Veg of Lund AB: Interim Report January - September 2022

July–September 2022    
•    Net sales amounted to TSEK 349 (610).
•    Operating profit before depreciation and amortization (EBITDA) amounted to TSEK -5,143 (-5,933), and EBIT amounted to TSEK -5,195 (-6,061).
•    Net profit amounted to TSEK -5,446 (-6,178).

January–September 2022
•    Net sales amounted to TSEK 1,873 (1,269).
•    Operating profit before depreciation and amortization (EBITDA) amounted to TSEK -34,147 (-13,513), and EBIT amounted to TSEK -34,302 (-13,875).
•    Net profit amounted to TSEK -34,628 (-14,035).

Significant events July–September 2022
•    The Board of Directors appointed Fredrik Carling as the new CEO of Veg of Lund. He took position on 19 September 2022.
•    Member of the board Magnus Nordin stepped down from the Board of Directors of Veg of Lund at his own request.
•    Veg of Lund carried out a directed issue of shares in order to convert bridge facility and resolved on allotment of shares due to one lender’s exercise of warrants.
•    CFO Emma Källqvist will leave her position as CFO of Veg of Lund in November.
•    Veg of Lund signed a letter of intent for production and distribution in Southeast Asia.

Significant events after the period
•    Veg of Lund resolved on allotment of shares due to lenders’ exercise of warrants.
•    Veg of Lund launched DUG Smoothie in the Swedish market.
•    The Board of Directors communicate decision to carry out a new issue of shares amounting to approx. MSEK 30.9 and gives notice of extraordinary general meeting.

Summary of the Group’s indicators

    
A word from the CEO

It has been confirmed that Veg of Lund is in possession of research and patented product concepts that are commercially relevant on a global scale and in a rapidly growing market. Many players are fighting to secure a spot on the shop shelves, gain the industry’s recognition, and catch the market’s attention. Few have done as well as Veg of Lund. With the DUG® brand, we have attained retail listings on a broad scale and won the recognition of the industry through a string of awards and attention that few can rival.

Now, it is time to gradually convert this success into a performance that drives growth and brings the company towards profitability in the long term.

The strategy leads in the right direction
The updated strategic direction that the company has defined, which was recently communicated, will ensure the necessary flexibility for the company moving forward. Different markets and products will provide various opportunities that will require a range of business models to successfully reach consumers. We call this the Veg of Lund hybrid model.

The United Kingdom and Sweden will remain countries where we as an organization will seek to maintain a high degree of market proximity. Today, we are using a combination of our in-house organization and close external partners for the tactical implementation of the strategy. This allows us to gain a detailed understanding of the returns our choices in terms of positioning, distribution and communication are yielding. These insights give us a greater ability to ramp up our efforts with distribution and licensing partners in new markets more quickly and more efficiently. It is already clear that we will need to target, for example, our marketing spend more wisely to get the maximum leverage of the money invested.

The business model involving licensing of patents and know-how is the one most conducive to a global approach to expansion. The letter of intent recently signed with experienced regional operators in Thailand and Vietnam is a good example of how we relatively quickly and cost-efficiently can establish our products in markets which otherwise would be difficult to address in the near future. We are looking forward to a launch in these markets during 2023.

For markets closer to home, in particular in parts of Europe, we will apply a combination of the models we use in Sweden and in the United Kingdom, and licensing partnerships.
This entails that Veg of Lund will be responsible for production, while national distributors handle the implementation at the retail level and with the food industry.

The continuous development of the patent and product portfolios is ongoing
To continue to focus on our unique product solution is also an important strategic choice. Our strength is that we, like no other, understand how to best develop and produce various forms of food based on potato and rapeseed oil. All elements of our product and patent portfolios hinge on this fact, and it will remain our focus for the foreseeable future.

Over the course of the year, the DUG potato beverage has acquired a fanbase of consumers that appreciate it for its flavour, consistency and content. It is also clear that a significant number of the target population is left unimpressed. The experience of the product has not matched their expectations of the concept and the brand. As such, we are looking forward to bringing an updated recipe for all three variants (Original, Barista and Unsweetened) to market in January 2023. The outcome of this hard work conducted over the past six months is a significantly improved sensation when adding DUG to the coffee, with the cereal or in the cooking. Fewer added ingredients, a more milk-like appearance and flavour, and an even better marriage of flavours when put into coffee—without compromising the advantages that DUG has always had. Environmentally sustainable, free of the 14 most common allergens, and a source of omega-3 and folic acid, to name a few.

Now in November, we have also launched DUG Smoothie in Sweden. The already highly regarded My Foodie line has been integrated into the DUG brand and meets the demand for a plant-based, non-allergenic snack with the lowest fructose content on the market. This is a position in which we are looking forward to establish ourselves, beginning in Sweden and later, in 2023, at the international level.

We will continue to add more product categories on an ongoing basis, including additional plant-based dairy products such as ice cream, where we are involved in discussions with commercial partners in relation to flavouring and commercial rollout. The well advanced plant-based meat project has moved on from the research phase and entered a product development phase, in collaboration with Scandi Standard. The response from those who have already worked with our product is positive. What has impressed most is the meat-like structure we have achieved, which many future competitors have had difficulty reaching.

Turning promise into performance
Since the DUG milk alternative was launched, it has been included in the ranges of leading grocery chains. Waitrose, Holland & Barret and OCADO, to mention a few in the United Kingdom. In Sweden, DUG is available from ICA, Hemköp and Mathem, among others.

All these chains share our view of the great potential of this concept. The spots on the shelves, the media attention and the curiosity of consumers were not converted into day-to-day sales to a sufficient degree. The performance during the third quarter 2022 is a sign of that.

The experiences of the past year now provide the breeding ground for converting our high expectations into future performance. The updated strategy is in place, as are the expansion and improvements to the existing product portfolio. The effort to complement the existing production closer to the European market is another key component that will fall into place in Q1 2023. In addition, we will strengthen the organization in strategically significant areas such as product development, international sales, and licensing partnerships.

Gearing up for continued product development and implementation of strategy
The rights issue announced today will provide us with the means to realize our plans and ambitions for the future. The organization will be strengthened in strategically important areas in order to implement the initiatives we have in market canvassing in existing and new markets—with existing DUG products as well as new and future products. This will enable us to achieve a 2023 appreciably different from 2022.

I personally am inspired by the challenge before us. Rarely do you have the privilege of managing the development of a company with such a significant potential. A company possessing so many of the prerequisites for success: a unique product concept, an organization with skilled and dedicated employees headed by an experienced Board of Directors. I am eager to put all these pieces together to continuously build the company and our performance going forward, quarter by quarter.

Fredrik Carling,
CEO

For more information, please contact:

Fredrik Carling,
Chief Executive Officer
Tel: +46 703 121 942
E-mail: fredrik.carling@vegoflund.se

Malmö, Sweden, 9 November 2022
Veg of Lund AB
The Board of Directors
 

About Veg of Lund
Veg of Lund 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 the Nasdaq First North Growth Market under 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: ca@mangold.se.

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 09-11-2022 08:58 CET.

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