Carbonxt Group (ASX: CG1) secures AU$24mn contract extension with Reworld

 Highlights

• Contract extension secured to supply premium Powder Activated Carbon (PAC) products to Reworld, a US-based waste management company and existing customer.
• The extended contract will span four years, commencing in October 2024.
• The contract is expected to generate approximately AU$6 million in annual revenue.
• The contract extension is anticipated to increase CG1's total annual revenues by over 25% and significantly boost the gross margin for the Black Birch facility.

Carbonxt Group Ltd (ASX:CG1) has announced a significant contract extension to the ongoing supply of PAC products from its Black Birch facility to Reworld, a US-based provider of sustainable waste solutions. Reworld is an existing Carbonxt customer.

This four-year contract, set to commence in October 2024, is projected to generate nearly AU$6 million annually in revenues, amounting to a total of AU$24 million over its duration.

The contract extension represents a substantial financial uplift, increasing CG1’s total annual revenue by more than 25%. Efficiency improvements at Black Birch have already been implemented to enhance capacity. The increased capacity and improved economies of scale resulting from the expanded contract volume are expected to achieve a gross margin of over 40% for the Black Birch facility.

CG1 Boosts Reworld Partnership

Currently, CG1 fulfils only a small portion of Reworld's PAC needs, but the extended contract marks a substantial increase in meeting those requirements. PAC from CG1 will be utilised across most of Reworld's thermomechanical treatment facilities (TTFs) in the United States. These facilities employ activated carbon technology to remove contaminants such as mercury, dioxins, and furans.

Reworld is dedicated to supplier sustainability and prioritises suppliers that provide recycled products. Therefore, Reworld selected CG1 as its PAC supplier, as the company’s PAC production process utilises recycled wood-based materials.

As a result of this agreement, CG1 has been included in Reworld’s Preferred Supplier Program. Moreover, the company Reworld will collaborate on various sustainability initiatives, including the development and procurement of renewable energy credits (RECs). This initiative not only opens avenues for further collaborative business opportunities but also aligns with both companies’ commitment to sustainable practices.

Kentucky plant progressing well

CG1 recently completed a sale of activated carbon (AC) products to (WPS), significantly boosting short-term cash flow by AU$4.3 million.

Data source: Company update

Final development stages are progressing at the Kentucky plant, with initial production anticipated in the third quarter of 2024. Negotiations are ongoing with several large customers for premium AC products from this facility.

CG1 shares trade higher

CG1 shares traded at AU$0.085 apiece, up nearly 9%, at the time of writing on 22 July 2024.a

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