Equity Research Svenska Aerogel, Q3 2024: Supplier agreements could boost revenues

Svenska Aerogel Holding AB’s sales in Q3 2024 were lower than our expectations, but lower than expected costs made profitability higher than estimated. Recently, the Company updated on two supplier agreements that can prove important for 2025 and beyond.

Lower costs and new supplier agreements can improve revenues

In Q3 2024, Svenska Aerogel reported sales of approximately SEK 0.6 million, falling short of our estimate of SEK 1.3 million. However, the company outperformed our profitability expectations due to lower-than-anticipated costs. It reported an EBITDA of minus SEK 7.0 million, higher than our estimate of minus SEK 8.0 million, and an EBIT of minus SEK 9.0 million compared to our EBIT-estimate of minus SEK 10.1 million.

On the same day as the report, Svenska Aerogel announced a new SEK 5 million loan facility with its main owner, Gästrike Nord Invest AB. The loan facility has a 12-month maturity and will only be utilized if necessary.

Svenska Aerogel has recently announced new supplier agreements with Outlast® Technologies (‘Outlast’) and Matrix Brands (‘Matrix’) regarding specially developed aerogel material. Outlast is active in temperature regulating solutions for the textile industry. They intend to launch a solution with insulating fibres containing Quartzene® in January 2025. The agreement with Matrix runs over five years. Svenska Aerogel will receive SEK 1.5 million from the Outlast to pay for necessary production adjustments and costs related to pilot production of the material. Furthermore, the Company announces that the number of projects in the pipeline has increased by approximately 50% compared to 2023.

Cash flow from operating activities in Q3 2024 was negative SEK 11.3 million. The total cash flow was negative SEK 10.7 million.We expect that the Company may need capital injections within six months and therefore model that a share issue of approximately SEK 40 million will be carried out during the first half of 2025. Following a recent reverse split, the new number of outstanding shares are 9,500,726.

Following the lower-than-anticipated sales in Q3 2024, we’ve revised our short-term estimates for Quartzene® sales downward for the full year 2024. Our new expectation is net sales of approximately SEK 2.2 million, a decrease from the previous SEK 3.6 million estimate. In our adjusted scenario, we anticipate sales of around 140 tons of Quartzene® and a positive net result in 2028. By the end of the estimate period (2023-2032), we project sales of approximately 550 tons of Quartzene®.

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