Svenska Aerogel (AERO.ST)

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Let’s start a discussion here about Svenska Aerogel (AERO.ST) from the Stockholm Stock Exchange, as there didn’t seem to be one yet.

In short, the company has developed aerogel for mass production, which was previously considered a difficult process. The company is located in Gävle, Sweden. Their proprietary product is the aerogel-based Quartzene, which is used to add or improve the properties of end products. Below are a few highlights of these:

Svenska Aerogel winner in innovation competition - Quartzene, insulation with nanotechnology

Svenska Aerogel develops thermal insulation in textiles - Consortium agreement with the textile industry

Quartzene provides fire protection in paint - Positive project result for Svenska Aerogel Holding AB (publ)

The company has gone through a few share issues and is now finalizing the latest one. The funds from the issue will be used for marketing and sales, product development with customers, production development, and strengthening the cash position. The prospectus for the issue probably best illustrates the company’s current state and future plans; I recommend checking it out if you’re thinking of adding this to your portfolio.

The coming year is a moment of truth for the company, and they need to start generating sales. Personally, I was expecting this already in 2020, but COVID-19 certainly impacted sales, as the company’s sales organization isn’t huge yet and it must have been difficult to sell from Sweden to elsewhere.

The first production line was completed about a year ago. During the construction phase, they managed to make further improvements to the line, which, among other things, reduced water usage by 75% and raw material consumption by 30%. This line was the first phase of the Master Pilot Plant 2019 (MPP 2019) facility, where a total of four production lines are planned, with a combined capacity of 900 tons of Quartzene per year. That means 225 tons with the current single line.

The prospectus for the latest share issue also mentions that negotiations are underway with customers for significantly larger production volumes. The possibility of placing production lines directly at customer facilities, as part of their production chain, is also mentioned in the prospectus.

Information on the exact price of Quartzene has previously been scarce, but at the end of November, Svenska Aerogel announced they had hit a sales record and two previous customers placed follow-up orders. The quantities are still small, with a total of 2.5 tons sold in November, which is about 13% of what current capacity could handle monthly. However, the most important observation here was the total value of the orders, which was 680,000 SEK (€66,330), meaning ~€26,500 per ton or €26.5 per kilo.

Unfortunately, it wasn’t mentioned over what timeframe those orders of over a ton were renewed—whether they order more goods monthly or a few times a year. I would assume these are not yet monthly orders. However, this will likely become clearer in the future if/when sales start to pick up.

In terms of figures, however, at that price of €26,500/ton and the current annual production of 225 tons, the company has the potential to sell €5,962,500 worth of goods. The company’s current market capitalization is 60,623,000 SEK, or roughly €5.9 million. Of course, this will change again with the share issue as new shares enter the market, but the order of magnitude remains in the millions of euros.

Because of this, I believe the upside is massive if the sales team delivers. The negotiations mentioned in the prospectus for significantly larger production capacity would suggest that sales exceeding 225 tons per year could be relevant in 2021, if the current 225-ton production isn’t enough to satisfy the needs of said customers? How much they will exceed 225 tons is just guesswork at this stage and impossible even to speculate on. However, sales could potentially exceed the current market cap several times over.

So far, orders have mainly come in smaller quantities from Rayoung Chemtech, Novcoat, and Ekomarine, while larger players like Worlée Chemie GmbH (1, 2) and Barozzi Vernici have been involved in product development and negotiations. There are others too if you go through the press releases, but those are some examples.

There are plenty of risks here, as the company subsists on share issues and other financing, and has yet to generate a proper profit. Quartzene-based products have performed well in tests, so I believe the product is good. The biggest question mark for me regarding sales is whether the product is priced in a way that makes it worth using. In any case, Quartzene seems to be generating interest and some demand in the form of orders, but time will tell how sales fare. Personally, I will hold over 150,000 shares after Q3 2021 if the subscription rights/warrants from the issue can be fully exercised.

Someone more skilled in Swedish and numbers can correct me if I have (likely) misinterpreted things at some point or looked at it through overly blue-and-yellow tinted glasses.

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Now that sounds like an interesting company. I hadn’t heard of them before, so I’ll have to look into them more next week to see if it’s the right fit for me. Anyway, thanks for bringing them up here @beloved_lover

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As a product, Quartzene is very interesting, but from an investor’s point of view, I don’t think it seems very attractive. The company’s primary business so far has been organizing share issues.

Osakeanti
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The first production line was completed already in December 2019. Where are the company’s revenues from this top product? Where is the turnover? 680 TSEK is not enough!

Jaahas
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I won’t even start on those three additional factories next to the current one. Apparently, they also want to finance them with share issues when they become relevant? :stuck_out_tongue:

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About 2 years ago I also got to know the company, back then we were much higher, we’ve skied down quite a bit. The same names keep appearing as customers with small test batches. However, I still follow the company, in case there’s a breakthrough in some area. In my opinion, the name is catchy, aerogel, even though the material is not directly aerogel, but granulate. The market has ceramic granulate under different brands. This hollow granulate is mixed, for example, into paint to improve insulation. However, in my opinion, painting doesn’t insulate much, the layers are too thin, and paint always contains a binder, so the applications are quite limited. In addition, these insulating paints have been on the market for a while. For example, what’s the difference in the final product compared to this? https://www.itccoatings.com/ceramic-coating
At work, these have been tested and researched, quite okay, not revolutionary. We didn’t end up using them in paint. Based on my own experiences, I expect some other application than paints. It could be otherwise.
I myself am waiting for some other application, for example, the water filtration presented on their website. Otherwise, I don’t see a big turnaround; we were without orders even before corona.
Of course, the price can jump, it’s a low-value company, perhaps for a reason?

Apologies for the mobile text.

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@BaeMk51A Glad that someone has a better perspective on those end products, since I don’t really know anything about them other than how they’ve performed. The company itself, of course, has strong faith that Quartzene is suitable for textiles and insulations as well, even though paints seem to be the main thing it’s been used for at the moment. They seem to be bragging a lot about, for example, the best fire ratings in tests, which one would think would mean something in the wooden house boom.

@Pohjolan_Eka Yes, offerings have first been circulated for product development, and then the first phase of that MPP was ramped up, after which money was raised through offerings to promote sales and stay afloat. In hindsight, I can say that the timing was bad, but let’s see what happens now.

My own view has largely been based on what the company itself says, meaning I’ve been following this with very blue-yellow glasses. For example, that test victory in the Netherlands in improving the energy efficiency of homes is a Quartzene-based application that is not paint.

More feedback, if you have a better understanding of the areas where Quartzene can be applied to end products.

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SA has been in the portfolio for about three years now, so I jumped on this train a bit too early. After the current issue, the average price is around 2.2 SEK. But I was planning this as a long-term investment, so I haven’t really stressed about it, especially since it’s not that much higher anyway.

The current market value is very low and doesn’t include any significant expectations. However, Quartzene is a functional product, extremely versatile, very high-margin, and for example, the ROI of new modules is really good, so there’s huge potential. Quartzene is so lightweight that its transportation costs are relatively high, which is why the ability to build production modules directly on customer premises is also a good competitive advantage.
And when it comes to aerogel, Quartzene is indeed an aerogel-like material, but much more affordable and in some respects also much more versatile. For example, aerogel’s structure doesn’t withstand liquids, whereas Quartzene can be mixed with paints, etc.

More sales are mainly what’s needed now, but I wouldn’t be too worried about it, even though some dissenting voices can be heard about the company (precisely because of the lack of sales). Proof-of-concept has already been obtained from several directions, and the value of the material and its benefits have been recognized by customers (from the mouth of the previous CEO). Once the pieces fall into place and product developments are completed, there will certainly be at least enough sales.

Corona had a big impact on why 2020 was a bad year sales-wise, so personally, I expect a significantly stronger year in 2021, although I won’t start painting any huge bombs out loud. Not yet. :slight_smile:

However, I would venture to guess that in terms of share price, we are now near the bottom, and next year we will see more positive surprises. This is supported, among other things, by insider stock purchases, as well as the T1-T3 options obtained with the current share issue, whose implementation dates are at the end of Q1, Q2, and Q3. It would make no sense to feed options (or whatever these are, as a warrant can mean something else) into the market that allow new shares to be subscribed at 70% of the market price unless there was an expectation that the price would turn upwards, in which case the capital raised with the new shares would also be naturally higher.

Time will tell. But we are moving towards 2021 and beyond with excitement.

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Yes, that pretty much summarizes why I also believe in the company. Let’s hope we’re not too far off. As I’ve hinted in previous messages, I started this thread with the idea of getting other perspectives too, since I’ve been living in my own SA bubble for a few years. The stock is really poorly followed on forums, or at least I’ve been on the wrong boards myself.

Production built at the customer’s site will certainly be a significant part of the revenue. From the latest share offering prospectus and some recent interview with Einari (CEO), it has indeed become clear that negotiations are ongoing for larger capacity requirements with some customers. Let’s hope that big deals come from there to get the stock’s valuation back to a reasonable level. Of course, a little skepticism always nags at me, wondering if these are just nice words to get the share offering fully subscribed, as there are no concrete agreements yet.

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I, for one, am exceptionally confident about SA. So many things click into place. The momentum is also good right now, partly due to the relatively widespread understanding of the importance of sustainable development.

Quartzene itself is an environmentally friendly product, both in terms of production and recyclability. It can replace toxic ingredients in many products/applications and also reduce the amount of material used in them. It has been mentioned many times that Q can replace plastic in some cases, but there is no certainty in which segment. My own guess, however, is the packaging industry, which is rapidly moving towards fully recyclable/compostable packaging. In connection with the packaging industry, SA has also mentioned practical examples such as juice/beverage cartons, where Quartzene can reduce the use of packaging material by even tens of percent. The function of Q in this area is to make the material itself structurally more rigid, which is, of course, essential for usability.

And these are just a superficial scratch of what can be achieved with Quartzene. Regarding textile industry solutions, something new is apparently coming relatively soon, and for example, a solution related to better printability will also be heard more about soon. For the former, I haven’t found many specific hints, and the only generally known partner is Sun Tekstil, as well as the Canadian Oros (which, however, has not been directly mentioned in connection with QuarInTex, as Sun Tekstil has). The latter, in turn, is apparently some kind of primer that significantly improves print quality in, for example, fiber-based products (e.g., laminate), tiles, and also paper- and cardboard-based products.

Regarding confirmed partners, these include Billerudkorsnäs, Mondi, Covestro, Wórlee Chemie, Sherwin-Williams, Dupont, Volvo, SeraPlus, and Logstor. Akzo Nobel has also been mentioned a few times. Among them, there are quickly a couple whose larger orders could swallow the entire current production capacity if it came to that.

As for money, this Master Pilot Plant 2019 alone is reportedly enough to turn the cash flow into positive. This, however, certainly requires selling at least almost the entire capacity. If, however, the management’s painted possibility of selling the entire capacity with one deal were to materialize, the situation would quickly become quite interesting. :wink: Is it to be trusted? Of course not.

However, it is surely only a matter of time before a larger customer ends up acquiring a production module for their own premises. Hopefully, this would happen rather in a year than, say, three years.

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Good news regarding the share issue. There was an exceptional amount of interest and the issue was subscribed 307%. It was genuinely a surprise, as the market price and the issue price were so close to each other, and for a moment, shares could even be bought for less than the issue price.

Of course, the value of the options could still rise unpredictably if sales pick up well next year. Or even just pick up. :grin:

https://www.aerogel.se/files/Main/15240/3254429/release.pdf

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Redeye also has a good and fresh summary of Svenska Aerogel and the potential markets for its material, though it’s in Swedish. Use a translator if you can’t manage otherwise. :slightly_smiling_face:

This week seems to be starting promisingly with almost +20% readings and recent days have seen active trading. A promising start to an interesting year.

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Some sales news for a change - nothing mind-blowing, but the CEO’s accompanying words about increased demand perhaps indicate that orders are now becoming more regular (albeit still relatively small), rather than scattered throughout the year, making it easier to produce accurate forecasts based on the numbers. Of course, we’re still talking about thousands of tons per month, not, for example, ten tons, which the current capacity would be sufficient for, so there’s still room for improvement in that regard.

The interim report and the 2020 annual report are also coming on Thursday, so then we’ll get to marvel at some numbers again. I’m mainly interested in the cash burn and Q4 sales. Otherwise, we’re mainly waiting for bigger deals for 2021.

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The earnings report came and went a while ago, but I haven’t had a chance to write about it here.

There weren’t any significant surprises in terms of the numbers; Q4 sales were as expected, which also didn’t amount to anything extraordinary.

Perhaps the most essential part of the entire report was the CEO’s accompanying remarks. Briefly summarized:

  • The construction industry has the greatest potential, with new interested customers in the USA, Canadian, and European markets.
  • Interest from the paper industry regarding the application of Quartzene.
  • The distribution network is expanding with new agreements.
  • Product development has been carried out in collaboration with customers of various sizes during 2020, and operations are moving from lab to pilot production and commercialization.

Pleasant to read, but of course, it’s always good to be a little skeptical when there’s no concrete evidence yet in the form of publicly announced agreements.

If we can secure deals with larger customers, that will likely be the breakthrough I’m perhaps most looking for this year: production built at larger customers’ sites, as part of their own production chain. This would create more credibility to achieve sustainable cash flow and significantly increase shareholder value through customer commitment, more so than, for example, Svenska’s (Svenska Aerogel) own local production, which is better suited to meet the needs of smaller customers.

The Gävle line also has environmental permits to expand to a 1000-ton capacity, which is also a positive sign if the number of customer orders starts to rise to a level where that capacity also needs to be built.

It has previously been mentioned that there have been discussions with some customers about larger delivery quantities than can be achieved with the current capacity. Based on this, those on-premises productions at the customer’s facilities could become relevant this year, but we’ll have to wait and see.

General investor sentiment is still at a rather hopeful level, although the company’s management certainly tries to create an impression that momentum is currently strong, e.g., agreements on expanding the distribution network, product development, and negotiations with customers to bring commercialized products to market. However, I myself am waiting for concrete evidence or its absence this year. At the beginning of the year, I did add a few shares at a price of 0.90 SEK, as I had a momentary belief that sales would increase significantly this year. I suppose we’ll know how it turned out by the end of the year :blush:

The CEO will be speaking on the 10th at the Aktieportföljen Live investor event. He will mainly focus on sales development and the future.

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These agreements have materialized at least partially: Growing sales network for Svenska Aerogel Holding AB (publ) - 4 new distributors in Europe and Asia

This may not yet send us to the moon like a rocket, but it should nicely support future sales, especially with smaller customers.

Hopefully, orders will start growing in H1 and potentially larger contracts will become visible.

Today also marked the start of the exercise period for the first (TO1) options that came with the offering. The last response day at Nordnet is the 25th. An interesting detail here is that the company waived the opportunity to keep the option price at a minimum of SEK 0.72 (offering price/share) and gave the full -30% discount from the average share price of the last two weeks, making the price per share only SEK 0.58. Could this have been an attempt to convey confidence in the future, suggesting that extra money is no longer desperately needed? Probably not many would have left those options unexercised, even if the price per share had been SEK 0.72.

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Large order for Svenska Aerogel Holding AB - US distributor orders just over 2 tons Quartzene

The desired concreteness is starting to show a bit, and an order has come from the US. As I understand it, this is the first “significant” (read: press release-worthy in the company’s opinion, even in English!) order from North America. If this pace starts to pick up now that there are partners in the distribution network, then things could start to look quite promising by the end of the year, and the probabilities of a new issue will decrease.

The order itself is on the same scale as the record sales at the end of last year, made up of two orders. So, financially, these are still small deals, and there’s no guarantee how often orders will be renewed.

The stock price reacted quite strongly to the news initially, but this is largely explained by the typically low trading volume for this stock, leading to large spreads between bid and ask levels.

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Hey, this order alone won’t get us far yet, but it’s been good to see more of these 1-2 ton orders coming in within a short period. I have pretty good faith that sales are now truly starting to turn the trend upwards. Perhaps not as steeply as one would hope due to COVID-19, but I’m sure this will turn out well if we just have a little more patience. :slight_smile:

The movements seem to be quite steep (though with relatively small volumes, as stated), so it will be interesting to see what happens when news of the first module delivery outside of our own facilities comes, at which point annual sales will likely jump almost instantly to 100-200+ tons per year.

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Thanks for bringing up this interesting company for discussion! Aerogels are an interesting area.

@ZeroPoint, have you been following the company? Obvious challenges with commercialization? Have you found competing companies that have already entered the market better?

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https://www.aerogel.se/investerare-media/pressmeddelanden/

The management and board apparently still have strong faith that quartzene (Quartzene) can be commercialized.
Sales volumes did increase last year, but this year sales should multiply again.

https://balkefors-ponsiluoma.se/lediga-tjanster/?fbclid=IwAR0SUheCpuhDlSC5-YLZwlul5dmLHmhZmzMSsK103TUCPmtpKiyx6bcvSw

Recruitment is also underway, so hopefully the first 10t+ orders will come soon.

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Good article from Yle, where Svenska Aerogel is also mentioned.

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https://www.aerogel.se/investerare-media/pressmeddelanden/2022/order-pa-15-ton-quartzene-skickad-till-kund--for-forsta-gangen-i-femkilossackar/

It seems that development is also progressing around the product itself.

They probably no longer report all new orders, as I don’t recall this 1.5-ton order mentioned in the report being announced previously.

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https://www.aerogel.se/investerare-media/pressmeddelanden/2022/svenska-aerogel-ingar-avtal-med-varldsledande-producent-inom-processindustrin/

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