Veg of Lund AB: Year-end Report, January – December 2021

Several important agreements in place, significant interest in DUG

October-December 2021

• Net sales for the fourth quarter amounted to TSEK 1,304 (352).
• Operating profit before depreciation and amortization (EBITDA) amounted to TSEK -8,987 (-3,387), and EBIT amounted to TSEK -9,766 (-3,504).
• Net profit amounted to TSEK -9,719 (-3,719).

January-December 2021

• Net sales for the full year 2021 amounted to TSEK 2,573 (1,177).
• Operating profit before depreciation and amortization (EBITDA) amounted to TSEK -22,500 (-17,325), and EBIT amounted to TSEK -23,641 (-17,785).
• Net profit amounted to TSEK -23,754 (-18,348).

Significant events October-December 2021

• The company conducted a directed issue of 78,080 shares following a request for conversion from lenders in the obtained bridge facility.
• The organization was strengthened with a Supply Chain Responsible.
• The UK food chain Waitrose is expanding its plant-based range to include DUG.
• Nasco, UK food wholesale company focusing on the Middle East and the Mediterranean region, chooses DUG.
• The largest health food wholesaler in the United Kingdom, Health Made Easy Group, chooses DUG.
• The largest independent wholesaler in the United Kingdom, Bestway, supplies DUG.
• Cecilia Lindwall left the Company and Emma Källqvist was appointed acting CEO of Veg of Lund.
• DUG launches on Ocado, the world’s largest online grocery retailer.

Significant events after the period

• An extraordinary general meeting held on 31 January 2022 elected two new members to the Board of Directors: Magnus Nordin and Håkan K Pålsson. Håkan K Pålsson was elected Chairman of the Board.

• Veg of Lund has started selling its plant-based beverage DUG directly to UK food producers.

Summary of the Group’s indicators

TSEK	Q4 2021	Q4 2020	Full year 2021	Full year 2020
Net sales	1,304	352	2,573	1,177
Gross margin, %	28	26	26	33
EBITDA	-8,987	-3,387	-22,500	-17,325
EBITDA margin, %	Neg.	Neg.	Neg.	Neg.
Operating profit (EBIT)	-9,766	-3,504	-23,641	-17,785
EBIT margin, %	Neg.	Neg.	Neg.	Neg.
Net profit for the period	-9,719	-3,719	-23,754	-18,348
Profit margin, %	Neg.	Neg.	Neg.	Neg.
Basic and diluted earnings per share, SEK	-0.80	-0.35	-2.10	-1.80
Equity/assets, %	75	70	75	70
Equity per share, SEK	1.60	0.60	1.60	0.60
Balance sheet total	25,971	9,063	25,971	9 063
Cash flow from operating activities	-13,233	-2,661	-31,484	-17,899
Average number of employees	6	2.5	5	2.5
This interim report and other financial information and press releases are available on the company’s website, ir.vegoflund.se

    
A word from the CEO

Increased sales of DUG^®

Veg of Lund’s potato-based beverage DUG® has in only a few months received significant attention from consumers and the media. During the launch in Sweden and the United Kingdom, we have concluded agreements with leading coffee shops, online stores, and several large and reputable food chains that want to sell DUG. Sales in 2021 were mainly made to smaller retailers that are among the pioneers of the industry, but in step with the positive feedback from customers and our own sales efforts, we have reached out more widely through well-known retailers such as Axfood, ICA, and Mathem in Sweden as well as Bestway, Ocado, and Nasco based in the United Kingdom. In 2022, we will start delivering to several of the customers that concluded agreements in the fourth quarter of 2021, including the well-known UK grocery chain Waitrose, which, in order to highlight the small carbon footprint of this root vegetable in food, has proclaimed 2022 to be the Year of the Potato.

The launch of DUG in our strategic markets Sweden and the United Kingdom, and in other selected geographies, continues. The DUG range comprises three different options, Original, Barista, and Unsweetened, which are sold in one-liter containers to consumers. We have now added 10-liter containers to the range, for food producers looking to use DUG in their food and bakery wares sold to final consumers. We consider this segment to have great potential, but we understand that it may take some time to adapt the existing practices and recipes.

Sales
During the fourth quarter, Veg of Lund’s net sales amounted to TSEK 1,304, a 270 percent increase over the corresponding quarter last year. For the year as a whole, the corresponding figures are TSEK 2,573 and 119 percent. The sales of DUG to customers in Sweden and the United Kingdom account for the great majority of the total. The COVID-19 restrictions have obviously impacted our markets. We are now seeing restrictions being lifted, and this restores the option to market and sell our products in in-store environments. As such, we will be able to carry out taste tests and in-store demonstrations, with a focus on major cities. During the spring and the summer, we will raise awareness through various activities aiming to strengthen our brand and promote knowledge about the nutritious, sustainable, and tasty profile of DUG.

Marketing
Veg of Lund’s brand DUG is off to an excellent start. In a short period of time, we have attracted a lot of attention and built trust in our products’ great nutritional properties, small carbon footprint, taste, absence of allergens and usefulness in many dishes.

Production and logistics
The fourth quarter was characterized by a continued focus on sales. In parallel, the possibilities to strengthen sourcing, production, and logistics to meet the increased demand were analyzed. It is no secret that COVID-19 is causing problems, even for Veg of Lund. For the most part, we have been able to resolve them, but when it comes to logistic bottlenecks, community-wide lockdowns, and travel restrictions, we have been forced to look for alternatives, which generally proved more time-consuming or costly. We are focusing on increasing sales in our strategic markets and other priority markets and on evaluating agreements with producers that are closer to the major customers and logistic flows. Negotiations have commenced with a Canadian producer, which will be able to supply DUG when we launch in the US market – the third of our strategic markets.

Scandi Standard and Veg of Lund are collaborating in a research and development project where the objective is to develop a plant-based white meat by the end of 2022. We expect the research phase to be completed at around the end of 2022.

Organization
In December, Cecilia Lindwall left her position as CEO of Veg of Lund, and I was appointed acting CEO in addition to my role as CFO. In this enhanced role, I am well supported by the entire Board of Directors. Most importantly, the organization has also been strengthened with several competent employees in the parent company. In addition, we have a network in the United Kingdom comprising consultants and specialists in research and development, marketing, and sales representatives.

In the fourth quarter of 2021, the uncertainty arising from COVID-19 continued. Around the turn of the year, the relaxations anticipated in the third quarter was replaced by new restrictions to curb the growing spread. We were forced back into a situation of greater caution and distancing, which, among other things, imposed a delay on planned sales activities. The restrictions have complicated and delayed many of the necessary sales presentations and marketing efforts across all our existing markets, but most clearly in countries outside Europe. We are now pleased to see restrictions being removed, but our assessment remains that a high degree of flexibility will be required.

Veg of Lund has amazing potential, the products are extremely timely in a growing market, and our brand DUG® has in a short period of time won the market’s clear approval. We are now focusing on raising the awareness of DUG among additional groups of consumers, such as flexitarians and others who wish to drink plant-based, tasty, and sustainable beverages. Owing to its potato origin, DUG is healthy, nutritious, and tasty.

Emma Källqvist,
acting CEO and CFO

For more information, please contact:

Emma Källqvist,
acting Chief Executive Officer and CFO.
Tel: +46 721 869 018
E-mail: [email protected]

Malmö, Sweden, 17 February 2022
Veg of Lund AB
The Board of Directors
 

This information is such that Veg of Lund AB (publ) is obligated to disclose pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 8:00 a.m. CET on 17 February 2022.

About Veg of Lund
Veg of Lund AB (publ) develops unique plant-based foods meeting consumers’ demands for taste and sustainability. The company has roots in research at Lund University and owns patented methods for developing new food categories in the fast-growing market for plant-based foods. Veg of Lund’s climate-smart and tasty products are sold in Europe and Asia under the DUG® brand. The company’s share is listed on Nasdaq First North Growth Market under the ticker VOLAB. Read more at ir.vegoflund.se. Mangold Fondkommission AB is the company’s Certified Adviser and can be contacted via telephone:
+46 8 5030 15 50 or e-mail: [email protected].

This disclosure contains information that Veg of Lund is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 17-02-2022 08:00 CET.

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