Polygiene Group reported a loss in the third quarter as sales declined 11 percent. The Swedish maker of antimicrobial fabric treatments cited the company’s underperformance to the strong dollar and U.S. trade policy, which are causing project delays, but also indicated that sales are recovering.
Ulrika Björk, CEO of the Polygiene Group, said, “The third quarter continued to be characterized by a challenging business climate and increased uncertainty in several markets. Demand has been subdued, particularly within Addmaster, where growth has been weak, even though there are clear signs of a recovery in the next quarter. At the same time, we are seeing positive signs within Polygiene, where optimism has increased and forward-looking sales show a stable trend. With this development behind us, we are well-positioned to close the year in a more favorable position with significantly more attractive figures.”
Sales in the quarter ended September 30 amounted to SEK 36.4 million ($3.9 mm), down 10.8 percent from SEK 40.8 million a year ago and declining 4.6 percent on a currency-adjusted basis. Björk said a weaker dollar continues to negatively impact both sales and margins.
Gross margins for the period were 7.1.1 percent, down from 71.6 percent. EBITDA amounted to SEK 2.9 million, down 49.1 percent from SEK 5.7 million a year ago. The loss was SEK 593,000, compared to earnings of SEK 1.76 million a year ago.
Björk said Polygiene Group achieved positive EBITDA despite lower sales, primarily due to a stronger gross margin resulting from a larger share of Polygiene brand sales. The company’s cost base is also under control, with fixed costs lower than the previous year and in line with expected levels.
By region, the highest growth came in the U.S., where the Polygiene brand grew 47 percent and Addmaster climbed 49 percent, plus an additional 7 percent on a currency-adjusted basis. Sales in China declined 30 percent. Björk said the decline was “largely a consequence of the effects of the trade war and the shift we are seeing that benefits the U.S. region while negatively impacting other regions.”
For the Polygiene brand, EMEA sales are in line with the previous year, while Addmaster, which largely sells within EMEA, saw a 34 percent decline. Björk said, “Many of Addmaster’s customers report high inventory levels, which has again led to postponed planned orders. Therefore, our assessment is that the final quarter of the year will be very strong for Addmaster.”
Björk said the trade war has caused delays in several expected deals. He said, “Among others, the key customer we communicated with in May has been affected by the situation. Production has indeed started on a small scale, but the larger volumes are still delayed. We are working intensively together with the customer to set a new start date and ensure that the project progresses according to plan.”
Björk said the ShedGuard development project is progressing, and several potential customers have now begun larger-scale test runs. He said, “The project has entered a new phase in which we are awaiting results from ongoing production tests under real operating conditions. Although commercial orders have not yet been placed, we see it as only a matter of time before they materialize. The strong interest in StayCool remains, and we are pleased to report that the first orders have already been received during the quarter. In addition, another 20 or so customers have chosen to implement our new technology during the coming year.”
In the nine months, sales improved 2.2 percent to SEK 109.8 million from SEK 112.2 million. The net loss totaled SEK 20.6 million, compared to earnings of SEK 9.5 million. EBITDA was reduced to SEK 4.78 million from SEK 13.1 million.
Björk concluded, “Even though we are currently navigating an uncertain business climate, I still feel optimistic. We have control over the factors we can influence — such as costs, sales activities, product development, and our close relationships with our customers. The positive signals we’ve seen at the beginning of October indicate that we are soon back on the growth journey we had begun, which was abruptly interrupted by tariff discussions and the trade war. The company is in a very strong position to seize the opportunities now arising as the situation has improved.”
Image courtesy Polygiene/Adidas Terrex
