Carbonxt Group Limited (ASX: CG1) is primarily involved in the development and sale of specialised Activated Carbon ('AC') products, with applications across various markets including industrial air purification, food and beverage processing, water treatment & other liquid phase markets (pharmaceutical, medical and chemical production), etc. The company’s products include Powdered Activated Carbon ('PAC'), granular AC and AC pellets for the removal of pollutants and toxins in industrial processes.
The company’s AC products are having an advantage over competitive products. The majority of competitors’ AC products for mercury capture contain bromine, which can cause corrosion of plant and equipment at significant cost to the utility companies. However, in Carbonxt’s case the products are non-brominated which provide superior performance relative to many brominated products, and without the corrosive impact.
The company is having a strong record of generating revenue from its proprietary products. In 2019 March quarter, the company generated revenue of $5.1 million, considerably better than the $1.7 million the company pulled in during the same quarter in 2019, representing an improvement of 191%.
During the March quarter, the company witnessed significant improvement in its operating performance, with the loss from operations reduced to $0.5m, compared to a loss of $2.4m in the same quarter last year. Besides, the company’s operational performance has improved at both the Arden Hills (pellets) and Black Birch (powdered) facilities. With most of the initial start-up issues being resolved, the company is witnessing material progress in the Arden Hills facility.
The company believes that it is on track to be cash flow positive by June 2019.
Operating Cashflows (Source: Company’s Report)
With new finance facility with PURE Asset Management Pty Ltd and Skye Alba Pty Ltd, the company is well placed to refinance its existing Convertible Note facility. The key terms of the new facility are:
- Retirement of the existing $2.5m convertible note facility and associated options at 50 cents per share. The interest rate on this facility was 8.0% per annum.
- A new note facility of $5.5m representing net $3.0m of additional funds. The associated warrants are at 60 cents per share.
- The interest rate on the new facility is 9.5% per annum with a term of four years. The facility is secured.
The company is having three production facilities in the USA which includes Black Birch in Georgia, Arden Hills in Minnesota and Prairie Point in Florida.The company is focussed on increasing its share in the US AC mercury capture market, increasing market share of the US pellet AC market, expanding into other US emission control markets and explore expansion into other geographies. The company’s strategy is to broaden its product range to mitigate the risk of single product exposure to the US PAC (powdered activated carbon) mercury control market, commonly referred to as MATS.
The Company is led by an experienced board and management team with a track record of driving strong commercial returns. The company’s CEO Mr. David Mazyck is a world-leading expert on activated carbon (AC) who has developed AC products for the major multinational AC manufacturers.
At the time of writing, i.e., on 17 May 2019 AEST 3:45 PM, the stock of the company is trading at a price of A$0.290 with the market capitalisation of ~A$25.75 Mn.
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