1HFY24 Report: Carbonxt Group (ASX: CG1) advances construction of Kentucky production facility

Highlights

• Construction at the Kentucky activated carbon production facility advanced significantly in 1HFY24.
• Presently, the facility is undergoing commissioning.
• Pellet sales accounted for 54% of revenue and 37% of sales volume in the first half of FY24.
• Powered activated carbon revenue grew by 31% YoY in 1HFY24.
• Gross margin reached 44% in the first half.

Carbonxt Group Limited (ASX: CG1) has been focused on advancing the development of its flagship activated carbon production facility in Kentucky. The activated carbon production facility is jointly owned by CG1 and Kentucky Carbon Processing, LLC (KCP).

Key developments across Kentucky plant in 1HFY24

To NewCarbon Processing, LLC, the company has contributed US$5.5 million along with its US partner KCP. Presently, CG1 holds a 35.5% interest in the facility and can increase it to 50% with further investment of US$4.5 million.

During the first half of FY24 ended 31 December 2023, construction advanced on the new activated carbon plant, which is located in the eastern Kentucky, the US. The initial capacity of the plant is expected to be 10,000 tonnes per annum, with the ability to expand to 20,000 tons per annum with further investment.

The plant has moved into the testing of front-and equipment and processes. In March 2024, the company expects to conduct final electrical activities.

The company has received positive reception by its formed industrial pellet customers, reflecting the progress of near-term sales efforts. For almost all prospective customers, next step is to send pellet samples from the facility, which would continue for the next few months.

Key financial metrics for 1HFY24

Total revenue stood at AU$8.42 million for the first half. During the period, revenue from powered activated carbon (PAC) grew by 31% over the previous corresponding year. PAC contributed 46% to the group’s half year revenue and accounted for 63% of sales volume. Pellet sales accounted for 54% of revenue and 37% of sales volume.

Gross margin during the first half reached 44%, an increase from 28% in the same period year ago. It was driven by positive flow-on effects from the rollout of operating cost reduction initiatives and a decrease in manufacturing shifts at Arden Hills.

In 1HFY24, underlying EBITDA improved by 69% with a loss of AU$286K, compared to 1HFY23 EBITDA loss of AU$930K.

Funding boost

In December 2023, the company announced an entitlement offer to raise AU$1.835 million by issuing more than 30.5 million shares at AU$0.06 issue price.

During the same month, the company informed about the successful raise of AU$600,000 through a placement of 10 million shares at an issue price of AU$0.06 apiece.

As part of the capital rise, CG1 made a further placement of 9.33 million to Pure Asset Management to raise additional AU$500,000.

What’s ahead?

Carbonxt expects the Kentucky facility to strengthen its position in the fast-growing market for pollution capture and reduction technologies in the US market.

The cost reduction initiatives over the last year have recorded a material increase in the group’s gross margins, back over 40% of sales.

Furthermore, Carbonxt plans to expand its pellet manufacturing capacity at the upcoming Kentucky plant. This state-of-the-art facility is designed to support growth and meet industrial demand, particularly as companies actively pursue technologies that reduce emissions and products for capturing pollutants.

Carbonxt is focused on tapping opportunities to establish its presence in the US water market.

CG1 shares traded at AU$0.095 on 1 March 2024.