I-Tech AB

STO:ITECH

Earnings Call Transcript 2023-Q2

[Unknown Attendee]

Hello, and welcome to today's webcast presentation, where we have I-Tech who will be presenting the Q2 report for 2023. With us presenting, we have the CEO, Philip Chaabane, who will be presenting today. IF you have any questions for Philip, you can use the form that is located to the right, and we'll take that up during the Q&A section after the presentation. And with that said, please go ahead with your presentation, Philip.

[Philip Chaabane, executive]

Okay. Thank you so much, and great welcome to our second quarter presentation. As mentioned, my name is Philip Chaabane, and I'm representing I-Tech as the CEO. Today, we are happy to announce the quarterly report and for you who are new, we have [ this one slide ] introducing what we do. So we are I-Tech interface technologies, that's the company that is IPR-driven tech company with ingredient technologies that are sold into the marine coating industry. The technology and the product is called Selektope. So it's 2 different brands, right, company is I-Tech, product is Selektope. The purpose of what we do is try to help make shipping much more efficient by keeping the underwater health clean and cleaner than what it has been before. That goes in hand with the sustainability targets within shipping, which is quite influential in the global CO2 footprint due to its huge representation in global transport systems. And the product, that is quite a unique one. We call it Selektope because it's selective and it acts against an octopamine receptor. It is hence a biotechnology-driven research program that span this product out from Gothenburg University and Chalmers University. It is a molecule. It is added to paint, and it is then available at the surface of paints, if correctly formulated, of course, and when in contact with -- in this case, the barnacle larvae, it forces them to swim away from the surface, like keeping 2 magnets together with the [ rolling side ]. It is impossible. It's a repellent technology rather than a [ legal mode of ] action technology. This is the uniqueness. The opportunity, if all this works out at the maximum capacity is somewhere around $350 million to $500 million. That is if Selektope molecules are introduced in recommended concentrations in all known production of antifouling coatings around the world. Of course, that is a maximum value somewhere. But all of these coatings do contain some sort of protection against barnacle fouling anyway. So theoretically, it's doable. And we are only at the starting point of this journey, as you have understood. So keep in mind, I-Tech the company, Selektope the products. All right. So now to the quarter. Strong quarter, strong sales growth boosts confidence. The customers continue to show strong confidence in our product, which clearly is reflected in the sales figures for the quarter. I want to stress [indiscernible] confidence in this report because we have come through a quarter here with some not so good or positive result as results -- news, I should say, from regulatory processes in EU that was conveyed earlier in the quarter. Now we see happily enough that our customers stay firm. This is a natural process that in many other cases also ends up with some different question marks, and it's far from being judging their faith in our product or in our technology. That means sales are up 85% compared to the same quarter last year, and that is a tremendous increase in growth. The EBITDA margin has improved. It's 29% reported to this quarter compared to 19% before driven by strong cost control, but mainly the higher sales growth that is accelerating all this and sustainable and growing net results, adding to our cash balance. That are the highlights -- those are the highlights for the quarter. Of course, we'll come into more of that. So a good start to coming back to office from summer break. The trend since some time has been looking quite well. We had our bumps here during the COVID period and our -- since early 2022. These are rolling 12-month figures. So it's not the actual event of that specific quarter, but we can see that the trend of the curve on the revenue side, which is the dark blue one, clearly picks up very nicely here in 2022 and accelerates into 2023 throughout the second quarter. And important to remark here is that the costs are not -- are shrinking in relation to the increase in revenue. It's a highly scalable business model that we have now proven that it works, and the consequences are [ very good ]. EBITDA margins that are now coming up on the really good levels. So this graph basically tells everything. Business model is working. We're growing. We're keeping costs under control, and it's becoming a very nice -- quite small, but very nice entity to work for and to have shares in [indiscernible]. Drivers for our work that is generating the eager and ambitions every day here to try to push forward on this increase in sales and keep cost under control and all that, is that we are part of a very interesting development in the shipping industry. That itself is responsible for some 80% of all transports around the world. So it's a very big system in keeping globalization and global trade floating. But it's not only representing a lot of goods, it's representing 2.3% to 2.6% [indiscernible] global CO2 emissions. That is quite a big footprint similar to the footprint of Germany as a country, splitting that by top mines, of course, it becomes less dominant in the transport sector. But as a total, as a whole, it is significant. The opportunity here on coatings because it is possible to derive or estimate the potential savings on coatings alone, meaning the underwater system is claimed to be around 100 million tonnes of CO2 saving potentials on these coatings compared to where we are today. So there's big opportunities and coatings are, as you know, our home turf when it comes to our business, our molecule is well integrated into many of these coatings as we speak. The second reason why we work for I-Tech and hopefully feel the same investing in I-Tech is that it's also protecting the marine ecosystems. It's proven that a [indiscernible], it could be a niche area, or it could be anywhere else on hull definitely poses a risk to bring forward alien species that could jump off or drop off in a new ecosystem and then become invasive, and that is a big environmental problem. So it's not only ballast water treatment. It's also hull condition that is part of this risk of transporting invasive species. So that is another good reason. And thirdly, it's about doing all this job, meaning saving fuel and emissions and protecting the ecosystems without emitting more than necessary of chemicals or active agents. And with Selektope, one could reduce and optimize these formulations to its best possible performance given the different ship types of operations. So it's a useful tool for paint makers to rethink a bit their traditional formulation concepts, meaning down the line, reducing biocidal loading or combining biocides in a much more efficient way than before to actually give the ship an even better possibility to escape any kind of marine fouling attachments. These are the reasons why we're here. Development in the customer sector is big. I should have said maybe before that more than 90% of our revenue in this business comes from 9 players where 6 are by far the most dominating. We are working with all of them on an R&D level, on the commercial level with 6 of them and that is commercial newbuilding, commercial dry docking, which is a bigger sector in volume. We're working with 3 of them. We hope to obviously bridge over from newbuilding customers into dry docking [indiscernible] where the most -- the more interesting volumes are. And there are new customers coming out as we are continuing the dialogue in a positive way with both of those. One is new altogether. The other one is hopefully bridging over from some presence in the newbuilding market to more accentuated presence outside, meaning dry docking. We're investing a lot of R&D in this to help bring forward new ideas and new formulations and make our molecule relevant, also new formulation systems. So that's where a large part of our investments go. All that included in the CapEx, of course, and OpEx, sorry. So a bit of a brief here on the shipping and it's a proportional impact on the transportation sector. The transportation sector according to Clarkson, the global footprint would be 25% and shipping would then be around 9% of the transportation part, somewhere around 0.8 billion tonnes. Actually measured out of 2023 from the same source [indiscernible] 822 million metric tons of CO2, meaning that they have more than 300 million metric tons to go before they close to the target 2050, which likely will be tightened as we move forward. So this is really a big impact, and this is driving technology investments in the industry. The good thing is that our is proven. It's not associated with taking a lot of risk and it's less by all the big paint makers who have recognized their performance and are now trying to work out their best possible formulations to help reduce this gap of CO2. Speaking of different technologies. Of course, there are many things to do on a ship, obviously, changing to hydrogen fuel or any non-fossil fuel where [indiscernible] instance change the whole game, and it would become so much more carbon friendly, so to say, provided that this energy source is produced on the carbon-friendly processes. But that's a huge change, and it's not ambitioned to happen in the near term or even maybe even midterm. Meanwhile, a lot of other technologies can make a big difference. The coating is definitely one of those, so continuously optimizing the selection of coating, optimizing the technology content in coatings has an interesting potential in the very near term to save 5% to 25% of CO2 depending on the reference of that ship. There are some other good ideas as well, of course, and the combination of these will take this industry a great bid on this trajectory to save the 300 million tonnes that still are needed to be saved. And we are happy to be part of one of these more tangible solutions. How it needs coating all the time and needs to be recoated every 4 to 5 years. So it's always a question on the desk. And in that sense, it feels good to be there. And on top, we're in the portfolio, most of the dominant paint makers. So the window opportunity is good, and that window is also being opened widely by regulators. It is not only the graph I just showed you but it's also the IMO who are together with [indiscernible] imposing and agreeing on milestones to improve CO2 footprint, and that is accompanied by a certain index, trying to show how efficient a ship is. And when this information a year or so from now become public for many of the ships, there will be a challenge to -- and a race and a challenging between them. Of course, to gain the best possible rating because would have an impact on charter rates, that would have an impact on tax, on financing, on insurances and so on. And we think this is one of the biggest driving forces in the industry. And then I speak for quite some time back, actually. So this is clearly over the coming 5 to 10 years, something that's going to be helping technology to move into this industry. But it's not only that nowadays. It's actually also now European Union Emission Trade System that is coming into shipping as well. It's known from other industries. But as of 2026, it will be put in foot force in the shipping industry. And that actually means costs will increase as of 2026 for the specific ship, if it's not reducing its emissions or even trying to avoid the carbon emissions. So it's the CII rating, which has secondary effects, and it's a direct effect of Emission Trade Systems. On top of all that, there are port alliances and the country alliances trying to create green corridors and other kind of incentives under what is known as the Green Shipping Challenge or Green Shipping Collaboration. These are fairly related to -- or driven by ports actually that they want to help optimize ports, so they don't come too early that they have sustainable ships coming to the ports and shore power and everything else available. But they will also have [indiscernible] protecting the waters from pollutants and from alien species of course. So all of these are relevant for us. Now back to the quarter. And now this time in actual figures rather than percentages. So what you have seen in the quarterly report, the sales figure of SEK 32.6 million in the first quarter -- sorry for the wrong month here, but that's for April to June, of course, and then comparing that to SEK 17.7 million for the year before. And for the half year, really picking up good here, January to June in 2023 is SEK 63 million versus [indiscernible]. Really good increase and really closing up on the full year 2022 sales levels. Gross margin is okay. It's where it's been past times. It does increase the different quarters, depending on customer mix mainly. On the EBITDA level and EBIT level, I would say, strong performance, a bit better performance the same last quarter, quarter 1, but still good. And as you can see on the EBIT and EBITDA, it's on par or maybe even exceeding what we achieved on the full year 2022. So we're clearly showing scalability in this business model this quarter and this first half year. And cash balance is obviously increasing mostly in conjunction with this strong growth and higher profitability. I could also mention the currencies are in effect -- is a tailwind effect in this quarter as well, not as accentuated as before because of the comparative figures maybe, but it's 79% currency adjusted growth this quarter. And I think this basically summarizes this. I should mention that we have a dependency of 2 large customers here. So 68% from one -- big one, Chugoku and another big one without a name at the moment. Unfortunately, it's somewhere at 29%, I think it was around 30%, 29%. So those 2 based in the Northeast Asia are clearly dominating our order book, but it's good that we now have 2 and we're quite convinced that this will become a matter for more customers looking 12 to 14 months to 18 months ahead. We'll see some nice developments. Korea was important. A lot of shipments into Korea. I think we said 50% in the CEO statement of the deliveries were into Korea, which is obviously true. So that's a newbuilding market. And consequently, this quarter was [ quiet ] in this first half [indiscernible] angle towards newbuilding, but that's not all our volumes. We do have a dry docking business maybe around 25% to 30% during the first half year. And it has to be mentioned that the cost impact from this EU/BPR has been notable, but it's not really impacting the bottom line figures. But if we put in contrast to external costs in general, like we have, it's about 20% of external costs. Of course, we have reduced some other costs. But -- and I would say, these are very cyclic. It's not every quarter, we will have these specific consultancy costs associated with this process. They will come and go. So for the first half year -- sorry, for this quarter, we had 20% of external cost, less for the full year. So I understand that you are interested as we continuously move forward in this EU process. We're focusing on the ED assessment since May this year, which -- in which we got a lot of attention because expert group within the 3 stages of ECHA opinion and dossier development they put forward. So the expert group had forward a statement that they believe that we -- the Selektope products, the molecule of medetomidine, which is a generic name, should be classified as ED, endocrine disruption. Since then, we have been gathering all kinds of support to push back on this, which can only be done through written comments into the Norwegian Environmental Agency who are responsible for our dossier at the moment. It is not so that they are obliged to listen to us or even read what we send them. So we have no clue if this is being taken into account or not. Either way, we are having a huge good and strong file that will be considered by the ECHA when the dossier is filed to ECHA, which is done during quarter 3 this year. And at that point, we do have a bigger possibility to influence the scientific reasonings. We have strong confidence that our case is solid, so does the scientific experts working for us. But politics is politics. So we are always cautious and will not put any forward-looking statements on to this matter. Should we set on the time line here that we are now leaving this preliminary phase and moving into the more formalized phase, which is the ECHA process somewhere during 2023 -- sorry, the rest of 2023, the member states are -- will review the full dossier, not only the ED, but all other aspects as well. And somewhere in 2024 first half, we will understand where they are on this and we start to have a dialogue, what we call working group meetings. And after that, we will come back with more clarity around the future plan. As we have said before, 2025 is set as the end time line for this process, if it functions as normal. We know from other molecules in the marine industry that are going through similar things or have gone through similar things in the past. But these time lines can be changed considerably. We have examples of those who have been prolonging the time line 8 years or 10 years even from this phase where we are now. So let's see. The only thing we know is that we're not alone with having challenges with the regulators within the marine. So likely there will be a lot of noise from others as well moving forward at some point. Finally, some of our really nice pictures during a trip to Hamburg with the team where we gather to discuss how to address different opportunities and challenges, of course. And in conjunction with that, we listed one of the busiest ports in Europe, the Hamburg Port and got a really close by to the huge ships that are every day, keeping our commercial trade system floating in this world. As you can see, the hulls are really big, the ships are really big. And I don't know if you can recognize in this green ship, there's a small boat here on the right side. You can just put a relation between that and the big ship itself. And the other interesting remark with these 2 pictures is that we completely exhausted coating system on the bottom left. That's how a coating system looks after 5 years, which we assume this is completely eroded, almost no coating left. That's the purpose, but it's also a dangerous if they go too long in water because they [indiscernible]. And then a lot of mechanical damage from anchors and so on. And this in contrast to the picture on the top left, completely newly painted ship, amazingly looking. I think you immediately understand what kind of benefits a ship has to keep the hull refreshed and in good condition as long as possible. New, old and then huge ship showing the magnitude of this industry. So by that, I thank you for listening in and look forward to questions.

[Unknown Attendee]

Thank you, Philip, for that presentation, and I will jump into the Q&A section, like you said. And with some of the first one. Could you give us an update regarding ongoing customer projects in general? And if there are any changes and maybe the outlook for the coming 12 months?

[Philip Chaabane, executive]

Yes. We have good progress in our customer development programs. We shipped quite a lot, actually, test material even after this announcement from the European Union to European large paint makers showing that there is a lot of forward-looking faith in the molecule and they are considering that molecule and not only the traditional coating systems, but also novel coating systems. So in that sense, we are very happy here that we are part of that. And I should say that we have collaborations ongoing, some official in the sense that there are [ in contract ] and some just ongoing with all these -- most of these big ones with different formulation types and novel ideas that have come up throughout the years here. So in that sense, there's no slowdown at all. It's [indiscernible] some increase in that -- in those kind of innovation-driven collaborations.

[Unknown Attendee]

And what's the status regarding Pettit Marine?

[Philip Chaabane, executive]

Pettit Marine is ongoing in dialogue, of course, there's not much Pettit and I-Tech can discuss at the moment other than confirming that Pettit tests in their different test sites prove that they have a very interesting and well-performing products with Selektope included. The reason why it's not propelling forward is because US-EPA have been delaying their answers in the process. Remember that Pettit and I-Tech are together going into this process. And we're not receiving responses, haven't received for the last 2 years other than delayed responses that they don't have time. And we know from Pettit that this is the same for all the different marine coating systems and ingredients. So it's just ignorance from U.S. authorities to deal with this and probably in -- because they're prioritizing other things and have a sharp reduction in staff following previous administrations that basically laid off at least a huge portion of experts in these agencies. So the ECHA/Environmental Protection Agency is one of those that got really hit. So things are just slow. We hope to be able to update you at the year-end because that's the next deadline for the authorities in the U.S. to give us a new indication on what we can expect.

[Unknown Attendee]

Okay. Do you have anything new regarding marine installations that you could comment on today?

[Philip Chaabane, executive]

Nothing new, [ Mike ], of interest for this community. We are continuously together with paint makers working with this and see if there are any other ideas that includes ocean-based energy generation, but it's also aquaculture and so on. But there's nothing specific on this that will impact our financial results in the near future. We do have this nice conference. I can inform about where we gather the whole global antifouling community, all customers in the world basically are coming -- the bigger yards are coming, the biggest, most in-depth technically-driven shipowners are here in Gothenburg 2 weeks from now and also a few representatives from these other [ use ] areas. So that's an opportunity to listen to their challenges as well. So -- but that's only on a very early level.

[Unknown Attendee]

Okay. The cash back balance is SEK 7 million. What's the plan regarding utilizing the money that most likely will continue to increase at an accelerating rate for the coming years?

[Philip Chaabane, executive]

This is becoming a very positive mission, right, a challenge from having -- not having money hold for many years. Now this is a topic, and I'm happy that this becomes a question here. That is [indiscernible] question. We are doing what we can now to look on the different routes available to expand within what we do or in adjacent areas. And then in parallel, obviously, the dividend question is on the Board. Agenda likely for the AGM, if nothing else has happened until then. But also, please remember, it's good to have cash for rainy days, maybe not this much and we maybe need a quarter or 2 more to see how costly this process in the European Union is. So far, it hasn't indicated that it's all costly, as you have seen, and this was a very intense quarter if you take it on that level. So we don't really see that process requiring that much cash either. So let's see moving forward, but I'm happy that we have this discussion because that proves that things are going well. And in due time, there would be a more specific response to this.

[Unknown Attendee]

Is there any intent to begin paying dividends in the near future? Or will all cash be used to grow the business?

[Philip Chaabane, executive]

The priority task is to see if there are relevant areas to grow the business with taking use of this cash, either organic or by acquisition kind of things. But as you know, we're in a very specific industry with very few alternatives where everybody is having similar opportunities and issues that we have. So it's not a given, but there may be a few, we will look into those quite closely. And then there's always this dividend. If we don't come up with something better, well, then dividends is a fair option.

[Unknown Attendee]

Is the Q2 OpEx level a reasonable measure for the coming quarters? Or should we expect more cost pressure?

[Philip Chaabane, executive]

No, I think it is very representative. There won't be quarters with [indiscernible] less. We have now understood that at least in the next maybe 12 months or so, the EU process won't be heavier than what we have reported now. And on the other side, on cost investments, it's a stable on budget kind of activity at the moment. So I don't think there will be much cost pressure coming forward actually other than what you have seen.

[Unknown Attendee]

Your profitable growth is trending positively. Can you comment on your scalability and the opportunities that lies ahead for I-Tech?

[Philip Chaabane, executive]

Yes, exactly, the scalability is really, really nice and this quality marks the whole company. That gives us opportunities as was discussed previously. We also think that the dominance of 2 customers -- I mean, first of all, it's good that it's a dominance of 2 customers, and we do have new opportunities coming around with new customers that hopefully will add to this growth curve and to this scalability. So for us, this is part of [ the burden ] of proof. So far, we have reached now, it's good figures, and we hope to be able to expand that through these collaborations and what we have said, possibilities to add new customers of significance to the top line.

[Unknown Attendee]

We're 2 months into Q3. Is there any guidance you can provide about the Q3 outlook? And is this supposed to be the weakest quarter for I-Tech?

[Philip Chaabane, executive]

We won't predict quarter 3, although we are very far into quarter 3. So -- but as you all understand, that's not possible to predict or to comment on. When it comes to [ season variants ] of the quarters, we are not seeing any such [indiscernible]. There will be quarters that are lower than others, of course, but that's due to more random factors, I would say, that's not the seasonality in it. Let me also say that quarters are becoming more and more competitive in comparative levels, right, because quarter 4 last year was quite good and quarter 1 this year is really good, right. So that may have an impact on the relative figures. But in general, where we feel strong, we feel confidence in our customers. We feel that there is interest in the technology, both on the [indiscernible] side and on the new products launch side. So all good so far.

[Unknown Attendee]

Do you expect the company to continue growing into 2024 under your double-digit previous guidance?

[Philip Chaabane, executive]

Of course, we hope so because that's the guidance for many, many years. Of course, there will be good and there will be less good years. But so far, we don't see any darker clouds on the commercial landscape. So definitely expecting a double-digit growth also in 2024.

[Unknown Attendee]

Perfect. What have you heard from your customers regarding the EU decision? Have you heard any plans to slow down Selektope demand due to this issue?

[Philip Chaabane, executive]

This is a good question because this is in sharp contrast to reaction by shareholders, right, and investor community in general. So the paint makers, they're used to these kind of issues. We are not the only substance that are troubling -- having troubles in the regulatory systems around the world. There's a lot of other issues going around. So for them, this is minor at the moment. They have strong belief in our case, which we obviously have explained to them. We are given a lot of confidence that we will sort it out and they will, as they claim, standby and support us and other biocides because there's only a handful left and if 1 or 2 of those goes, then marine coatings altogether go. So I think this is helping the industry together to unite and try to help each other because marine coatings are super sophisticated, and they have been built for many years around 5 to 6 different technical core compounds where a biocides is the majority of that, right? And with some initial issues here and some others on other compounds, I think together, we're going to sort this out because there's no options.

[Unknown Attendee]

We see that the top 2 customers represent 97% of the sales. What is the current status regarding the rest of your customers?

[Philip Chaabane, executive]

Large viability, I should say. Some of them come in, in the quarter with much more demand and then silent for a quarter or 2. So in this quarter, as you correctly pointed out, it's 2 major paint makers, which again is better than a huge dominance of one in [ internal ] risk perspective. But it's not that others have canceled their operations or their sales of the products. It's just an unfortunate quarter and not coming [indiscernible] orders. Having said that, it's a disappointment that some of the big accounts that we have talked about before are not growing faster, and that is still an issue, of course. However, both -- all of those paint makers are now have in mind with underestimated performance in terms of contribution to our revenue are ordering larger and larger R&D volumes. So a lot of things are going on there, and let's see where that all ends up, so to say. But I'm happy that we have 2 big paint makers contributing to this.

[Unknown Attendee]

What are your key tools to battle the change of the classification for Selektope?

[Philip Chaabane, executive]

So the key tools are scientific. We've had a few of those in the press release back in May 24th. These have been developed. So the scientific reasoning is strong. This means that we clearly do not accept that there is a link between this, how to say, the indications that the expert group have put forward and real world. So there's no link in between. And there's a lot of scientific reasoning to why there will not be a link, even if someone tested it. So in that sense, the scientific summary or scientific approach is strong. And it's also so that scientists are honestly backing us up by for thorough belief that this is not a relevant way of looking at it, the way the expert group did. The other [ bar ] is a legal one, right, because there's certain legal criteria that need to fulfill within the ecosystem to actually be classified as an ED substance. Also in that end, we believe we have a strong case that whatever expert group has recommended. And if it is at the end of the process, actually will be implemented. It is also in violation to how the European Union has specified the definition of ED criteria. And on top of all that, it is the social economical factors, as I mentioned just a minute ago, without biocides, and again, those are quite a few at the moment left on the market. Without those, the shipping is not going to be even close to say it's needed emissions [ to air ]. There are no good options taking in account a full fleet of ships [indiscernible]. Of course, there are kind of ships that could survive without biocides for shorter dry-docking intervals mainly. But for the long dry-docking intervals, it's less silicone or self-polishing coatings, all high-performing coatings over [indiscernible] systems. So the majority of the fleet do contain biocides. We believe that this socioeconomic thing will be to our and other advantages if it ends up in a political discussion at the European Commission.

[Unknown Attendee]

And what has been the response from your current customers on this suggested change of classification for Selektope?

[Philip Chaabane, executive]

Frustration that the lack of realistic scenarios are not taking into account, a frustration that it's all so hazard-based and not opportunity based, not even risk-based. It's only looking at hazard, not even take into account the use of the product, the good aspects of the product, the reasons why it's existing all that. I think it's a frustration generally in Swedish, it's not Swedish, European chemical industries that the raw materials are getting so much heat from regulators, whereas in other regions of the world, it's a combined product that's important. What does the benefit, what's the benefit versus the possible negative effects and then you make a judgment. So I think the frustration translates into support from the paint makers. There's no one backing down. There's no one saying that we won't work with you, or we would cancel our R&D projects, well the opposite. We see a good [indiscernible] all of them. And as an example, all of these big paint makers are coming to our conference, September 12 and 13 here in Gothenburg with 150 people from the whole industry. That's the sign itself, of course.

[Unknown Attendee]

And could you comment on how you see the competitive landscape and what your position is compared to your closest competitors?

[Philip Chaabane, executive]

Of course, our competitive landscape is both on the paint system itself and on the biocide system. In the biocide group of suppliers, there are some overlaps between the different products, of course, but there are also at least in terms of Selektope, combination opportunities that will increase performance. So in terms -- as Selektope is possible to be combined with all of those and then the different paint makers or different aspects to it, we believe that the biocidal future is lowering the concentrations rather than lowering the number of biocides. So taking -- using less of a few but optimizing metrics. So in that sense, we don't feel competition, right? We feel rather collaboration also with other biocide suppliers, by the way. If you take the [indiscernible] systems, certainly, if you're now a Swedish boat owner, there's been a lot of discussion about silicones and biocide-free and all that. That works in a very limited time frame on very specific vessel types, very specific [indiscernible] parts and are very difficult to recoat if mechanical damage occurs. We do see that [ biocidal though with ] silicones are getting momentum in the shipping industry, however. And that's another interesting area for I-Tech to dive into as we speak, of course, with in-depth collaborations with customers to figure out how that can be done. So -- of course, one could say that biocide-free silicones could be a competitor. We don't see that coming around at all near or midterm. We see opportunity actually to be part of some of those coatings actually, yet self-polishing will be the dominating coating type 2 to its so proven strong performances over the past 30 years.

[Unknown Attendee]

And how would it affect I-Tech and Selektope should [indiscernible] classifying Selektope as ED remain?

[Philip Chaabane, executive]

That's a difficult question to answer. But the theory, the belief here is that we have a relatively small European market exposure with our molecule because European yards are much less -- fewer than what the Asian yard industry is. So most of our [indiscernible], somewhere around there is sales into Asia. So in that sense, probably won't affect us that much anyway. But Europe has a big impact on reputation on brands and so on. So there is a risk of our brand perception damage, of course that we don't -- we can't really see how that will influence. In terms of knock-on effects to other legislations, we are present, have checked U.S., Korea, Japan, China, and a lot. Nothing is on the same level when it comes to ED as Europe. No one is so consequently looking at only hazard and [indiscernible] and most of them -- some of them don't even look at ED, right? In Japan, they looked at ED, where we were renewed and [indiscernible] our approval back in 2020, they found this was not an issue. So we hope that, that will remain for other regions I mentioned as well.

[Unknown Attendee]

And with a one final question here. What can investors expect from I-Tech in the remainder of 2023?

[Philip Chaabane, executive]

Hopefully, continued strong performance, that's what we hope. You can get further confidence in that customers are coming to us. Of course, there may be quarters here, who knows. But in general, I hope that we can communicate a strong growth and maybe some increased customer activity from accounts that have not been so visible before. That's my wish list, of course, if it happens, let's see, right? So far, we look quite positive on things.

[Unknown Attendee]

Okay. Thank you very much, Philip, for presenting today and answering all of our questions. And a big thanks to all of you who followed along for I-Tech's Q2 report for 2023. Hope you have a great rest of the day and until next time. Thank you very much, and goodbye.

[Philip Chaabane, executive]

Thank you so much.