Cambi ASA

OSE:CAMBI

Earnings Call Transcript 2021-Q4

[Per-Christian Lillebo, executive]

Hello, everyone, and welcome to Cambi's Fourth Quarter and Full Year Results Presentation. As always, please read the disclaimer included in both the published report and in this presentation. I'd like to take you through the company results for the fourth quarter and 2021. But let me first talk about the situation in Ukraine.

We do not have personnel in Ukraine, but we have a project in the city of Lviv that's been under construction since late 2020. The contract is currently under force majeure. And as a consequence, we have stopped production and notified our suppliers accordingly. From start of the project until the end of 2021, we had recognized NOK 40 million in revenue on the project, and we had a remaining backlog of NOK 49 million. Because of the uncertain and very dynamic situation, we have removed the project from our backlog distribution for 2022 and included it in the report published today in distribution of backlog after 2022. If there are changes to our contract, whether there is a restart of the project or if the contract is canceled, we will inform you accordingly.

Turning next to 2021. This is the first year as a listed company after the successful private placement and subsequent listing on your next growth in the February last year. The listing itself has not significantly affected our operations, but we see more attention from the market for inbound requests on projects, whether that is due to the higher visibility in the market as a consequence of the listing or if it's other marketing efforts, it's difficult to pinpoint. But we do see a higher increase for our solutions. It was a year where we dealt with several significant external challenges. And I want to thank everyone in Cambi around the world for going the extra mile in ensuring that we delivered strong overall performance despite inflationary pricing, supply chain disruptions and FX headwinds in our most important currencies.

In 2021, we delivered strong revenue growth of 25%. EBITDA ended at 1.5x that of 2020. The growth is primarily in the Cambi Group with Equipment being up 45% and the recurring aftermarket demand in services delivered its fourth consecutive year of growth. Gross margin was impacted by the increase in raw material prices, and the revenue was also impacted by delays in execution, both at our customer sites and also in longer lead times for raw material affecting construction at Cambi Group. That became more visible in the fourth quarter, which you'll see from the numbers [ that present it better ]. We also increased our SG&A during the year. We invested more in sales and project development, both in standard equipment sales and working on upgrade sales and also within the DBO segment.

As mentioned on the previous slide, Cambi Group delivered well during 2021 with revenue being up 35%. In Equipment, we delivered a growth of 45% despite FX headwinds of between 5.2% and 8.5% in our main currencies. Of the overall revenue income group, 91% is in foreign currencies, primarily dollars, pounds and euros. And that is one of the impacts that you see from the numbers. EBITDA has more than doubled in the period. And in Cambi Group, as for [ Grønn Vekst ] and in Cambi Invest, we, as I mentioned, invested more in sales and marketing, but also in product development. For Cambi Invest, the turnover rate in line with 2020 is slightly below. It's been a year with lower activity in the construction business affecting soil sales. There's also been a negative product mix impact on gross margins. And we have invested, as I mentioned, more in the DBO segment, it's both in sales and early-stage development project, but also higher tendering costs because of the higher activity. In the fourth quarter, we secured a contract in Belgium for a complete sludge process in the new facility. And during the year, we have had high tender activity. We bid on a total of 78 projects with a combined value of NOK 5.7 billion. We have gained a higher visibility on projects -- larger projects that we see a higher probability of landing within the next period, growing our order backlog towards the end of this year.

Talking about the order intake and backlog in more detail. You can see the backlog is up 5% in the year, primarily due to Grønn Vekst securing some cornerstone contracts, that will turn revenue over the next couple of years. The order intake is down 18% for the group. As expected when we set out for the year and the second half of the year, the larger contracts that I mentioned, when we will become on the critical part of project is uncertain, but we see good development in the overall project execution on several contracts in the market. Operationally and strategic initiatives that included activity in product development to continue leading the technology improvements in our markets showed good progress during the year. We launched a new product and secured a change order for that product on an ongoing project, and we are continuing to develop this product this year to further improve the energy efficiency of our solutions.

So overall, despite order intake being lower than last year, the medium-term growth perspectives are very, very exciting.

Looking at the fourth quarter, as I mentioned before, the revenue is impacted by delays both at customer sites, and that's not being ready for our equipment to be delivered. So those are completed, manufactured and sitting waiting for it to be shipped at year-end. We also had delivery issues from -- for raw material with extended lead times of up to 3 to 4 months compared to what we saw in the first half of the year.

EBITDA decreases because, obviously, of the lower turnover but also increased costs in SG&A compared to last year. And last year, we also had a high margin product mix that is more normalized this year. The impact on the revenue is higher in Cambi Group. And in Cambi Invest, it's down 10% on revenue. And I've already mentioned the main reasons for the slippage. We expect to have a catch-up during the first half of this year on those projects.

For Cambi Invest, we ended a 2% -- about 2% lower than last year due to the mentioned lower activity in the construction business. And the EBITDA impact is both on the unfavorable product mix in Cambi Invest, but also the investments that we're making in the DBO segment.

Lastly, on the balance sheet, our financial position remains solid with a good cash position. Working capital is impacted due to the mentioned delays. We have more material in stock compared to last year and some products are finished manufacturing and waiting to be shipped early 2022.

With that, I'll open up for questions. There seems to be no questions that's come in. We'll give it a second. Okay. There seems to be no questions that's come in. And if there are any questions that come to mind after the presentation, please do not hesitate to reach out to me either through the investor e-mail or to me directly. So with that, I want to thank you for your attention, and wish you a nice week ahead. Thank you.