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Carbonxt (ASX:CG1) H1 report highlights new carbon plant, contract renewal with largest customer - Kalkine Media

March 06, 2023 07:53 PM AEDT | By Team Kalkine Media
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Highlights

  • Carbonxt performed maintenance and installation programs at its existing facilities during the first half, expected to boost its margin growth in 2023.
  • The company achieved crucial near-term objectives concerning its strategic KCP JV for an activated carbon plant in Kentucky.
  • The period saw a capital raising program of AU$8.5 million, as well as renewal of the company’s supply contract with its largest customer.
  • CG1 believes that it is well poised to tap opportunities in the US cleantech market.

The first half of FY23 saw Carbonxt Group Limited (ASX:CG1) moving ahead with its near-term development strategy to strengthen its position in the fast-growing market for pollution capture and reduction technologies in the US market.

The ASX-listed cleantech company develops and sells specialised Activated Carbon (AC) products, including Powdered Activated Carbon (PAC) and AC pellets for the removal of pollutants and toxins in industrial processes.

In its recently released half year report for the period ended 31 December 2022, the company reported a revenue of AU$8.9 million. The period saw the company renewing supply contract with its largest customer, entering a joint venture for its new Kentucky manufacturing facility, undertaking a capital raising program and continuing research & development activities.

The company held AU$6.2 million cash at the end of the reported period.

Image: © 2023 Krish Capital Pty. Ltd.

Major highlights for the first half FY23

Pellet and PAC sales - Carbonxt reported strong demand for industrial pellets during the period. The sales under this category accounted for 47% of sales volume and 69% of revenue. The PAC segment accounted for 53% of sales volume and 31% of revenue.

Kentucky plant - In the first half, the company signed a term sheet for the 50% ownership in a new state-of-the-art activated carbon plant located in Eastern Kentucky, US, in a joint venture with KCP. The plant is expected to increase the company’s production capacity by 57% from approximately 16,000 tonnes to over 25,000 tonnes.

The engineering feasibility work for the project has been wrapped up while final legal documentation is likely to be completed in the near future. Post which, construction work is anticipated to start.

Largest customer renewed supply contract - Carbonxt marked a major milestone during the first half as its largest customer renewed supply contract for an 8-year term to 2030. This resulted in a 20% increase in the contracted price, effective from first day of this year.

R&D efforts – The company is also engaged in Phase 2 development of its technology designed to address the mitigation of Florida Red Tide algae blooms. The first half saw the company continuing advancement of the research program, which falls under broader long-term opportunity in the US market for water treatment processes.

Capital raising - The company successfully completed a capital raise during the period, to fund its initial contribution towards the Kentucky plant. It raised AU$8.5 million via the issue of 85 million new fully paid ordinary shares.

Borrowing Facility - Carbonxt signed an amended and restated loan facility agreement with Pure Asset Management to secure AU$15 million. The company plans to use this facility to pay back the existing loan and fund the KCP Joint Venture, acquisitions and product development, and for working capital purposes. The new facility is subject to the completion of the JV agreement.

Carbonxt guides for strong 2023

During the first half, the company carried out maintenance and installation programs at its existing sites in Arden Hills and Black Birch. Considering this work, Carbonxt expects improved margin growth and per-unit production economics via its existing revenue streams in the current year.

There has been growing focus of organisations across the globe towards emission-reducing technologies and pollutant-capture products. The company believes that this trend would offer immense opportunities. With the development of plans to expand its pellet production output at the pending Kentucky plant, the company expects further growth opportunities and meet industrial demand.

Data source: CG1 update

CG1 shares last traded at AU$0.070 on 6 March 2023.


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