Earnings Call: Q2 2021

Jul 21, 2021

Good day and thank you for standing by. Welcome to the Stedzvik Q2 2021 Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand over the call to your speaker today, Ms. Camilla Houghlin. Thank you. Please go ahead. Thank you very much, operator. Ladies and gentlemen, warmly welcome to the SUTSIC interim report for the Q2 2021. We will walk you through the Stadzic report for the Q2 and half year twenty twenty one that shows the continued strengthening of the group's results. Next slide please. Please let me start with a brief introduction of the Sotvik company. Stadzic's main market is nuclear industry. Our roughly 500 employees based in Sweden, Germany, U. S, U. K, Switzerland, Japan and China support the customers worldwide and across the whole nuclear fuel and reactor cycle. Stadzic is an independent organization that operates on a global market with a strong international brand. Decommissioning, including handling of radioactive waste to final disposal. The customers are represented by the whole industry like utilities, fuel vendors, international research organizations and regulators. A key initiative beyond nuclear has been to expand into a new segment, medical isotopes production. Quarter and half year compared to last year and the highlights in the quarter are that we reached a sales increase of 24% and the improved operating margin, mainly due to a strong performance within decommissioning and radiation protection The business area continues to deliver on a very high demand during the revision period. Fuel and Materials Technology also delivers a stable performance in the quarter. Strategic Agreements have been signed in the quarter within decommissioning and radiation protection services, SEK135 million over a 3 year period for dismantling services. The agreements are important in the transition from Technology, a new international program, SEK110 1,000,000 over a 5 year period. The agreement is valuable In summary, The 2 largest business areas, decommissioning and radiation protection services and fuel and materials technology, have a strong and solid performance in the quarter. Next page please. Decommissioning and radiation protection services We delivered a quarter with strong growth and operating margin. The business area made a great achievement to meet the high demand During the revision period and the utilization level was high throughout the organization. The improved commercial customer contracts have also contributed to a positive impact of the overall results. The new agreements That are in place are strategic in the transition from reactors in operations to shutdown in 2022. The remaining nuclear power plants in operation in Germany will shut down in 2022, meaning next year. There will be a strong demand for the services Stodzik is offering to the market today even after the shutdown of the reactors. Personnel and recruiting new staff in the expanding area of decommissioning. Stuttgart is also performing work in Switzerland, where Stossik has an office and in Belgium and in the Netherlands with long term customer relations. Stossik is well prepared to meet Next Page please. Fuel and Materials Technology has a strong backlog that supports the sales increase in the quarter. First of a kind for irradiated materials, the agreements also require an upgrade of testing capabilities in the facility at the Stadzde And there are several investment programs in place to improve the overall capacity over a 2 years period, including both equipment, infrastructure and employees. Following the Stuttig strategic initiatives, The business area has signed the international agreement for material testing to support the life extension programs of the light water reactors. The agreement is worth SEK110 1,000,000 over a 5 year period with participants from 8 countries and 15 organizations. This program is a collaborative network of world leading specialists that support the industry with high value resulting to prolong the lifetime of the nuclear reactors. Next page please. For ScanPower, there were no major software sales in the quarter. There are commercial negotiations ongoing for new sales and the target is to close some opportunities in the second half of the year. To answer new geographical markets, it is a key to be well positioned on the global market. ScanPower is pursuing long term market activities in the Middle East and Eastern Europe. The business area is focusing on developing new Partnerships to access new geographical markets. For example, Sustek is participating in a bidding process for BBER, the Russian reactor type in Ukraine, where ScanPower software can expand for BBER applications. Another long term initiative is the cooperation with vendors for new reactor technologies, Like small modular reactors called SMRs, where scan powered software is being used for The SMR designs, fuel designs. The business area is also focusing on expanding the capabilities into more SMRs and advanced reactors, which are being designed, demonstrated around the world today. However, this is a long term initiative. Next page, please. The results for the quarter includes There was no license business signed in the quarter. However, there are license opportunities In Europe and North America, especially for the Indran Technology. And the focus is to sign a license opportunity before year end. The background is that waste management technology has an efficient waste technology with possibilities to support environmental safe and cost efficient solutions. Nuclear waste storage is That translates directly to reducing the waste storage costs and the cost savings for the owners. There are also requirements for the waste to be stored in an environmentally safe manner. And one of the features of the Stadzik Technologies is So there is a clear need for the weight handling globally and the obstacle is the timing with long lead times and decision processes. Next page, please. Sales, operating profit And operating profit margin has improved significantly for the quarter and first half year compared to last year. And as mentioned before, the required expansion within fuel and material technology has increased the investment. Next page, please. So the outlook for the business area. As mentioned in the beginning of the call, the Stadzik Group shows the continued strengthening of the results, mainly Due to the 2 largest business areas, decommissioning and radiation protection services and fuel and materials technologies, Both have a strong solid performance that is expected to continue for the full year. For Canpower, it is a timing question for the new There are also some delays in sales activities on the Chinese market. Still the business area is expected to improve by closing sales Towards the end of the year, for waste management technology, it's more difficult to predict the timing for a breakthrough in Indran, Although there is a strong market need and customer interest, the business area is focusing on closing a license sale this year to show the proof of concept. Next page, please. Thank you for listening to Stadzic Q2 interim report. Over to operator and Q and A session. Thank Okay. We will now take our first question is from the line of Paul Jarnes from a Private Investor. Thank you. Please ask your question. Quarter and very pleasing to see the positive development in Germany. I am, as But so far, Stodzik declines to answer. I find that very surprising, and I'm actually quite upset about that fact. Thank you, Paul, for your questions. We never give any, As you know very well, confidential information to specific agreements we have with the customers or agents. But to answer your question in the way possible, we have no further information to that and discussions are ongoing with the agent. It means that you have maintained what you believe is a Leading technology, not the Indrum, but still related to the Indrum on the Chinese market with a sole distributor that is not distributing and not paying. I find that quite surprising. I hope that you addressed that. Moving on then. Waste Management Technology has, under the last 10 years, been named many different things, consultancy services, treatment and now the ingram technology, the freeze tech technology. And it still continues to lose money. And at the same time, it defends A goodwill value of DKK176 1,000,000, so very, very significant goodwill value that is posted Thank you, Paul, for the question. Annette And as you possibly have seen in the report for Q2 on Page 9, the goodwill of the group amounting to about €180,000,000 in total has been reallocated. And the reason for this It's that this is an accounting matter and after a thorough review, we have seen that the earlier allocation The reallocation does not have had any effect on previous year's results, which we have made impairment tests for earlier periods to confirm. So as seen in the quarterly report, about EUR120 1,000,000 Instead of waste management technology. Thank you. That was a clever move, and it also confirms The waste management technology is not as promising as you as in other ways was looking in And then ScanPower, Middle East has been mentioned in repeatedly in the reports that No. I think I mentioned verbally, I'm sorry if I wasn't correct on that, We are absolutely pursuing the Middle East. But as you also are aware, all these activities are quite long term activities and opportunities that we are pursuing. So that's still an option. I was just surprised that it was Not mentioned in the report. Okay, thank you. Now I'll let someone else ask some questions. Thank you. Okay. Paul Jarnes would like to ask a question again. Please go ahead. Your line is open. Since no one else is asking, What about Elekta? Any sales shipments to Elekta or is that contract up and standstill? Now as we have said before and that we are waiting for the irradiated pellet supply and we have received the irradiated Pellet supply and the production has started, but we have no more results to share today, but that will be for the quarter 3 reporting. Okay. So the production is ongoing now. That's very good news. Please restarted, yes. Looks like there are no further questions after Paul. You may just continue. Thank you, gentlemen and ladies, and I wish you all a very nice summer. And thank you for calling in today. Bye bye. So that does conclude our conference for today. You may all disconnect.