Highlights
- Carbonxt reported record revenue in FY22, backed by increased sales in both the pellet and PAC segments.
- The company expects continued sales to its largest customers in both segments at least through FY23.
- Factors such as new innovative technologies, production capacity expansion and the US environment policy are expected to offer further growth opportunities.
US-focused cleantech company Carbonxt Group Ltd (ASX:CG1) has delivered another set of strong performance, registering record revenues in FY22 ended 30 June 2022.
The company also ended the last quarter of FY22 on a strong note with a 50% increase in customer receipts.
Carbonxt is focused on specialised activated carbon products, designed for use in wastewater treatment, industrial air purification, and liquid and gas phase markets.
FY22 – A year of achievements
Carbonxt reported an increase of 49% year-on-year in annual revenues to a record of AU$18.4 million.
There was an 87% surge in pellet sales revenue compared to FY21. The pellet sales accounted for 70% of revenue and 55% of sales volume. The surge in sales volume was backed by higher production requirements due to rising natural gas costs, resulting in higher demand from the company client.
Given rising sales volume to a large industrial customer for customised Carbonxt pellets, the production of pellet tooling at the Arden Hills facility continued during the reported period. The company expects sales to this customer to increase in FY23 relative to FY22.
The revenue from the powdered activated carbon (PAC) segment remained largely unchanged from FY21. The segment contributed to 30% of revenue and 45% of sales volume. In January 2022, the company started delivering powdered activated carbon to an industrial client. Volumes under the contract are expected to hit up to 3,000 tons per year.
Underlying EBITDA - Carbonxt hit another milestone as the underlying EBITDA was around breakeven for FY22, compared to FY21 EBITDA loss of AU$2.4 million.
Gross margin - This year, the annual gross margin for the company stood at 34% compared to 28% in FY21. The improvement in gross margin was mainly attributed to more efficient operations at the production facilities and higher sales in the pellet segment backed by increased customer demand.
Strong business outlook for FY23
Carbonxt is the sole activated carbon industrial pellet developer and supplier in the United States. Maintaining a strong outlook, the company expects increased production capacity and gross margins in FY23. It expects the broader market conditions to drive the positive trends in top-line revenue and operating EBITDA that CG1 enjoyed in FY22.
New facility to boost production capacity - In early FY23, Carbonxt signed a term sheet for 50% ownership in a new state-of-the-art activated carbon plant in a joint venture with US firm KCP.
The new facility is expected to significantly increase the company’s production capacity and gross margins. It will also help reposition the existing capacity to produce more specialised technologies at higher margins. Further, the cost of production is also expected to be lower than existing costs.
Government support for new technologies - Carbonxt’s HydRestor technology was selected for an award worth AU$400,000 as an innovative technology for an extensive research program. The company was also awarded a grant of US$147,000 to support the development of a technology to address the impact of red tides on coastal environments and communities in Florida.
Favourable macroeconomic trends - The US environment policy supports cleantech solutions, a significant growth opportunity for Carbonxt.
The company uses renewable feedstock for its PAC products. This indicates another major opportunity for the company amid renewed and continuing emphasis among US firms to match or exceed their stated ESG objectives.
Further, global supply chain disruptions caused by COVID-19 and rising geo-political conflicts have increased the demand for a more diversified regional marketplace including more domestic sourcing.
Carbonxt is working on potential paths to bring forth new innovative technologies with a target to tap new identified growth opportunities.
CG1 shares traded at AU$0.11 apiece on 6 September 2022.