Microsalt (LSE:SALT) — Investor Presentation

0:02 Good afternoon, ladies and gentlemen, and welcome to the MICROSALT PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish your responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from MICROSALT PLC. Rick, good afternoon, sir. Good afternoon. Thank you for having us. I wanna introduce, with me is, Gary, our our chief financial officer, and he'll be, assisting with the presentation as we go along. So, again, thanks for everyone for attending, in our in our presentation about MICROSALT and our current journey.

1:01 Most of the information we have, financial information we have, will will pertain to h one and some of our projections. But as a reminder of where we're coming from and what we're doing, our vision, our whole reason for being in business is to help reduce cardiovascular disease across the globe. And we do that by selling and commercializing our patented processes that makes traditional salt low sodium salt. And the key to that is that we maintain these properties and the functionality of traditional salt so the taste remains the same. Our whole value proposition to the food manufacturing community is based on the fact that we don't change the flavor, so you don't have to engage the consumer to lower sodium.

1:51 You don't have to go on the market and say, hey. Lower sodium version of property of item x or SKU y. You just simply change the formula, the sodium goes down, and the flavor stays the same. So it's a it's a really exciting breakthrough when it comes to, health initiatives No matter where you might live, whether it be The UK, The US, Canada, Mexico, it it doesn't really matter. Across the globe, sodium sodium initiatives are gaining strength. And that something like MICROSALT is a significant breakthrough when food companies can lower their sodium without impacting the flavor, which means they don't have to impact and engage with the consumer on previous or reduced sodium levels.

2:40 So we what this is what we do. We connect the science, the industry, and the impact for the consumer. We have a patented process that that generates low sodium salt, up to 50% less sodium, where our target market is the blue chip worldwide, food manufacturing companies. You know, we need to understand that we're selling salt, and therefore, salt only works at scale. So we are selling to the world's largest companies. And what that gives us two things. It gives us a significant runway of revenue, and it also gives us a very secure consumer base. So far this year, through the end of June, we have impacted over 471,000,000 servings of food made with MICROSALT.

3:32 That's a significant number, and that's only for the first six months. So our product is not only is it is it being accepted by the food manufacturing communities, it's being used in on the streets and in the shelves, so we are impacting people's health. And, you know, our system we're systematically making things more healthy, whether it's a bag of crisps or french fries or cheese sauce. It doesn't really matter what it is. It's made with MICROSALT. It's made healthier. A little bit about myself. I've been the CEO since December 2021 and very happy to be here. It's I tell people it's I think it's the job that I was born to do.

4:20 Gary is our interim CFO. Gary has been on the board since day one. We decided to, to to move in this direction as we begin to grow. Gary is very well very well received in the industry. He's got a lot of great experience, and I'm very happy and excited to have Gary with me along for the journey. I'm gonna switch this slide over to Gary. He's gonna jump in here. Okay. Thanks, Rick. And also, if I can say, glad to be here as well, and glad to be on board helping Rick on this incredible journey. Yeah. So half one highlights, revenue up to $800,000. That's a significant increase on the prior year, and that's largely due to repeat orders from a bulk customer, which is good.

5:08 With the on the back of that, we've reduced the net loss in h one, but largely due to the turnover, but also due to starting to see some economies of scale, which clearly will accelerate as we continue to grow. Gross cash, point nine at the end of, h one. Obviously, we we did the raise in in February. A lot of those proceeds have been applied into increased revenues sorry, increased inventories, I should say, which sits at point nine at the end of the half year. And given that we've grown those inventories, that should see a different approach to the cash burn in h two, which should be much reduced on the back of that. Trade and other receivables are slightly increased to a million, partly on the back of the increased revenues as I've talked about, and trade and other payables slightly down, which really relates to phasings of payments to suppliers.

6:00 Alright then. I'll hand it to you, Rick. Thank you, Gary. And we'll keep going on our on our operational highlights. I've already mentioned that we're we've we've participated in over 471,000,000 servings. And as we we expect that number by the end of the year to be close to a billion, and that's just one year. So the product is out in the real world and doing what it's supposed to do, lowering cardiovascular disease. We've expanded our sales to The UK and Belgium while increasing our sales in existing markets in, I'll say, US, Mexico, and Canada, basically North America plus Mexico. Our Mexican business is extremely strong. They have a very rigid sodium reduction regulations in place.

6:46 Canada is following suit, so we're we're in a great position to grow in those markets. We received the low sodium salt technology award for 2025, from food business review. We were named the fast companies 2025 list of most innovative companies, and we recognized by the IFE, the International Food and Drink Event in London, for our groundbreaking, contributions to the food industry. Again, there's a million great ideas. Very few of them actually turn into reality. And one of our most pride moments is this 472,000,000 servings number. That means it's actually working. People are actually benefiting from our products. Just from a competitive landscape, you know, it's just it's it's just pretty simple. This is the basic products that are available.

7:34 And as you can see down across the bottom on the of the of the of the chart, the ingredients, we're salt and non GMO maltodextrin. Morton is salt. Look at their serve sodium per serving numbers. We're a 150. They're 590. Now their salt substitute has zero sodium, but it's potassium chloride and a number of other chemicals. And that is problematic not only for consumer health, but also for labeling, if you want a clean label. And in some parts of the world, The UK specifically, that requires you to have a health warning because potassium chloride carries its own health concerns. Plus, potassium chloride has a very metallic taste. So what you end up doing is if you're using potassium chloride, you have to cover up the flavor.

8:23 So if I'm a crisp company and I'm running, my original flavor potato crisps five days a week, I don't wanna have to add another flavor just to cover up my low sodium option. So we're in a great spot from a competitive standpoint, and we continue we spend, we spend a lot of attention on our r and d work to make our formulas strong, to make them work for individual customer specifications. As far as the as far as the market is concerned, first of all, you know, the WHO, the World Health Organization, part of the United Nations, has come out an issue that, hey. You know, we, we need to lower sodium across the globe by 30% by the end of twenty twenty five.

9:08 Now we all know anyone in this call knows if you're in the food business, that's not gonna happen. But what that is, basically, it's like when, you know, when you go to rehab and they say the first step is you have to acknowledge you have a problem. The WHO has done that for the world. They said, hey. We need to lower sodium. Now 95% of the WHO companies will miss that target. That's okay because that's market for us. As we go along and as as geographies create their own low sodium regulations, we're there to help them. As a contrast, for example, in The UK and in Mexico, manufacturers are penalized from producing low sodium, foods. Wherein Asia, Singapore specifically, you're rewarded. You're paid if you can make low sodium food. So there's a lot of different approaches across the globe.

10:03 In The US alone, we spent over $219,000,000,000 on high blood pressure. You know, trips to the doctor, crazy expensive medications, you know, high blood pressure devices to measure it. And much of that is self imposed by excess sodium consumption. It starts about when you're seven or eight years old, and you start to really have your own sense of what you like, what you don't like, what you ask your mother you're gonna make at home. It starts then. So it's like one little grain at a time. So who's surprised when you're middle aged and you have high blood pressure? You've been consuming excess sodium your entire life. Almost twenty one million people a year die from this cardiovascular disease resulting from excess sodium.

10:51 And it's just it's it's it's it's really an unfortunate number. As far as the market goes, we're at about $37,000,000,000 potential market for SALT and $16,000,000,000 just for the french fry market. You know, french fry for us is a is a target because it's very visible. We've created a product specifically for french fries so that the consumer doesn't doesn't say, hey. I don't see any salt in my french fries anymore. So we've really, really, taken this particular market, by the horns, as it would say. Our growth strategy is pretty simple. We're targeting the large b to b customer food manufacturers. We go out to the food shows. We go out and we meet people. We talk to everybody.

11:38 Don't get me wrong. We love the small guy. The small guy wants to come and buy two bags of of Microsoft from us, fantastic. But, you know, our sales efforts and our priorities are the big producers that can actually influence the the food supply. And we have a great focused r and d, department that uses food scientists and food engineers. Specifically, I'll I'll go back to my earlier example about french fries. How do we make our formulas more applicable to french fries? And we were successful with that. Foodservice. You know, when when you when you want to expand into food service, you have to think about packaging. So, again, our r and d people have been able to, redesign some of our formulas to make it simpler and easy for us to package in little tiny bags. They call them sachets or little tiny bags. You've seen them when you have get to go food.

12:32 So it's a very exciting opportunity for us, and now we can make we can address this huge market for food service. And from a production standpoint, we utilize very stable co manufacturers. We have two locations currently up and running, one in Upper Minnesota and one in New Jersey. We've selected the Upper Minnesota one as our main main source of supply. They have drier air because it's so far north, and they have a lot of clean water. And those are really the two components that we require, a dry air and clean water. And we're able to reduce our production and storage costs by forcing our production through mostly one location, but having a second as a backup. Every good company has redundancy in its production, and, we're on that list. We have redundancy.

13:22 We can, we can move orders around to different locations. And as a result, when you combine the two capacities, we have we're in a great, situation capacity wise for at least the next three to four years. And as we get bigger, you know, we all know it's economies of scale. As we get bigger, our runs get bigger. Our run rate, our toll rate, for lack of a better word, goes down. So that improves our margins. So the bigger we get, the stronger our margins become. From a from a sales and and marketing strategy point of view, you know, again, we went to a lot of food shows, and we will continue to do that next year and the year after. We did appoint a QSR, which is a, quick serve restaurant specialist to help us with Microsoft Premium internationally.

14:14 Most of the major QSR chains are international companies. You can go to, you know, Bangkok and go to McDonald's. You can go to, you can go to Downtown London and go to Burg go to Burger King. So these are international companies that we're dealing with. Again, we've won a number of, of awards last year, and we expect to continue to be to continue our raise our profile during next year. It's important to spend a little bit money on marketing because people need to know that we're out there as their solution. We are we have to start with the r and d people, and the r and d people are who we target when we come to marketing so that they know, hey. There is a solution. It's not just potassium chloride anymore. From an investment proposition, you know, first, we talked about a little bit about the global health regulation, tailwinds for us. Basically, governments across the across the world are legislating sodium reduction.

15:17 So depending on where you are, you know, depending how aggressive you are is how aggressive those food companies will become. And it's all good news for us. You know, as The UK gets stricter, we find companies more and more willing to address every formulation. So it's all good for us, and it's unusual that you have governments supporting a position for a company like ours. Unique and defensible technology. We have a patented process. Nobody can come out and do this the way we do it, and we have a significant amount of know how. It's not just hit a button and turn it out. We there it's very it's a very complicated and, intricate system to make our products. So we feel very comfortable in the fact that we're not gonna get knocked off, to be to be blunt about it. We're we're we're very secure in our technology.

16:15 Large manufactures, multi sector, addressable markets. Guys, walk into a retail store, any store you want, any brand, whether it's, Tesco in The UK or Loblaws in Canada, and you'll just see item after item after item that needs to reduce sodium. At some point, they're all gonna have to do it, and we're the first in line. We are the we're we're the go to people in sodium reduction. Doesn't matter whether it's pickles or it's crisps or it's shaved ham meat. It doesn't matter. We're we're there for them. We have the same functionality as SALT, so we're able to address all these markets.

17:02 I'll even say that it even extends into pharmaceuticals. We've been contacted by a of companies that use salt as a stabilizer, and they're now realizing that they need to reduce the sodium in their salt without impacting their the stabilization functions, which we can do. So it's the market the the runway for us is astronomical. And, you know, we've worked hard, and we've developed a significant partnership with some of, and if not the world's largest food manufacturer. And as you can see by our revenue projections for 2025, 2026, and 2027, they are increasing rapidly on the back of this relationship.

17:50 As they expand item by item, we pick up volume item by item, and some of these volume these items are iconic across the globe. So we're in a great position to make that happen. Great. Just to add to that, once we have been added into the formulation, it's quite difficult for a manufacturer to then take us back out because why would they want to increase their sodium content? That's right. And it it it's the sales cycle for us is is a bit extended because we have some approvals to go through internally. So they're not gonna undo that. Once we've proven which we have that we're a dependable supplier, that we don't run them out of salt, there's no reason, and there's no way to go back. How are they gonna go back and increase their sodium? It's almost impossible.

18:40 And, you know, from a from a business standpoint, from a scalability standpoint, as I mentioned earlier, we're selling salt. Salt works at scale. So as we get bigger, we can we produce our commodities. We we purchase our commodities rather at a lower cost. So as we get bigger, our margins only improve. We don't necessarily need to ratchet up our marketing and sales expenses as a as a percent of sales growth because it's confined to the a a certain number of extremely large manufacturers. As we get our production runs themselves become larger, We produce more per hour. We reduce our cleaning fees. It all adds up to be a very strong, stable business model.

19:31 And once we get once we get to a situation where we have a a stable formula, it's pretty CapEx light. We have a formula. We know how to make it, and that's what we do. Now we're sensitive to the consumer needs. We're sensitive that for example, the way that they season crisps in The UK is different than the way a lot of companies do it here in The US. So we're we're sensitive to that. So we've developed a number of different formulas for MICROSALT to adjust to that. Still within our patent, still with the same functionality, and still with the same sodium reduction. And just just to kinda kinda wrap this up, our outlook is is rock solid.

20:19 You know, our sales projections for 2020 sucks are almost 7,000,000 6,700,000. And I wanna stress that that number is is what we have today this year, 2025, plus what we've been promised by one customer on one item. So we are not, this is not a wild guess. This is factual numbers to get us to 6.7. It's in hand. That equates to almost 2,900,000,000 servings next year of healthier food. And in for twenty twenty six, twenty twenty seven, the same volume projections and the same simple methodology leads us to sales of almost or over 11,000,000 for 2027.

21:08 And, again, the bigger we get, stronger our margins get. So we're in a great spot to grow this company to where it needs to be. When you get to 2027, you know, when you when you're when you're in the 13 to 15,000,000 range, that's when people start taking you seriously. And our our we're we expect our economies of scale to really, really take hold. And, you know, from an r and d standpoint and an outlook, I want you to envision a world where you don't just have salt. Envision a world where you have salt that has flavors. Envision a world that has salt that has nutritional benefits to it, not just sodium chloride.

21:54 And that's where we're going. We're going to be able to produce and offer these food companies multilevel solutions on the back of the original MICROSALT formula. Someone comes to us and say, hey, Rick. I need a red salt that tastes like lime. Done. They can't get that from anybody else in the food business except us. So it's really we're really in a great spot. That's our song and dance. Thanks for listening. I could I could drone on all day long about Microsoft, but we'll stop. And I think Gary's got some questions. Gary, are there any questions that we can answer? I'm just looking. I think we've answered one or two.

22:44 I think you've answered this one about the 6,700,000 projection, but I think you've answered that one already. Alright. Hey. We're going here. How would you describe the adoption rate of MICROSALT? We hear some great news, stroke awards, but revenue and commercial take up hasn't been at that level. Okay. That's a really good question. What I would tell you is that the sales cycle for MICROSALT is long. These large food companies take a very long time. Very quickly, there's there's there's there are some stages at first. The first stage is we have to break through to the customer and get to the right people, basically do the old fashioned hard yard sales work to get in, get a get an audience, get the meeting. Okay? So once that's done, we then go to the r d department, we send them samples. And they conduct what's called bench testing, where they just basically mess with the product. They taste it. They they pour it out. They look at it. They examine the paperwork.

23:48 And they say, okay. That's good. Now we're gonna go to batch testing. So then still within the lab, they do a batch. Let's just say they're making product x. They make 30 pounds of product x with MICROSALT, and they spread it around internally for taste tests. That happens. Then they say, okay. This is good. We've got a viable low sodium solution. Now we have to go to production testing. So what happens here is that they have to run it on their real equipment, real people, real packaging at real time, which means they need to shut their machines down. In one case, we had to wait almost nine months to get on the schedule to do a four hour production run because, you know, they're they're running food. I mean, this is their business. They don't wanna shut their machines down.

24:38 So it it can it can be frustrating, and it can be a a long process, but it's vital to the system. Once that's done, that product then goes out to external focus groups and taste testing. And when that comes back, then it's approved. Then it goes into their marketing department. Say, okay. When are we gonna put this out? What have we got promotion schedule wise? So you have to kinda work yourself into what's called the planograms. So even though our news flow is strong, it does take a long time. And it but it does come around, and this is more to Gary's point. It's extremely difficult for someone to undo all that work. Extremely difficult. So we're in a great position. So we are customers are accepting our product. They are investing in production runs, and that's an investment.

25:32 You have to imagine remember that even though our product is SALT and it has a five year shelf life, their products do not. So when they turn off a machine running a cereal brand, for example, for four hours, they're really risking short term shelf life product that's in the market. So they really have to be careful in there. It's a big investment on their part. When we hear that they're going to production testing, we know that it's gonna work because they're not gonna spend the money and the time if they don't believe it's gonna work. So that's a little bit of reason why sometimes it's a disjoint disjoint between news flow and revenues. It's just it's just it's just timing.

26:21 Did I get it, Gary? Did I answer the question? Yep. Sounds good. Yep. Thank you. Again, I think you've part covered this one, but any areas within your supply chain where you've identified for efficiency improvements, and have we taken action yet? Yes. You know, cleaning fees. For example, that's a since this is a simple one, there's a cleaning fee between runs since we use a third party manufacturer. We want the machines to be clean when we start, and so does the guy after us. So there's clean fees, and they're excessive. They could be upwards of 20,000 US dollars. So if you run one run of 200,000 pounds, it's 20,000. But if you run four runs of 50, it's $80,000. So as you get bigger, those cleaning fees get significantly reduced.

27:06 As you get bigger, the toll charge goes down because they'd lead less people to to monitor it. We can in the future, we can automate packaging. We can obviously the more component the more salt you buy at one time, the cheaper it is. You know, we go out in the salt market just like our our customers do and buy the same salt they do. So the more we buy, the cheaper it becomes. The same thing goes with freight. As we develop freight channels, which we have going into Mexico as we speak, we've been able to negotiate extremely attractive freight rates for us not only to the border, but over the border into Mexico for local storage in Mexico City. There is a lot of room for us to, improve our margins as we go go through, and it's just ballpark of scalability.

27:59 Okay. Thank you. One come in here. How does the margin for Microsoft premium compare to the bulk ingredient or bulk standard ingredient? The margin? Yes. Yes. That's whoever asked that is a smart person. The margin for premium is a little lower than bulk, because it there's an extra process involved. Now as we grow and we get to to have some additional capacities in one location, we'll be able to reduce that upcharge. It's about a 10% hit, on our margin between premium and bulk. Bulk will be a significant portion of our sales, so we're not too concerned about the margin erosion when it comes to premium. And, again, it's it's all a function of scale.

28:51 We get a big hit on premium, and we can take care of that 10. Mhmm. Okay. Just one come in here. Have you explored airline food manufacturers? Apparently, due to a reduction in taste at altitude of 30%, airline food is over salted. It is. And, we have talked to a number of the food caterers that, you know, sell to the airlines. And because of that, they're a little hesitant to to alter their formulas, and they're not really the airlines aren't really under any pressure to do that just yet. So we put them on the I'm gonna say not the back burner, but they're on the stove, but they're not bubbling over for us. It's mostly prepared meals that you you but that you you taste the oversalt.

29:40 And, we've addressed them if you remember when I was talking about premium, and I said it it now packs in small sachets. We have approached the airlines with our product in a sachet. Because, know, when you get the airline food, you always get a little you always get a little package of salt. And we think that a good way to start with them is to have the sachet of salt be low sodium. So, yes, it is on the it is on the the radar for us. Okay. Thank you. Do you expect to exceed your sales forecast for the next two years? I'm sorry, Gabe. What was the question again? Do I Do you you expect to exceed your sales forecast for the next two years?

30:27 No. You're talking with sales guy. Oh, you know, I'm always gonna say yes to that question, but I am very, very comfortable with our our numbers that we've put out for 2026 and '27. Very comfortable that the numbers are already there. Barring any governmental intercedents, I don't have any any any hesitations at all. Okay. I think we're getting close to the questions. Alright. Well, I think that's it, guys. Anyone who who attended, again, thank you for, joining us, on our on our on our vision and our journey.

31:16 We are here for the long term. We are going to be continue to be groundbreakers. We will continue to improve the food supply, no matter where you live in the world, and we're excited about the way we're doing it. We're doing it the right way. We're building it at scale. And takes a little bit of patience, but when you get there, you get there. So thank you very much. Perfect. Gary, if I may just jump back in there. Thank you very much for your presentation, for being so generous of your time, addressing all of those questions that came in for investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation just for you to review. But apart from that, guys, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations?

32:10 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of MICROSALT PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.