Hav Group ASA

OSE:HAV

Earnings Call Transcript 2021-Q4

[Gunnar Larsen, executive]

Hello and welcome to the presentation of the fourth quarter financial results for HAV Group ASA. Together with me today, I have Pal Aurvag, which is the CFO of HAV Group. We will be giving the presentation in English today as we have got feedback from our international stakeholders that they also are very interested in the company. You have had possibility to ask questions and there has been a Q&A session. There will be a Q&A session after the presentation, approximately 20 minutes. On the screen now you see the Q&A log-in and the code and you also have possibilities to use the QR code and scan that with your camera. So I'm going to talk a little bit about the highlights of Q4 and saying a little bit about HAV Group ASA and the company in brief, about the subsidiaries and market opportunities. Pal Aurvag, the CFO, will present the financials. And then we are going to talk a little bit about the future and the market outlook before we have the Q&A session after the presentation.

We had a very good Q4 as for the rest of the year. We had revenues of NOK 224 million, year-to-date was NOK 917 million. And we have an EBIT in the Q4 of NOK 25 million and a total EBIT year-to-date of NOK 92 million. The cash from operations was NOK 214 million and our cash balance end of the year was NOK 376 million. The external backlog was in excess of NOK 380 million. We also had a very good development of shareholders so we went from around 1,500 shareholders to 4,500 shareholders mainly due to the dividend from HAV Group in HAV shares done at the end of last year. And the market cap on the 9th of March was NOK 564 million. The key developments of Q4 was that we got a new contract in Norwegian Electric Systems, a contract for commercial vessel. In HAV Group, we started repurchase program of own shares and per end of February, we had bought back 1.78% of our own shares.

And there also, as I mentioned, was a dividend in HAV Group ASA where they reduced their shares in ownership in HAV from 33% -- or 66% to 33% and then the number of investors increased also significantly. We also had a very good start of 2022. Very, very exciting and good news was that we finally got the U.S. Coast Guard approval for Norwegian Greentech's ballast water treatment systems and also Norwegian Electric Systems signed their largest contracts ever of approximately NOK 100 million. So the start has been very good. So I'm going to tell you more about HAV Group in brief. We are an international provider of technology and services for the maritime industries. Our vision is to contribute to a sustainable future at sea. Even though we were established in 2021, we are a company comprising 4 companies -- a group comprising 4 companies that has existed since 2005 and they have expertise in guiding the marine and maritime industries towards 0 emissions.

They already have good technology, good references, markets and good prospects for the future and we are making good money as you see from the results. The value creation in HAV Group is to make these 4 companies act together in a way that we are creating more than if they were separate entities. We are taking part in the strategic development of the companies, we are extracting synergies, we are cooperating with regards to business development and R&D processes and also the group has a strategy to pursue further accretive growth either organic or through consolidation and acquisitions. So we have a growth strategy for the future. The 4 companies delivering technologies for the ocean is HAV Design, which are in the forefront of innovative ship design especially low and 0 emission vessels. Norwegian Green Tech, they are the clean water expert and the biggest product today is the ballast water treatment system.

Norwegian Electric System, they are a supplier of sustainable energy design and smart control systems and they can supply for a wide range of vessels for the global maritime market. HAV Hydrogen, they are a developer of hydrogen energy systems for ships. And I will say more about each of these companies later. We are also an experienced management team with experience from the maritime and other industries for many, many years. As some of you that have followed the company since the beginning, we have also got more people into the management team today. In addition to me and Pal Aurvag as the CFO, the management is also consisting of Frank Levi Kvalsund, which in HR and QHSE. We have a new Business Development Director and all the Managing Directors of each of the companies are also part of the group management. And also we have a very experienced Board of Directors.

So then I will talk a little bit about the subsidiaries, what has happened in Q4 and the further market opportunities for these companies. HAV Design had a very, very good result for all last year and also for Q4. Their operating income was NOK 111 million and they had an EBIT of approximately NOK 15 million. And their competitiveness is to deliver special purpose, special designs based on simulation-based and configuration-based design technology. So they are experts in learning about the operator or the shipowner's needs and designing an optimal vessel using advanced simulation technology and computer knowledge. Strength and deliveries that they have today is within fully electric car ferries, windmills, support vessels, live fish carriers and also coastal cruiser vessels. They will also be using their knowledge and tools and exploring new markets where you can use the same technology.

And we see that there is a lot of markets now that need new technology with regards to reducing energy consumption, increasing efficiency and safety and saving emissions. So HAV Design is very well positioned to also approach new segments and new markets with their technology. Norwegian Greentech are the clean water experts. They also have had a very good development. We see now that since the ballast water treatment convention was entered into in 2019, the market for retrofit especially is seriously coming. So they have experienced a tremendous growth in 2021 and we expect also a further growth in the years to come. Their operating income in Q4 was NOK 45.7 million and with an EBIT of NOK 3.6 million. In addition to the large retrofit market for ballast water treatment systems, they are also developing new products, new technology within water treatment especially within land-based fish farming and also other land-based applications in addition to marine technology.

So we also see that in addition to utilize the boom that we have in ballast water treatment systems now for maybe 2, 3 years ahead and also the aftermarket with service and retrofit following the deliveries, we see that there is a big market also delivering new technology within water treatment. Norwegian Electric Systems are delivering energy design, electric propulsion systems, control systems, navigation systems and also digital solutions in order to enable the shipowners and operators to reduce emissions, reduce energy consumption and increase safety. And they also are very well positioned for the requirements that come onwards. Their operating income in Q4 was NOK 73.5 million with an EBIT of NOK 6.4 million. And they are extremely well positioned because what we see with all the requirements coming for reducing emissions at sea.

Very much of that emission reductions will require electrification. That you need some kind of electric operation of the propulsion of other systems on board, you need energy storage systems like batteries and you also need smart control in order to optimize the operation of the vessel. So we see that Norwegian Electric Systems, they have the technology. We have technology development programs and we are also able to deliver this technology to very many different ship segments. So they're not limited to a special ship type, but we see that a lot of the ship types and the ships that will even be built or retrofitted with new technology will require the type of technology that Norwegian Electric Systems offer. We have also taken steps in order to increase our international presence and we are focusing on market by market in order to give support to both the shipyards and the shipowners requiring this technology internationally.

HAV Hydrogen, which is the youngest company in the HAV Group. They have worked since 2018 developing a hydrogen energy system for larger vessels sailing longer distances. They have been working for a preliminary approval of the system meaning that it's a very short way from the preliminary approval to actually implement the technology in the system on board a specific vessel. And we have reached a milestone also there now. We have delivered the documentation to Class and authorities. We are doing the final risk analysis and we are doing the final dialog with Class and authorities in order to get a preliminary approval. HAV Hydrogen has also used a lot of resources in other product development and making -- being ready to launch products when we see the market is coming and when we have the approval. We also at the same time developed the organization with a capacity and knowledge that is needed in order to increase our sales and delivery capacity as we are evolving.

So we believe that hydrogen will be an important energy carrier or fuel in the green transition also in the maritime industries. It's maybe the only one producing green hydrogen. It's maybe the only fuel that is completely emission-free throughout the value chain. So we are looking at the whole value chain from how to -- which projects will be the first project. We have a plan towards 2025 how to implement and get our products into the market. And we are looking very carefully then on who to cooperate with and which type of projects will be most applicable for HAV Hydrogen in the future. That was about the group, about the figures and the initial outlook for the companies. I will tell a little bit more about the general outlook afterwards and we will also answer questions during the Q&A sessions.

And then I leave the table or the floor to Pal Aurvag, which will say a little bit more about the financials.

[Pal Aurvag, executive]

My name is Pal. I'm the CFO in HAV Group, and I'm delighted to be able to have this presentation with the figures that has been presented in the report today. We guided revenue in between NOK 850 million and NOK 950 million and with margin according to the Q3, 9.7%. We are on a turnover of NOK 917 million with NOK 92 million EBIT and the figures then. So we are, let's say, mid in the revenue guiding and top end of the performance related to the EBIT. So it's quite good with 11% of EBIT margin in Q4 and year-to-date 10%. So when we look at the 2021 figures and relate them to 2020, it's completely other figures on higher level. So I think we can sum up and say that we are delivering according to guiding or better. So I think we should be proud for these figures for 2021. If we look at the balance sheet, there is not that much that has happened since Q3 other than the operational effects.

We see that the total figures is a bit reduced related if you compare to year start and that's related to a reduction in -- or a lot of deliveries in the year and we see especially huge deliveries to projects related to Havyard Leirvik. So if you look at the details for the changes from Q3 to Q4 -- to this last quarter, we see a cash reduction of NOK 30 million. We have a reduction in receivables of NOK 65 million. And on the other side, we see an equity increase of [ 30 ] and we are on an equity ratio of 28% at year-end. We see we have NOK 5 million lower long-term liabilities related to installments and current liabilities is related -- is a reduction of NOK 120 million and that's related to prepayments from our customers. The working capital at the end of the year is NOK 143 million, it's plus NOK 37 million since last quarter and NOK 160 million increase for the whole year.

If we look at the cash flow, we see that the cash flow from the operating activity is NOK 214 million year-to-date and this is mainly related to the profit of NOK 89 million and the net increase in receivables of NOK 123 million. There is a small negative cash flow related to investments and that is related to investments in R&D. We see that the sum is quite lower than last year and that's related to that at the end of 2020 there was huge investments in the ballast water management system. That project is now finished and, as Gunnar mentioned and also we had communicated, they now have got the approval for USCG and, let's say, they are going from development process into a full speed and are up and running for supporting this ballast water booming.

When we look at cash flow financials, more or less the same figures as before, NOK 140 million in this year and that's related to the capital increase of NOK 90 million and also the long-term debt that was transferred in transactions when we had a spin-off from HAV Group. So in total, we have a cash balance at NOK 376 million so that is quite good for today. When you look at the order backlog, we see a small reduction from -- in the quarter and that's of course related to that we had a quite high revenue in this quarter. But when we look into 2022, we see now that we have signed up a significant order for Norwegian Greentech -- sorry, Norwegian Electric Systems and we see also that the Norwegian Greentech is having an increasing backlog again. And as we have said before, the fleet agreements are signed with shipowners, but we don't include them in the official backlogs before they enter the purchase order.

That was -- then we go into the market outlook.

[Gunnar Larsen, executive]

Thank you very much, Pal. At least we have a very sound financial situation. We are making good money so that also positions us to take the opportunities that we see in the market. As we have said from the beginning when we launched this company, there are a lot of good opportunities for a type of company that we are that deliver technology that enables our customers to reduce emissions and reduce energy consumption. In general, there is very strong fundamentals for maritime cleantech. We see that even though the energy crisis -- or the energy crisis also is showing that we need big changes. We need a lot of new technology in order both to reduce the energy consumption, maybe the most important thing, and also use technology that reduces emissions. So in the maritime market, the need for technology -- the need for the type of technology that we have in the company will just continue to rise.

We are an established company with leading offerings. We have customers -- a good customer base, we have good technology, we have a sound good order book and we are making money. So that also makes us in a very good position to further develop both new technology and new business and grow into the future together with our customers' needs. In addition, what our philosophy is that, as I said in the beginning, that we try to have companies that have complementary knowledge and complementary technology. So when they cooperate, they generate end results that is bigger than if these companies were operating one by one. And that is also the strategy that we have with regards to look at developing these companies organically or looking at new companies that can fit into our portfolio. We have a very strong value chain of companies and offerings already and we are looking at also complementing this value chain.

Based on these fundamentals with regards to where we are today, the technology and components we have, the strong financial position and very good market opportunities; we foresee that we will be able to have a revenue in excess of NOK 1.3 million -- sorry, NOK 1.3 billion in 2025 and that is the organic growth. Eventual other opportunities will -- can change also those growth ambitions of course. So we are very positive and we are very happy of course of what we have done this 1 year that we have been HAV Group or less than 1 year. We have built an even stronger foundation and we are very eager now to utilize the opportunities that we see for the future.

So with those end remarks, I think we go to the Q&A session. I know from Pal that we have already got a lot of questions. We will have a session of around 20 minutes. Some of the questions are also in the same category so we are trying to answer not the same question several times, but hope that we can give satisfactory answers to most of the questions that has been put forward to us. So Pal?

[Pal Aurvag, executive]

Yes. We have some questions and we can start with a question related to dividends, do we have?

Let's say yes, I think we have previously announced that our major -- or the scope is to have growth as a growing company and that dividend is not priority 1.

And then there is have we any percentage related to growth for the coming years or plans for dividend?

[Gunnar Larsen, executive]

With regards to the growth, what we see is -- what we have projected now is the organic growth of approximately NOK 1.3 billion in 2025. And then in addition to that, we already are looking at several possibilities. We see that we are becoming more and more interesting for different type of companies also that see that they could do something together with us. So with regards to dividend, we will always have a focus on having a sensible dividend policy towards our stakeholders, our investors. But from what we see now from the perspective that we still -- we have a lot of opportunities to grow and invest in growth. I think that will be the major priority for the coming period at least. And that is also investing in profitable growth is also investing in value for our investors.

[Pal Aurvag, executive]

Then there's a question related to hydrogen. Is there any agreement with governmental support related to new contracts for that business?

[Gunnar Larsen, executive]

We have the general institutions in Norway that are supporting research and development and business development like Innovation Norway, Enova, [indiscernible]. And these organizations, they have frames that we will be utilizing as much as possible taking the free cost project, which is then developing an energy system for large -- hydrogen energy systems for larger vessels has a huge support from these institutions. And we are looking in all different companies also including hydrogen to still utilize that possibility. The Norwegian government has also put up money for developing hydrogen in general in Norway. They also have some governmental tenders for vessels that were operating on hydrogen. But frankly speaking, we are expecting that the government also take a bigger part and invest more in new technology also regarding hydrogen. And I think that is also what we have seen as signals from the new government.

[Pal Aurvag, executive]

And there is a statement, it's difficult to get Norwegian resources or workers. Do you want to see or look for the resources abroad to pick up the resources you need related to the expertise required for the growth?

[Gunnar Larsen, executive]

First of all, the maritime cluster in Norway is extremely strong. So there is a lot of good resources, good knowledge also in Norway. We are localized in Olufsen and in Bergen and in Fosnavag and we have the possibility and the flexibility to recruit competence and knowledge from these places. And we also have the possibility of course to do the same abroad. I think that initially will be when we are establishing bridgeheads in strategic markets abroad, then also we have the possibility to recruit competence from there. But we are not limiting at all for recruiting Norwegian competence. We recruit competence wherever it's needed in addition to doing it from a very strong maritime Norwegian cluster.

[Pal Aurvag, executive]

Yes. And we can also add information that we have branch office or we have engineering both in Croatia and Poland. And also now with the opening of the office in Turkey, we also have resources from that area.

[Gunnar Larsen, executive]

Yes, correct.

[Pal Aurvag, executive]

Then there's a question related to Euronext Growth. The investors are running from Euronext Growth is the statement. And then the question is do we have any plan for moving up to the main list at the stock exchange?

[Gunnar Larsen, executive]

We do not have any plans as per today to do that and that will of course be an evaluation that will be done regularly on what is sensible for our company. But we are confident also that when we continue to deliver results, we continue to show improvement, we continue to show development, even being on Euronext Growth can be a good arena for HAV. But we will take those considerations as we go through our development and then we will choose what is best of course for the company with regards to having access to the financing that is needed for the growth strategy that we have.

[Pal Aurvag, executive]

I can link that question to also another question related to what do we do to get more investors from funds or big investors.

And of course if we move up to the main list, of course we are able to get -- it's easier for them to be investors because there are some regulations and also related to investors from abroad. It's easier to be investor when you are on the main list. So we take this into consideration with the other perspectives.

And then there is several questions related to how do you see the market some for 2020, some for 5-year perspective. And I think maybe you have answered that.

[Gunnar Larsen, executive]

Yes. I think I answered maybe in the presentation. But again even though we are living in very uncertain times with regards to the Ukrainian crisis and the effect of the crisis is not very easy to foresee. It's very difficult for me at least and for us in HAV to see that we are changing with regards to having to do something with the environment. We are in desperate need of energy and we are in desperate need of reducing emissions of -- and our technology is doing both. We think again it's very important to have focus on reducing energy consumption also. We have to produce more renewable energy, we have to increase the energy production in general, but we also have to reduce the energy consumption and the technology from all our companies are contributing to that. So we feel that the market outlook has not changed since we entered or even before we entered into HAV and for the future, I think it will only accelerate and be even more. So we are very optimistic for the market development for our products also onwards.

[Pal Aurvag, executive]

There is also a question related to the short-term basis 2022. Will we see an explosive growth in the year ahead?

[Gunnar Larsen, executive]

We have established a policy now that we do not guide short term. The guiding that you will get from us is the guiding that we said that we are very optimistic for the organic growth and that we will be able to have a revenue in excess of NOK 1.3 billion in 2025 with sound margins and that is the aim that we are looking for. And then of course we are also in a project-related business so you will see fluctuations in our revenues for instance from quarter-to-quarter and maybe in the short term. But that is -- we see that the trend, if you draw the line from now until 2025, we will have very huge opportunities and very good growth onwards in the horizon that we are guiding for and we are very positive.

[Pal Aurvag, executive]

Next question. Will all contracts be communicated through NewsWeb, this portal on the stock exchange for the future?

[Gunnar Larsen, executive]

Yes. We see of course that investors, they are always looking to have as good insight in the company as possible and you cannot come and look into our books on a regular basis. So information from our side is very important. We have strengthened also our internal resources with regards to being able to tell the message and give good information on a regular basis. With regards to contracts on NewsWeb, we will -- we have to publish important contracts that will affect the market and we also publish some contracts that we think is interesting for the investors. But we will not publish every contract, every small contract for instance. Like for instance, Norwegian Greentech maybe have 150, 200 contracts per year or something like that. We cannot publish all of them. But we will still be trying to be as good as possible in communicating the right information to the market. And we also hope that the general development in the company and the things that we are doing will give you confidence that we are in the right way and have the right strategy to reach the growth that we are projecting.

[Pal Aurvag, executive]

Then there's a question related to the ballast water management system. In our information, we say that we focus on the smaller and midsize ships. And the question is then is it possible to scale up this to fit the larger ships for the future?

[Gunnar Larsen, executive]

Yes, the technology that we have can be scaled up to the largest vessels. But very often if you are going to be competitive, if you're going to be profitable, you are not going for everything. You have to go for where you have the best possibilities to compete and the best possibilities to make money. And when we started the offshore ballast water treatment boom, there was approximately 60,000 vessels that were going to be retrofitted in a period of 5 years. And aiming for all the 60,000 vessels is not possible and then we aim for the market segments that we are most competitive and that is the smaller and the midsize vessels. And in our growth strategy now, that will still be our focus and we see that taking the -- utilizing this possibility, this opportunity has more than enough growth potential also for the ballast water treatment system. So it's better to be very good in these segments and get as much as possible of this market than to try to take a larger segment of the market.

[Pal Aurvag, executive]

Also another question related to the ballast water. We have kind of communicated that we have this USCG approval now in February and of course that is linked to the U.S. Coast Guard is the USCG let's say that's what it stands for. Will the American market be or get any special attention for the coming period? Do we have any, let's say, plans for entering into that area both for Greentech and also for the other business areas?

[Gunnar Larsen, executive]

Yes, U.S. market is important for Norwegian Greentech and ballast water treatment systems. The U.S. Coast Guard certificate is not only applicable for U.S. built vessels. They are applicable for all vessels entering U.S. waters and that means that it's equally and maybe even more important to establish bridgeheads and maintain the bridgeheads that we have internationally to sell to all nationalities and geographical areas because they are building vessels with U.S. Coast which will be visiting U.S. waters in almost all around the world. And we also have of course attention on U.S. both for Norwegian Greentech systems -- Norwegian Greentech and also for other companies.

And I hope also that you will see results from that also in what we can project for the future. But for Norwegian Greentech and the ballast water systems, the most important was to get the U.S. Coast Guard certification because that opens an even bigger market than we have had today everywhere in the world where ships are built or retrofitted. And I must say that I'm quite proud of the guys that have been able to have this growth already in 2021 without the U.S. Coast Guard certificate because we have seen that that has been a barrier in order to get in some -- with some owners and in some markets. So hopefully, this will give a very good boost now in 2022 with regards to being able to take a maybe even bigger market share for this company.

[Pal Aurvag, executive]

Then there is a question related to the stock and, let's say, the analytic the cover of the share. Today, Fearnley Securities is the one that has published any analysis. Is there something -- is there others that will do this? And HAV Group, do they want to pay for this and get more reports out to the market?

[Gunnar Larsen, executive]

We are in dialog with several analysts companies and providing information and having a good dialog. And hopefully with the development that we will show, more companies will also -- analysts will be interested and take coverage of the company. We do not have any plans as per today to pay for any analysis. As I say, we hope that development delivering results will also generate interest for the stock, interest for the company and not at least value for the investors.

[Pal Aurvag, executive]

Then there is a question related to the buyback of the shares. You buy approximately 15,000 to 17,000 stocks per share. Why don't you buy more?

[Gunnar Larsen, executive]

We are in general, as we said, limited by the safe harbor rules so there is a maximum amount that we can buy. But we see that from the broker that is doing the buyback on our behalf that the biggest problem is available stocks. So they are buying everything they can get hold of within the safe harbor limits. But up to now, it has been difficult to utilize the full level that we can have there also. We have seen that it has increased a little bit lately and we will continue in the same strategy until, I think it's end of May or 1st of May I'm not quite sure when, we have this original buyback program. So the offering of stocks, if there is a bigger offering of stocks, then also we will buy more.

[Pal Aurvag, executive]

Yes. Then there is questions about international growth, should HAV Group be a leading international player in, let's say, its business?

[Gunnar Larsen, executive]

Yes, that is maybe difficult to determine or define when you are a leading player. I think technology-wise we are leading in most segments that we are. There are bigger players in some of the segments. But we will do our utmost to utilize the platform that we have with a sound financial situation, very good technology, very good people with very good knowledge in order to take as big shares of the market as possible. And then time will show if we can be classified as leading in some of the segments. At least the potential for us is still very big and maybe even better to be in our position, taking a bigger part of the cake from the leading suppliers than being a leading supplier trying to defend. So we hope to evolve at least and take market shares in most segments that we are operating.

[Pal Aurvag, executive]

There is also another question related to growth and expansion. HAV Group should be a support to the global green shift through, let's say, development of companies. Do we have any plans related to this?

[Gunnar Larsen, executive]

Yes, we have plans. Of course we think there are good opportunities also. We cannot publish any of this in such a Q&A session of course. But we are looking for companies that will add something to the existing group of companies and that is -- that can be complementary technology, that can be market access and it can be possibilities for growth. So as I said previously also, we are looking at prospects and we are also looking at getting more prospects. So if there are companies that see that they are fitting into our strategy, they are very welcome to contact us and discuss how we can cooperate in order to together get mutual benefits out of the corporation in order to grow.

[Pal Aurvag, executive]

What type of resources is transferred from HAV Group to HAV Group? That is related to a highlight that was in the report?

[Gunnar Larsen, executive]

Maybe you can answer that, Pal, because you are in charge of most of them.

[Pal Aurvag, executive]

Yes. Let's say HAV Group is a spin-off from Havyard Group and we had what we call as shared service solution. We had resources and economy, IT, we had law and HR in a central resource pool. And those resources are now transferred into HAV Group and we are selling back some, let's say, a small part of the capacity back to Havyard Group. But the main focus is now HAV Group. So I think in number of figures to 10 persons. So before 1st of March, they were -- we bought the same resources into the company. Now we have it in our own hands and sell a small bit of it back to Havyard Group.

Then there's a question related to the green shift and growth. I think the question is if we are going to go down the supply chain and buy more of what we actually support in the package. So are we going downwards and buying the suppliers?

[Gunnar Larsen, executive]

I think we can go vertically and horizontally, it's depending mainly on the complementary and how this can support our strategy. So we don't limit which type of companies we are looking at, but we are not just buying companies for growing either. It has to give synergies, it has to give complementarity and it has to support profitable growth in the total company.

[Pal Aurvag, executive]

There was a question related to the revenue ambitions for NOK 1.3 billion. As I understand, the revenue is worrying a lot and that's also an issue for us when we are reporting. We see that the revenue is up and down between quarters and that's, let's say, all into the amount of trading. So the question is do these ambitions include the trading parts?

[Gunnar Larsen, executive]

Yes, it include the trading parts. But I would say that this ambition is, let's say, an average case with the normal percentage of trading. So that difference is in trading. Or to say it another way, the part with the normal trading will increase in our projections so hopefully if things deviate from this, it can deviate in a positive direction. But still periodically it can be fluctuations as we say that when we are both selling with a bigger part of trading and also if you have periods with lower deliveries or bigger deliveries, then this fluctuations will be bigger. But again for instance when Norwegian Greentech and their ballast water treatment systems, which is a much more stable income with smaller orders in bigger amounts, they will support the base so that the base will grow and the fluctuations maybe will be a little bit less than they have been at some times at least previously. But trading will still be a part of the business.

[Pal Aurvag, executive]

It's an interesting question here. I think it's related to you mentioned the 60,000 ships in the ballast water treatment. And how many of the ships have still not got the ballast water treatment systems?

I think that's difficult for us to answer. But in general we see that the boom -- both due to corona and now also with other issues in the world, we see that the boom is going to the right in a way that we said that.

[Gunnar Larsen, executive]

It's a little bit postponed. But I think our projections there is also that it will be a growth until maybe 2025 and then you will see a downturn in the retrofit market at least. But then again, it's depending on the new building activity, which will be the base. We will see that when we are finished with the boom and even during the boom when we are putting ballast water treatment systems into the market into operation, then they start generating recurring revenue in the aftermarket. And that is also very sound business normally with good profit margins. And then in addition, we are developing the new technology for new markets within water cleaning also within Norwegian Greentech, that which will support the further growth.

[Pal Aurvag, executive]

As you are expanding internationally, how -- let's say what's the share -- your international share of your business today and what is your expectation for the future?

[Gunnar Larsen, executive]

Yes. I don't have the figures, Pal, in my head. But it has developed very positively at least because if you look at 2019, 2018 for instance, we delivered very much to the shipyard in the group Havyard, which is now Havyard Leirvik. Now we are not delivering anything almost internally and more and more of our business is international..

[Pal Aurvag, executive]

Yes, I think and of course that is also due to the -- or let's say the activity in the Norwegian yards is quite low in general. So that's it. There are some detailed questions related to merger and acquisitions and how close we are and et cetera. I think that's questions we're not able to answer.

[Gunnar Larsen, executive]

There's very many questions and that is very positive because that shows interest. But at the same time, we have to try not to answer the same questions.

[Pal Aurvag, executive]

Then there is a question related to hydrogen, how far are we from these approvals? I think you mentioned maybe some in your presentation.

[Gunnar Larsen, executive]

Yes, I did and of course it's like with the U.S. Coast Guard. It's a little bit similar also the U.S. Coast Guard certificate because we believe that we should have that I think in third quarter last year and that was based on that we were finished with everything. We have sent everything to the U.S. Coast Guard. Then there was different type of questions and we needed to deliver new information. And the same has been with hydrogen also, but there the question has been or the issue has been even more difficult because there is no regulations. So you need to have discussions with the Class and authorities, how -- what kind of criteria to be used in order to design and approve the system. But as I said earlier, now the milestone that we have passed is that I think we have an agreement with the Class and authorities on what they require, what type of documentation they require in order to do the approval.

This documentation is sent to the government and the Class. And we are also in addition doing risk -- an additional risk analysis. So now it's the communication with Class and authorities that will define or determine how long it will take. What I maybe also would like to mention is that you see that there is several suppliers also within the hydrogen segment that has got approval in principle for their systems. It's a little bit difficult to explain, but approval in principle is more like general approval of a concept. You cannot put that concept into operation, then you need to do a formal approval. What we are doing now is that we are doing a preliminary approval, which is much further and much closer to the final approval. So when we get preliminary approval, if a customer wants to buy this installation that we have approved, the distance and the time to have this finally approved is much shorter than if we had just done the preliminary approval for the system.

So I'm very sorry that I cannot give you a final answer on that still, but we will keep you informed of the progress. And I can also say that we are working very hard in the market in order to detect possible pilot projects. We are developing more modernized systems and being ready to get the final approval and get the projects when these are in the market. So hopefully you will see news and positive news also from HAV Hydrogen not in the far future.

[Pal Aurvag, executive]

Yes. Then there is a question related to the office in Turkey or not just office, the company in Turkey and the risk inflation and also the risk in Turkey. And let's say, first of all, the resources to be employed in that office or in that company is local resources. That's first of all. And this is skilled workers within electronics and automation.

[Gunnar Larsen, executive]

What is the question?

[Pal Aurvag, executive]

Yes. Is the risk if you have evaluated and is this a healthy establishment or let's say, should -- maybe he's worried about the cost and the risk that I think.

[Gunnar Larsen, executive]

Okay. First of all, HAV come from Havyard and we have been operating in Turkey since 2005. The shipyard in Havyard bought more than 50 hulls from Turkey outfitting in Norway. We have very good relations with Turkish companies and Turkish people. We have always been aware of the risk. The risk is difficult to handle. Of course the risk was much bigger when we bought all these hulls in Turkey at the time at the shipyard. We have evaluated the risk now also. But the concept of the company now is mainly to support the deliveries that we have directly from Norwegian Electric Systems in Norway to the Turkish shipyards.

The reason behind the strategy was that it was very difficult to compete with the local system integrators only operating from Norway because we see it to be close to the shipyards, to be close to the customers giving them support, having local commissioning engineers and also doing local engineering and some local purchasing can be very sensible in order to both get into the market and being profitable in the market. The risk within the company is not so big because they will not be a huge entity in Turkey. They will have the necessary resources in order to support the Norwegian activity and they are supplying services into the Norwegian company. But we are aware of the risk of course and we will continue to monitor it and we will do mitigations always in order to have the total risk as low as possible. And that applies of course to all of our business in different areas of the world.

[Pal Aurvag, executive]

And then there's a question related to the USCG approval. And is there a new market opening up now and, let's say, will be represented in U.S.?

[Gunnar Larsen, executive]

I think we answered that questions already.

[Pal Aurvag, executive]

Then Havyard Leirvik having problem with getting their new ships, does this affect HAV?

[Gunnar Larsen, executive]

There's still 3 vessels to be delivered. 1 is close to be ready and the other is in the final stages. From HAV, we have delivered I think all of the equipment and all the deliveries. What is left is the commissioning work. We also have security for all the payments so the risk is very low for HAV Group. The effect can be that we have to be involved in these projects for a longer period than was expected. But there is no big concerns from -- for us with regards to Havyard Leirvik projects.

[Pal Aurvag, executive]

And there's more detailed questions regarding mergers and acquisitions. So I think when we look at the cash balance and also that we are listed that we have the tools to be able to both use our own funding and get external funding. So that's okay. So I think that was to the end.

[Gunnar Larsen, executive]

So thank you again for listening to our presentation and especially for giving a lot of good questions that we hopefully have answered at least so you have got a better understanding of the company. It's very good to see that so many are interested in HAV and interest is what we want. And again, we want to show you that we deliver on what we promise and that you will see development. Hopefully we can also satisfy your needs for constant news. And to 1 of the questions we got here also and I got in an e-mail also, we will make coffee cups with HAV and good investors maybe can get a coffee cup with the HAV brand on enjoying the coffee and hopefully seeing good development in their investment in HAV.

So with that, I think we wrap up the session. And then we are looking forward to going back to work and creating value for the company and our stakeholders. We hope you continue to follow us. And then we are looking forward to this same stage again in May when we are presenting the first quarter results. And before that also, we are presenting the fiscal year reports.

[Pal Aurvag, executive]

Yes, but not online.

[Gunnar Larsen, executive]

No, not online. That only be on as a stock announcement. Okay. Thank you very much.