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EcoSynthetix, Renewable Chemicals Company, Reports its 2011 Financial Results

Published on 2011-08-26. Author : SpecialChem

BURLINGTON, Ontario -- EcoSynthetix Inc., a renewable chemicals company that produces a family of commercially proven bio-based products, including ECOSTIX®, announced its financial results for the three months and six months ended June 30, 2011. This is EcoSynthetix's first reporting period since the Company closed its initial public offering on August 4, 2011 (financial references are in U.S. dollars unless otherwise indicated).

  • Completed an initial public offering of 11,150,000 common shares at a price of Cdn$9.00 per share resulting in gross proceeds of Cdn$100,350,000 subsequent to the end of the quarter
  • Converted two of the global top 20 coated paper and paperboard manufacturers into customers subsequent to quarter-end; the Company is now commercial with five of the global top 20 manufacturers
  • Secured the Company's first commercial customer in the personal care segment during the quarter
  • Reached full-scale production levels in the Netherlands manufacturing facility during Q2

Q2 2011 Financial Highlights

  • Revenue increased to $5.6 million compared to $3.5 million in Q2 2010
  • Gross profit increased to $1.4 million compared to $1.0 million in Q2 2010
  • Adjusted EBITDA┬╣ decreased to ($0.7) million compared to ($0.2) million in Q2 2010

"Volatility in the price of oil and growing commercial adoption of our competitively priced products drove strong year-over-year sales growth for the Company," said John van Leeuwen, Chairman and Chief Executive Officer. "We converted two more of the global top twenty coated paper and paperboard manufacturers to EcoSphere® Biolatex® binders subsequent to quarter-end. The number of mill trials we have outstanding has increased since the end of the first quarter and we expect our cost advantage to drive the continued conversion of prospects into customers during the seasonally strong second half."

"On August 4th, we completed our initial public offering and listing on the TSX. The $100 million we raised will be used to fund our capacity build-out, to further develop our bio-based product suite and to meet our working capital needs. As a low cost provider, we believe we are well positioned to capture additional market share in the coated paper and paperboard industry and to accelerate the adoption of our bio-based products into new markets and novel applications."

Financial Summary

Revenue

Total revenue for the quarter was $5.6 million compared to $3.5 million in Q2 2010, an increase of 58%. Revenue for the year-to-date ("YTD") period was $11.8 million compared to $5.2 million in the prior period. 95% of revenue in Q2 2011 came from recurring sales to current customers, while 5% of total revenue was generated from new customers.

Gross Profit

Gross profit for the quarter was $1.4 million or 24.1% of revenue compared to $1.0 million or 29.3% of revenue during the quarter ended June 30, 2010. For the YTD period, gross profit was $2.8 million or 24.2% of revenue compared to $1.5 million or 29.4% of revenue in the prior period. The compression in gross margin year-over-year was primarily a factor of increased cornstarch costs, which were partially offset by price increases.

Selling, General and Administrative

Selling, general and administrative costs for the quarter were $2.2 million compared to $1.4 million for the same period in 2010. Selling, general and administrative costs for the YTD period were $3.4 million compared to $2.3 million in the prior period. The increase in cost from the prior year is primarily a reflection of the higher staffing levels required to support the Company's growth.

Research and Development

Research and development expenses for the quarter were $0.3 million compared to $0.2 million for the same period in 2010. For the YTD period, expenses were $0.7 million compared to $0.5 million in the prior period. The higher expense year-over-year was primarily reflective of the continued commissioning of the pilot production line in the Company's Burlington, Ontario facility. The pilot production line is expected to be operational by September, 2011.

Adjusted EBITDA

Adjusted EBITDA for the quarter was ($0.7) million compared to ($0.2) million for the same period in 2010. For the YTD period, adjusted EBITDA was ($0.5) million compared to ($0.6) million in the prior period. The decrease in adjusted EBITDA in Q2 was primarily caused by the increase in operating expenses required to support the growth of the business, combined with higher cornstarch costs. The increase in expenses during the quarter was partially offset by growth in sales volume and average selling prices compared with Q2 2010.

Loss related to change in fair value of warrants and redeemable preferred shares

The redeemable preferred shares and warrants have been designated as financial liabilities, with changes in fair value reflected directly in earnings. For Q2 2011 the loss related to the change in fair value of warrants and redeemable preferred shares was $190.9 million compared to $18.4 million in the prior period. For the YTD period, the loss related to the change in fair value of warrants and redeemable preferred shares was $246.8 million compared to $18.8 million in the prior period. All preferred shares and warrants outstanding at the closing of the initial public offering on August 4, 2011 were automatically converted into common shares and common share purchase warrants.

Net Loss and Comprehensive Loss

The net loss and comprehensive loss in Q2 2011 was $192.0 million, or $177.95 per common share (basic and fully diluted), compared to a net loss of $19.0 million, or $23.85 per share (basic and fully diluted), for the quarter ended June 30, 2010. For the YTD period, the net loss and comprehensive loss was $248.1 million, or $264.57 per share (basic and fully diluted) compared to $20.1 million, or $26.35 per share (basic and fully diluted) in the prior period.

The pro-forma (before fair value charges) net loss in Q2 2011 was $1.1 million or $1.01 per share (basic and fully diluted) compared with a pro-forma net loss of $0.6 million or $0.80 per share (basic and fully diluted) in Q2 2010. For the YTD period, the pro-forma net loss was $1.2 million, or $1.33 per share (basic and fully diluted) compared to $1.2 million or $1.61 per share (basic and fully diluted) in the prior period.

Liquidity

As at June 30, 2011, EcoSynthetix's cash balance was $27.7 million, compared with $35.2 million on December 31, 2010. Working capital as of June 30, 2011, was $32.2 million. The Company believes that ongoing operations, working capital and associated cash flow in addition to cash resources provide sufficient liquidity to support ongoing business operations for at least the next 12 months.

Highlights of EcoStix

ECOSTIX to function as PSA

ECOSTIX is derived by chemically reacting ECOMER with an acrylic monomer to make a sugar-based vinyl copolymer that functions as a Pressure Sensitive Adhesive (PSA). These are considered "smart" adhesives since their adhesive properties are designed to turn off in response to specific external conditions.

These waterborne PSAs have unique properties that will allow them to address specific end-use needs such as wash-off labels for recyclable packaging and fruit labeling, repulpable tapes, paper labels and postage stamps which do not interfere in paper recycling, high temperature resistant labels for automotive ("under the hood") applications, biodegradation for adhesion to materials that are compostable such as bio-based plastic films as well as paper.

About EcoSynthetix Inc.

EcoSynthetix manufactures a family of commercially proven bio-based inputs for a wide range of consumer and industrial goods. EcoSynthetix's lead product, EcoSphere® Biolatex® binder, is used commercially by a number of the top global coated paper and paperboard companies. The Company's "green" technology platforms provide customers with opportunities to significantly reduce their carbon footprint while switching to renewable, cost-effective inputs.

Source: EcoSynthetix Inc.


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