Good morning, everyone, and welcome to this presentation of the second quarter Polygiene Group. I am Ulrika Björk, and I'm the CEO of the company. Today I have Niklas Blomstedt, our CFO, joining from another location.
Good morning.
First of all, I would like to just give a brief summary on the situation. It has been a very, very tough quarter, as you can see. It's a very disappointing report, and I believe you have many questions for us. I encourage you to write questions in the chat that you can see here in the meeting. It has been a very challenging quarter, and it's due to external factors only that have impacted the quarter very heavily. The tariffs that we mentioned in the last report, we didn't know how that would impact the group. We knew that we don't have any direct consequences because we don't ship any products to the U.S. We also highlighted that it could be an impact if our customers are affected. We are an ingredient, and we can't sell if we don't have customers that are producing.
We've closed dialogues with our customers. They have indicated that there has been a lot of disruption in the production chain. Many projects have been put on hold. These tariffs have to be mitigated. There is a lot of price negotiations going on. During this time, a lot of projects were just delayed. These discounts they're asking for, it's really hard for the fabric mills or the manufacturing partners to absorb these tariffs, which also led to a lot of capacities that are empty now in China. We can see that brands are trying to relocate to other countries. I will come back on this topic when I go into the segments. We also had a negative impact on the currency effect this quarter compared to last year, which also had a quite big impact. It, of course, not only was negative this quarter. We also had some positive news.
We announced in May the strategic partnership with a new customer in the U.S. in the healthcare sector, and they have an estimated annual volume of SEK 30 million. We also maintained cost control. I know that there were concerns about the cost increases in the last quarter, but that is only an effect of periodics, how we allocate costs during the year. We believe that in the full year, we will be around the same levels as 2024. We had some breakthroughs in the ShedGuard development. I also would like to give you a little bit of an update on where we are in the launch of the Stay Cool technology. First, Niklas will go through the numbers.
Yes, if we start with the summary, the sales were down 12% from SEK 36.4 million -SEK 31.9 million. 12% of that was related to foreign exchange impact. We had a gross margin of 63% versus 65%. On the top level, all of that was also related to currency. We will get into a little bit more details on the segments later on. Looking at the operating costs, as Ulrika said, it was in line with last year. We're even lower, SEK 19.8 million versus SEK 20.1 million. EBITDA was negative with SEK 1.2 million versus SEK 2.6 million last year. In the SEK 1.2 million, there is a currency conversion difference impact of SEK - 1 million . We have an EBITDA of SEK -2.6 million versus SEK 1.2 million. The cash flow was negative with SEK 12.6 million. Apart from the impact of ordinary business, we had some extraordinary items during the quarter.
We had a dividend of SEK 5 million. We had an inventory buildup of SEK 4 million, and we had some payments of tax debts of SEK 1 million. The cash end of the period was SEK 47.4 million versus SEK 54.3 million last year. If we then look a little bit more into the sales, as we said on the top line, it was down 12% where 7% was due to FX. Addmaster dropped with 44% in the quarter versus last year, while Polygiene increased 24%. The increase in Polygiene was driven by the distribution sales. With this increase in Polygiene, we can also then see that the Polygiene share of the total in the quarter was 66% versus 46% last year, while Addmaster dropped to 34% versus 54% last year. The drop in Addmaster also then impacted the different regions differently.
We saw the biggest decrease in EMEA, and Addmaster had the lion part of their sales in EMEA. That's why EMEA had the biggest drop. APAC dropped 33% and Americas with 19%. Next, some more details. I think we talked about the sales already. The margin on the top level, as we said, driven by FX. We had a positive, if we go into more details, we had a positive segment mix as Polygiene had a higher margin than Addmaster, and we saw a big increase of the Polygiene sales. However, in Polygiene we had a negative customer mix as it was much higher distribution sales this year versus last year. As we said, operating costs were more or less in line or lower versus last year. On the EBITDA of SEK -1.2 million, we had the currency conversion impact of SEK - 1 million.
Cash flow, the extraordinary items of the dividend, stock buildup, and the payment of a tax debt of SEK 1 million .
Okay, thank you. Now moving into the segments. I will start with the Polygiene side of the business, which is the textile part. Yes, as Niklas said, we had a growth, and year to date, 33%. This quarter was 24%. I also would like to say that all in all, with Q1 and Q2, year to date in the group, we are still having a growth. I just want to mention that. These numbers are actually higher if you consider the currency effect. I would say that the main part of all sales in Polygiene is in dollars. Of course, we have an impact on almost 10% there. The growth is actually higher. As Niklas said, these 66% that Polygiene has of the sale share of the sales would trigger a higher margin for the group.
The sales mix within Polygiene has now been to the negative side in terms of margin, where the distributors have many orders, and they have a lower margin initially. When the royalty arrives, the margin will stabilize. This quarter has been a lot of focus to stay close with our customers. I have been talking to many other players in the industry. I have been talking to other distributors. I have been talking to mill partners. I have also been talking to competitors. All witness the same, that in this industry, it had taken a big hit on the tariffs, just because the production is mainly in China. We also know that there are a lot of things going on with relocating business. We can already see that Vietnam is growing. The distributor actually today placed other orders saying the business is coming.
We need to have more goods that we have to fly in now because it was like a surprise that it will move so fast. We have global distribution set up. Wherever our customers will move, we have all the registrations, we have stock, we have distributor agreements in all these areas. We are quite confident that we can continue to serve our partners if they were going to move their business. It's business as usual. All of this that happened is lying outside. We still have this positive momentum internal. All the planned activities, all the trade shows, everything is still ongoing. We still onboard new customers that have been planned since before. For instance, FILA, a well-known brand, launched collections in this second quarter. We also have other brands that are also launching. All this has happened before and continues.
We can also see that markets that had less impact of the trade war, for instance, Japan, are signaling a very strong Q3. They also took a hit now in Q2. I think they were flat. Normally, they are in a good situation now. I think they were growing 25% in the first quarter. The second quarter was flat because they also, of course, are impacted. We have global brands that are selling all over, so they are impacted. They indicated for us now that they see that they're going to claw back some of these volumes in Q3. I hope the other regions also will give me the same signals. We have positive news on the ShedGuard project and on Stay Cool. Starting with Stay Cool, it is a cooling technology that is moisture-activated and gives you a cooling sensation when you wear it. It has been very successful.
We launched it late March-April, so it's quite new, but still we see a lot of interest. We have now introduced this technology to more than 80 brands. When I say introduced, it's that we had a sit-down with a meeting. They have shown interest, and we can see that 50% of those already moved into a trial phase, which is a really, really big conversion rate. They either do a wearer trial, where we send these treated T-shirts, or they actually moved into production trials, meaning that we put our technology on their fabrics. The wearer trials have come out very positive. We got a lot of positive feedback, and we believe that this could really be a big hit next year. We do have some brands that already confirmed that they will start using Stay Cool, and that is for the spring-summer collection 2027.
They have a long sales cycle here because they are now working on these collections, and they are produced in 2026. We don't believe there are going to be a lot of sales this year for Stay Cool, but definitely we will see something happening next year, I'm sure. Now we are working on fine-tuning recipes. We're trying to decide which test protocol we're going to use. We're also finalizing the certifications, the Blues ign, the OEKO-TEX, everything we need to have this product on the market. This is a very, very positive outcome so far, and it's just launched. It's just a couple of months. We've been working really, really hard on getting this out in the market. Then onto the innovation project, Polygiene ShedGuard.
This is a textile finishing that can help us to keep the fibers to the fabrics, which means we can reduce microfiber loss when we wash clothes or wear clothes. This technology has been developed since 2021. It took a long time to do research and try to find the right technology or the right chemistries. In 2024, we launched this innovation project, which basically is where we get help from our partners, if it's mill or brands, to develop this project. If we're going to get a big hit, we already have customers in line for this. The phase I, we got very inconsistent results. It was very hard for us to analyze. We partnered up with the Manchester of University and they have experts on microfibers. We actually got this project funded as well.
They have been a fantastic help for us to understand the data we get from all these trials. We have the phase II, which basically was we took the success cases from phase I, and we continued to develop with these fabrics into phase II. That was finalized in May. Now we have identified some fabrics that we really can show there are consistent positive results. What we have been doing with these fabrics now, we're going back to these partners and offering them a commercial agreement. Where we are now is actually to get their feedback on pricing, on other terms and conditions. We have more than nine. I heard today there was another one interesting. We're going to continue to do more tests, more trials, and in parallel, we're going to develop commercial projects. It is actually that we have one Swedish company interested in this as well.
I think this could be, if the commercial agreements and the feedback are good, I think this also could be interesting to see where it can go next year. Just to show you the performance, this is one of the partners. It's two different kinds of fabrics. It's mainly fleece fabrics, which is very good for these kinds of technologies because it's plastic and fleece. They shed a lot. As you can see, the gray box here, it's untreated fabric, the control. Then we have the orange box, which shows when the ShedGuard is applied on the textile. We wash this 5x . The Manchester of University analyzes the data. They count the microfibers that are being reduced, and they also weigh and look and do a lot of things to just get to these numbers.
As you can see, we have a 58.1% reduction on fabric A and a 41% reduction in fabric B. These are really, really good results. They are way over what the customer is asking for, which means we can see there is a consistency here that ShedGuard could make a difference in the future. Very exciting. Moving into Addmaster, who had been struggling a little bit. As Niklas said, there was a big loss here or decrease in sales in the second quarter. It is also directed back to these tariffs because they create uncertainty, and uncertainty is never, never good. It has disrupted across industries. Many of our customers are global, so they are impacted. Even if sales are mainly in Europe and U.K., they are still part of a global network. Many of those are producing in China as well.
What we have learned from talking to all our top customers is that orders are pushed further to Q3, Q4. They witness that they have stock levels. They also said that projects have been delayed or even lost in some cases. It is not a lost customer. It is more a lost production of a specific product. They do not want to change any strategies until they know what is the true impact. It is still ongoing. We do not really, really know where it is going to end. We are talking, there are discussions about Europe now and the U.K. Until everything is stabilized, they just put a lot of projects on hold. There are also price pressures like we see in the textile side that everybody is negotiating.
We also attended industry meetings like the British Plastics Federation to get insights and to get knowledge from other partners, other players about the current business climate. We can see that the output is exactly the same as when we talk to our customers. This is the main business climate that we are facing right now. We continue doing what we do. We have an upcoming agent and distributor meeting here in September because we want to strengthen our sales force and really educate all the distributors about the Addmaster offering to really, really get them on board to be strong. We also have some interesting product development going on in Addmaster. It is a new field. It is a new interesting development. I hope I can talk more about this in the next quarter when we have more results.
Just to finalize, to give you a little bit of outlook of how we see the rest of 2025, I would like to again emphasize that this is a temporary setback. It's caused 100% by external factors. There's nothing changed within the company or in our long-term plan. We know that it will be stabilized, but it will take some time. We don't really know exactly when we're going to recover. For sure, we know that when we recover, the financial position will be back again at these positive key figures that we have been used to see in the company. The positive momentum we had for the last six, seven quarters in the business hasn't changed. We have our business pipeline. We have new tech launched, and that's really, really interesting. We also continue to work with our R&D on more projects coming for the future.
Also, just to highlight and heads up, because we know that these tariffs have to be mitigated somewhere. Either the brands will absorb them and hit their margin, but I don't think that is the case. I think some of these tariffs will hit the consumer. When consumer prices go up, that could affect volumes and then, of course, hit the volumes where we are an ingredient. We don't know yet, but I'm sure there are going to be a lot of price discussions moving forward, and we are also part of that. We are working very hard now on our own supply chain to optimize, to try to squeeze out, do more efficiently, looking at freights, looking at how we ship things, just to be prepared when it turns and be able to support our customers as well.
I think more than ever, there is a big chance now for Polygiene Group as an ingredient that adds a value who can strengthen your competitive advantage. We know that you can even charge more to the end consumer if you communicate the value. This is exactly what Polygiene Group is very, very strong at. I think more than ever, we have to prove our value out there so we are not just being seen as a cost that you can cut off. That is very important for us to work hard on. I think that was all slides. I think we can go to the Q&A now, Niklas. Do we have any questions coming in?
Yes, we had some questions prior to the meeting about some new products on Stay Cool and ShedGuard, the status, and also how the revenue stream was. I think you talked about it already and gave us an update. Can you talk a little bit? Has there been any kind of impact on the revenue for those products yet?
No, not yet. We are still in the trial phase. There could be, I asked the sales force, could there be anything in 2025 that could be minor? I think we will see the big impact next year. Since it's spring-summer, mainly 2027, that is production, the second half of next year.
There were some questions about the cash flow. I think we touched upon that as well with the extraordinary items of the dividend payments, the inventory buildup, and the payment of the tax settlements. I think we covered that one. There was a quite interesting question about the year textiles. Last year, we had a quite big order in Q2 in Addmaster. It was almost SEK 5 million. How has that been this year and what do we see for the full year?
Yeah, that's true. It's positive. We have an agreement with our exclusive partner. They have committed to volumes. Year to date, they haven't took anything yet because the other stock they took was end of last year. I believe we will see this coming in the coming quarters. That is a significant increase from last year. That's coming.
I think that actually covered the questions we got before and during the meeting. Yes.
Okay, I think then I interpreted that we covered and answered most of the questions. I just also would like to say again to everyone that this is a temporary setback caused by external factors. It will come back. It will bounce back. I can't say and promise now when, but I really hope it will be in this year. As I said, we see positive signals already from some regions that they're going to beat their Q3 and have very good numbers. I really hope that's going to be a trend for the rest of the regions. I think that was all for us. I wish you a happy summer. Thank you.