it a little bit more if we can, right?
Yeah, and as I said also, you know, operational improvements, right? We are looking at further improving this going forward. But yeah, of course, there is a limit.
And acquisitions, is that something you look at?
It's part of the, yeah, the opportunity portfolio, you could say, various types of acquisitions.
And what kind of type, could you elaborate a little bit? Is it technology or market position and so on?
Yeah, most likely a combination, right? So if you would envision us just enlarging the portfolio, right, we could add Selektope too, right? Another active ingredient that is targeting another important biofouling organisms. Now we talked a lot about barnacles and hard fouling. Soft fouling is also a problem if we talk about slime and algae and so on, right?
So you could envision that being interesting for us as a potential area to move into, either, you know, organically or inorganically, right? And we are looking at both, you could say. And then also, I mean, if you take the value in sort of a bucket of paint or antifouling solution, right? The active ingredients that we're talking about here is one important part. The other important parts are, for instance, binders that is sort of representing a big part. You could also envision us looking into such technologies, right? So there are interesting complementing technologies that would make us sort of an even more relevant and strong partner for our coating customers.
Okay. How common is it among your clients, I mean, a paint company to work with companies like yours? Is it part of the business or are you?
To some extent, yes.
But you know, a coating company is a risk-averse business. It's a lot about optimizing your supply chain. It's a lot about volume, sort of a scale game. You have seen a lot of acquisitions in general in coating. And of course, to put pressure on your suppliers, right? Which is the name of the game. So to reach ultimately profitability. Anti-fouling coating is a little bit of a special category because it's really a performance game here and it has a clear value. Of course, an architectural coating is not a performance game to the same extent. It's more to be able to offer the right color of vanilla, right?
Yeah, I understand. And regulations is obviously a big opportunity as well. What should we expect going forward from you guys? Is it something we need to take if we follow you, your company?
Are there any milestones or triggers that we should bear in mind?
Yeah, so coming back to the E.U. process then, we still hope that we could reach a conclusion this year sort of for the reapproval of Selektope for the European market. I mentioned the U.S. then as a new market opportunity. Here, unfortunately, we will not be able to complete it this year, I can say. But the problem is in general, these regulatory processes are quite intransparent in terms of timing, right? Because you are depending then on a governmental body on the other side. So it is really highly unpredictable in terms of timing. We at least will do sort of what the EPA has asked of us now in sort of complementing data, et cetera, during this year.
And then best case, it could be like one or two-year period before we know something for the American market. So that's sort of the game that we're playing in here. Do they have any staff left? Yeah, that was actually an issue last time Trump became president, right? He actually fired a lot of EPA employees and all of a sudden there was no one to, you know, pick up the phone or receive the emails, right? So it was difficult to get new products registered.
Yeah, we have to wait and see then. I mean, you have been the CEO for six months or something like that, right? In the long term, do you think you will pay dividends or how will you, what's your strategy?
Yes, we embarked on a dividend journey last year, right?
And this year we are increasing the dividend a little bit more, right? So it's SEK 1.75 as the proposal for this year.
Yeah, so you will continue to increase.
Yeah.
Okay, very good.
Yeah, time flies. We don't have any more time for questions. Thank you very much. Thank you.