Good Investing Talks - Is va-Q-tec a hidden European energy champion, Joachim Kuhn?

Episode Date: December 1, 2022

va-Q-tec is another European company that could be interesting for investors looking for opportunities in the energy crisis. The company specializes in energy savings with its unique isolation technology.

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And now without further ado, enjoy our video. Dear viewers of Good Investing Talks, it's great to have you back on the podcast. Today, I'm having another European company on and Mr. Joachim Kuhn of VacuTech is here today. How are you doing in Wurzburg? Yes, all fine here. Nice weather today. and we are looking forward to an exciting winter time. It's an interesting bridge already to the topic of energy

because the weather currently is like super warm here. You might even see it at my glasses which are where air condensates and it's not a usual October in Europe and this might also be a good thing because it saves us energy and VacuTech as a company is a very interesting European company that's why I invited you because your mission is also to save energy. Was this all the vision you founded in VacuTech in 2001 with, like 20 years ago, you founded the company in Wurzburg?

What has led you to it? At that time, back in the year 2001, we had the vision that the world needs more energy saving. And we produce an invented vacuum insulation panel. which is a super insulating panel with 10 times better insulation and it can can save energy in so many applications and this mission of the year 2001 still drives us today and sometimes unfortunately it becomes every day more and more truth and valuable what was the kind of setup you founded the company in the you came out of of a research institution that is still founded by the Bavarian state.

It's also there an advantage to be a founder in Wurzburg, which isn't like the city many people know, but yeah. Yeah, here in Wurzburg, we have a great and also big university with, in total, we have 35,000 students. And this creates a very nice spirit and a good environment for innovations. that's where we come from so we have this still this surrounding today have created a nice company with a lot of employees here in the town and we are in central europe and so we can deliver our product to everywhere so we are very happy with this environment here is there also an advantage coming from being placed in wurtzburg in your city city yeah of course we know the the environment here, we are well known. We have an interaction with a lot of cultural and social

society here. And we are well known as an employer as well. You have a nice light on describing your technology. This way you use the thermomac or like the kind of atmospheric load of the Thermomac, you've put it into this plate or this element, you're selling, and that's your Petitenta technology. What kind of problems can this technology solve? Yeah, in general, we reproduce a high efficient thermal insulation panel. And as you showed in this graph, vacuum thermal insulation is well known since the thermos bottle, which has been invented, let's say, around 100 years ago.

120 years ago and we have mastered now to make these cylindrical shaped vacuum insulation into a panel shaped insulation which is a very big step yeah and we mastered this technology and apply now the vacuum insulation panels in many many applications how much time did it need for you to develop this technology from like maybe first starting with research and then making something you could think this could be a product. Yeah, so since the 19s or late 80s, we developed at the university, the physics, or we tried to discover the physics of thermal insulation. And while working on that, we of course discovered that getting rid of the air in the insulation

gives you another level of insulation. And from that innovation, we developed the production line. So we brought it into application. We produced it literally. And that we pioneered this type of innovation. How is your technology protected? Are there patterns that you have that protect this technology? Yeah, the principle of vacuum insulation is not patentable.

But we have a lot of patterns around about various types of this technology, about how to produce it, how to check the quality, for example. So, in total, our company masters about 220, I think, patterns and patterns applications. Is there any risk that they will run out if they have been done in 2001, 2002? we have subsequently filed new patterns and patent applications so of course some will run out others will come and by nature a pattern is only valid for about 20 years if this patterns run out how hard it is for other companies to yeah build the same quality as you do yeah you may never forget that the pattern is not only it's not alone we have a lot of knowledge around it it's in the brains of our great team it's in the yeah it's it's in the company so even if you can read a

patent and if it runs out many patents are not easily reproducible so you're a founder and the owner operator and you came out of university and like universities are usually not the place where you learn business. It's more about research and writing papers. In the last 20 years, how did you develop the skills to be a business builder or a businessman? How did you make this transformation? So a little bit of learning by doing, I would say. But I had already a strong foundation. I'm a physicist. I did my PhD in physics. But I also started business administration and also sports to some extent. And all this flows together in a good basis.

And the rest can you can learn by doing. Also today, there is no university education, no masterclass, how to be an entrepreneur, how to be a managing director. All these things have to be learned by doing. what was the hardest thing for you to to get right as a businessman and maybe where are you still struggling with like getting better yeah you can you always can improve you always can improve your leadership quality you always can improve of course your your knowledge and your skills only this week they had several meetings where I really learned a lot of new things for me in business administration as well in legal matters for example as well so the world is full of new things you can learn and you should be ready the most important thing is you should be ready to adapt them and and to be open to apply the new things you learn what drives you to to go to to work every morning

and like not say okay i sell my shares and i go and have a nice life actually i have a nice life actually because i feel absolutely comfortable and what drives me every morning and every night is i think that we still have a great technology base a disruptive one which still has a lot of potential to apply to be applied in several industries and we are working on this vision and it's still the vision when we started the company we can save an enormous amount of energy and as you know by daily use the world needs that we need to save energy that does not mean that we have to lose some comfort our life will be still comfortable but in another way but but it will be less energy consuming. You decided to go public in 2016. Where was this in the best interest of the company to become public then? Yeah, we spoke about awareness of people.

And when we went public, it brought a lot of awareness to the public about our company, about our technology, which was really needed. we have not only created the super insulation panel, as you know, but we have also pioneered a high-performal thermal packaging and boxes and containers which are used to ship pharmaceutical goods or vaccines around the world. We had a major part in COVID vaccine distribution internationally. So I think this technology is something what the world needs

and we every day it's more needed and the technology we have will be distributed in the world some of the boxes are behind you so you're always thinking out of the box yeah yes very good also behind you i see um on your left hand there the graph i think it's the hockey stick temperature development of the of the world i know this this painting and that is also what drives me yeah I have one presentation which is called The World is the Box. And it is like that. We are a very close environment. And on the graph behind you, you see that the temperatures in the last years have risen more than ever before.

And we don't know the end yet. That is also a little bit frightening. We hope it has an end and we can adapt to it. And we have a lot of possibilities to do. And one is our technology. That's good to hear. let me jump back to the point with the stock market you are now public five six years that's a good point to some to make a cut and think what was good in your performance

and where would you think you did mistakes and underestimated the challenges on the stock market of course it's challenging but i think we have done quite quite well sometimes we didn't succeed in educating the market as good as we should have done, then that brought us, yeah, some, some, some, let's say, yeah, drawback. But I think we have been in a, in a very good position. We have, we saw our stock rising and falling. At the morning, at the moment, we are a little bit lower and the markets probably have their own problems partly. Partly maybe we didn't give them enough knowledge about our technology and our company. But in total, I think it was a very good journey what we saw in the last six years for us.

Awareness has risen immediately. We have a very good connection with the international financial markets, which are kind of the driver. They give you the fuel, what you need to develop. And it has been, even if the share price today is low, it has been in total, I would say, a story of success. Coming back to the point on education, what are three things the market has to know about you to really get a sense for the stock and the business performance? So, first thing is, we master a disruptive technology to save energy. And the second is we are we have a high very good quality product made and made in Germany and we also have a great team which wants to internationally expand.

And the second is the future will need our technology more and more. we are not related to let's say quarterly events we have a long-term vision and that is what you should know when you buy our shares i want to now jump a bit in the business fields you have and you have this nice light in your presentation so that shows that you have two kind of clusters of business field more the temp chain and also like the energy efficiency part, the thermo energy efficiency part. And I would be interested how these business fields came about. So you have this new technology developed and you look for applications. And how did you, yeah, find entry points and ideas to go into new business fields?

Yeah. So we still have our great disruptive technology of super insulation. And when we started with this in 2001, after two, three years, we found that the business doesn't grow strongly enough to get a sustainable business. So we tried to get ourselves in some application and we pioneered the high-performance thermal insulation box, a box which can keep temperature super stable without any energy supplied during transport for five. to 10 days and so we created this box and that's how we stepped in into this temp chain market so temperature controlled packaging solutions and nowadays we are a very high level provider probably one of the leading companies in the world and we that's how we stepped in and at that time when we went into this business back in 2003, 4,

the biotech in the pharma industry started to develop. So our offering of high-performance thermal boxes came together with the birth of biotechnology in a large scale, and they needed this temperature, this high-performance boxes to ship their products around the world. so a coincidence a good coincidence and that's how we grew what i've learned from previous presentations and talks with you you're offering more expensive product than conventional solutions so to say but it seems it has a higher longer lifetime and a higher quality but a lot of the industries

that were on the slide they are price competitive for instance if you think about freezers people decide on the price of the freezer also in energy. How do you manage this tension between a more expensive product compared to other solutions but a higher quality product? So expensive is a relative word. If you really compare costs per square meter, which is a very rough and basic, let's say comparison, then maybe we are more expensive. But if you look in total costs, it's actually our solution, which is a very rough. which in many cases is very much cost saving. This is exactly how we try to educate the market to really think about their total costs of energy consumption, of total ownership, including transport, including product losses, for example.

And then you will easily see that our technology is not the most expensive one, but I'd say the most, yeah, economic one what kind of cost savings can you achieve over a lifetime it's highly input dependent but yeah that depends on the various industries you have of course simply spoken for example if you apply the panels in the fridge you save a lot of energy and the kilowatt hour five years ago isn't there's another price than today so the last this energy crisis leads people to save energy and we have the right products to do that. So in other applications, you save product losses, yeah? Many of the vaccines or pharmaceutical products before could not be used

because they saw temperature deviations to cold to hot. We have not had any temperature losses, any product losses up today in our products. So these are alone hundreds of millions or billions what you save compared to the previous solutions two examples you are a quite young company and hardware intense company with the boxes and the panels um so you have to scale up production to a certain extent and this also leads to units costs might be higher as you if you're fully scaled up so do you see over time that the price you offer with your products could go down as you go to scale or is there anything that works against this trend yeah i think we can of course improve um and and scale down prices

for some for some products um but i think all those other products have already reached a quite good market level uh which will which will yeah sustain um but in other areas we can't definitely improve that depends a little bit on the products where you apply the panels Let's jump back into the business fields and look at the TameChamp business field. It differs a bit from the other businesses in my eyes. It's more a logistical business. Why did this business line that is now 75% of your revenues take off that much compared to other business lines? You already mentioned a bit, but...

Yeah, as mentioned before, it came when we developed these boxes, everybody asks us, why do you need this super high performance boxes five to ten days without any energy supply who needs that this stability who needs that but then the biotech industry came generating a vast new majority of new products new new drugs and so the temp chain business is was rising with biotech industry and today i would say of the top 100 selling pharmaceutical products, 80 or 90 are biotech based and need this high temperature control during storage and shipment. That's why this took off. And I want to say that we have a strong technology base, and that's also the message for our economy, that we can have other

fields where our technology will be used, which can take off in a similar way, maybe a bit later maybe in another area but the potential is there i'm also interested in understanding the company and you as a business builder so parts of these temp chain logistics is logistics you're doing so how have you built this competency in logistics and how much competency do you need yourself and how much is given from partners so we are doing not logistic We are only providing the tools to have a good thermal logistics, but we are not the logistics company at all. And so when we offered our products, our tools, our services, we speak with exactly these logistic companies and the guys who wanted to, who need the logistics, for example, the pharmaceutical shippers, but we also speak with the forwarders, with the airlines, with the integrators of this world. and tell them about the advantages, how they can save costs, how they can save product losses,

how they can have predictable shipments with no deviations. That's what we tell them. And that's why I think we are very successful in this area. Parts of the success or of the story is also a bit bound to the pandemic in the vaccine delivery. We will see in this kind of segment of your business a decline if the pandemic normalizes or what is your future estimate for this part of the business? So we also grow in the underlying business, so the business accept the influences of COVID-19 vaccine distribution. That was a little bit overestimated in the last years, that we are a COVID-pure player, but we, which is not true.

So under our underlying business, even last year, where we had a great growth of the company with 44%. Yes, the growth was coming from COVID, but also the underlying business grew double-digit. You have to get a realistic assumption about the impact of the pandemic, even in the future with this business line. What is your assumption for this? So all depends how vaccination processes will continue. And as you know, there's a lot of discussion in our society about vaccinations, about

boosters, about the variants of the virus, and so on. So very hard to predict. We have a low visibility here. We are quite sure that we do not. Let's say, yes, that we do not have to have to worry. There will be always business to distribute. But I think in the long run, of course, COVID vaccination business will go definitely down. Let's come back to the other business line and look again at the slide.

Appliances, building mobility. are their topics that give this business lines. How long does it usually take for you to get into these markets and get your technology applied in the customer's products? What are the time frame in this markets? Well, the timeframes can be very different. For example, the longest time frame, of course, has automotive industry or the airplane industry,

or the airplane industry, I think in building industry, we have, we see good momentum, good traction, but still takes a little bit to discover in the market, to spread more in the markets. Very different time frames here, ranging from two years to 10 years. We already discussed fridges a bit, so I think it's easy what kind of problem you solve here, but what kind of problems are you solving in techniques and industry, in building, and mobility, can you maybe give some details here? Yeah, I have to solve in this area as we can solve, for example, it's all about energy saving. And in a fridge, we can save up to 50, 60% of energy, depending how many panels of our panels, the fridge producer uses. We have definitely in other areas, for example, in mobility, we can better insulate, for example,

the skin, the chassis of a car, we can insulate batteries leading to a much improved thermal management of the car or of its components. These are just some examples here. So in the car industry, it usually like they do their planning five years ahead for the production lines or three to five years ahead. And so the uptake in your business will be seen also in this kind of timeframes if their electronic mobility becomes more dominant yeah or or longer we don't know exactly because the european car industry um who would be our first client is now let's say still struggling with e-mobility um they have launched their first set of products now they are in a second phase where they improve these products and maybe in the third phase which will come in five

years they will definitely have a neat and improved thermal management of the car and its components and i think in this in this wave maybe after five to ten years we will be in how much testing and back on four will you have with your customers when implementing the new panels to for instance the building sector which is a quite conservative sector uh for instance yeah you can know You can apply it at any time. We have already now all the approvals needed to be. It's a matter of approval here in the building sector. We have a lot of approvals needed.

For example, we just recently got the approval of the Italian industry for their energy saving programs. So we are already in a good shape. What we have to do here is to integrate our panels more in systems and we have to wait a little bit until we have done this system approval that is more done by the system providers and that can take one, two years. Driven through the energy crisis, is there also like a higher demand that's coming to you? Or is it more like that you have to build a sales organization for the different fields and

really go do the hard underground work to promote your product and get in touch with the customers? Yeah, definitely. So we need to build up the sales organization. It's not all done by ourselves. we need also sales partners or system partners who include our products in their systems and their sales process. I think we have a lot of interesting partners here and we have to penetrate more of these markets. It's a big job and we have limited resources, of course. We are trying to focus with our resources on the field where we see in near future the biggest success.

that's our strategy how do you come to the conclusion that success is more likely in this sub segment of the market yeah we see how the customers react and and how readily it's accepted and implemented in their industry and you always have a first mover in the markets typically someone who is the first adapter of the technology and when he appears in the market and shows really advantages of his newly designed products with the VIPs included then others follow okay has the energy crisis changed the playing field or are all the planning is a bit more in shock and example in the building sector project have to be postponed because of rising costs or is there already something you see where the playing field has changed in your favor so we have our our own costs are let's say pretty much under control as good as it can be we have no supply issues at the moment and i think in future we will also develop greatly in this in this field we see now an increasing awareness and i would say our panels are used when you have no space

but you need a very good insulation. You need these two factors. No space. Very good insulation. And of course, with the rising awareness, also with the regulations, with new energy efficiency regulations, we are more and more in the focus.

And in a typical building, it's only maybe 3 to 5% of the total area to be insulated where we can apply our panels. with these circumstances, no space, but very good insulation, a problem solver. But these 2 to 5% of the market are massive. And that is our goal to penetrate these massive 2 to 5% of these market. What does it mean in terms of revenue, massive?

Yeah, it's definitely, if you feel all this, literally these niches, the niche in the building sector, is a multi-billion market. Okay. It sounds quite interesting and promising. Thinking about a bit of the, for the end of our interview, about the life cycle of the product, it's a bit of a rough question, but maybe you have some examples that come to mind. How much energy do you need to build a panel or a product and how much can it save over a lifetime?

Do we have any ratios for some use cases for this? Yeah, first of all, we are. carbon neutral company, all our products are produced in a carbon neutral way still since 2021.

We are proud about that. Looking at the variety of our portfolio with more than 200, 300 products, boxes, panels, everything, I cannot give you a general answer here. But I would say in the lifetime of the

application where we use our panels, the panel can save much more energy than it needed to produce it. Also, our energy bill to produce the panels, of course, not including the raw materials, but our energy bill is maybe 1.5% of our overall turnover. And that also gives you imagination how energy saving our products are also in production. thinking again about the lifetime of the product also across different use cases how long is the lifetime is for example a box behind you how long can it last if it's in high intense use and when should there be new purchases yeah i think that depends also on the product we have boxes of containers

with a lifetime of 10 years easily yeah or even more and we have boxes and containers and which are also designed, and don't get me wrong, for a one-way use. That doesn't mean that they are thrown away, but they are then one way, and then they are reused, for example, locally in another application. But we have all of that. And so our lifetime of our products, including boxes, panels, ranges from, let's say, two years, up to 50 years. That's good to hear. For the end of our interview, I always give the chance for my guest to add something we haven't discussed.

So is there anything you want to add? Yeah, I just want to emphasis again that we have a great technology basis to pioneer and revolutionize several more industries. We are now very well known for our temp chain business, providing tools for pharmaceutical and vaccine distributions. But I think many, many other sectors will come. We have the potential to revolutionize any type of temp chain logistics. It can also be in food industry. It can be in other industries. And we have also the possibility to revolutionize a lot of where you save thermal energy.

60% of our primary energy consumption in industrial countries is used today for thermal purposes. 60%. It's not mobility. It's not IT. It's not light. it's thermal properties where you use the lot the most of the energy and that is our playground so there's a big field where we can play and we are absolutely committed and dedicated to save a very much amount of thermal energy in the future sounds like an interesting story

to follow thank you very much for your time mr coon and thank you very much to the audience for staying till here and bye bye from my side thank you very much bye bye as in every video also here is the disclaimer you can find a link to the disclaimer below in the show notes the disclaimer says always do your own work what we're doing here is no recommendation and no advice so please always do your own work thank you very much