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#Nexam: Increased activity at customers

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Specialty chemical company Nexam just released its Q2 2015 report. The actual numbers were less in focus, due to the development stage the company is in. Therefore we focus on the statement by CEO Anders Spetz:

The second quarter for Nexam Chemical has meant full concentration on business development in our focus areas. Through active sales efforts and a number of test runs in our plastic lab and at our customers, we have been able to take important steps towards commercial sales on a larger scale. We are pleased to see that more of our customers are testing our product formulations directly in their production process. This shows that the technology has become more robust. In order to adapt our NEXAMITE®-additives for specific customer needs, we are simulating our customers’ production processes in our plastic application laboratory, where our machines are going warm. All future development and formulation evaluation has now been moved from Lund to our chemistry lab at the production facility in Scotland. All teams are going full ahead forward.

Sales

Sales have developed positive in the second quarter and we expect this trend to continue in the third quarter. However, the majority of orders coming in are still intended for large and small test runs at customers.

For our high-performance products, we now have the first regular business rolling and it is expected to gradually grow in volume during the coming quarters. Volume wise, it is a small business, but with good profitability.

We have sold smaller volumes for full scale production of polyester foam (e.g. PET) and within this area we expect to see volume growth in the long term. However, we are dependent on our clients’ business development, with product launches and market activities, and that will take time.

Regarding polyethylene, and primarily in pipe applications, promising full scale production runs have been done by end customer. The highly regulated quality assurance in this area takes considerable calendar time, e.g. accelerated age tests on pipes takes up to one year to carry through. Our customers have come part of the way with promising results so far.

The number of customers that test our products in pilot or full scale production increased during the quarter in all focus areas. These activities strengthen our pipeline for the future. Even if it takes time to implement both production trials and evaluation these, this is a confirmation that customers from the entire value chain see the opportunities with our products.

During the quarter, we received an order worth approximately SEK 2.4 million from a global pharmaceutical company on a product outside of our strategic focus. The fact that we won the order, which we can produce without disrupting our regular business, is a confirmation of our know-how in specialty chemicals.

Market

Our market activities are partly directed to broaden our customer base in our three focus areas (polyester foam, polyethylene, high-performance applications) and to introduce our technology to companies in new application areas. During the quarter we have participated in trade fairs, conferences and webinars with good response from the market.

R&D

Development activities, such as formulation optimization and process development to help our customers to optimize their production processes, are priorities for our development team.

Our research is now focused on streamlining developed solutions intended for polypropylene. We have also initiated a strategy during the second quarter in order to give direction to our long-term development work. I will return to this area in future reports.

Cost saving program

Thanks to a total commitment and efforts from our employees, we can now see that our savings program results in an improved cash flow. We follow our plan, and in the coming six months, we will be able to see more effects from this.

Organization

To further increase our capacity and level of sales activities in our chosen focus areas, we are now recruiting two key persons. The intention is to reinforce the team with a dedicated sales person and one person for technical services/technical sales.

I would also like to thank the four founders who, except for Daniel Röme, have left their operative role in the company. It is thanks to their long and strong contributions to the company that we are where we are today. I feel a great support from them all when we now are setting full speed ahead and moving into the next phase of the company’s development.”

Nordic Investor

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