Carbonxt Group (ASX:CG1) Presentation, FNN Online Investor Event, October 2021


Carbonxt Group Limited (ASX:CG1) Managing Director Warren Murphy provides an update on the company’s powdered activated carbon and pellets used to capture pollutants, its US manufacturing operations and capacity, and market demand and outlook.
 
Carbonxt is a pollution control company, we particularly manufacture activated carbon, which is a material with a huge surface area that acts like a sponge to capture pollutants. In particular, we make two types of products, powdered activated carbon and pellets. The pellets are used in water and wastewater applications, principally, but also to capture organic compounds such as toluene. We are the only manufacturer in the US of industrial activated carbon pellets. I should say our entire business is based in the US in Gainesville, Florida. We roughly are about $42-$44 million in price value, depending on where we’re trading. At the moment, $0.25-$0.26, and for a smallish company, thanks to Shaws and their help in raising the IPO, we have quite an institutional register with Pie Funds as our largest shareholder at 8%. We are one of only seven cleantech companies producing revenue in our view, but we believe we are significantly undervalued trading at less than two times revenue.

We were affected by COVID, I just picked up the last of the previous gentleman’s slide, and it is certainly hard to predict, but what we have seen now in the last quarter is we’re back to where we were in the beginning of COVID, we had a dramatic increase in the last quarter up 81% up to $4.9 million in revenue, we continue to increase, we are now cash flow positive. We have three manufacturing facilities with capacity to sell about 20,000 tons of our two products powdered and pelletized. We are building a new plant in Kentucky, that’s due to be advanced in the first half of next calendar year. And it’s a unique facility in that it’s a 100% financed by our joint venture partner there, we’ve structured a really unique deal to not spend any money ourselves, working capital provided by them, and we effectively maintain control of the sales relationship, and it’s effectively like an outsourcing or even a licensed style deal. Things are really kicking on for us, we’ve massively noticed a change since President Biden was elected, cleantech, issues cleaning air, cleaning water, incredible significance.

Areas of business we are in, we started off in power plants, so those people that were around when we were floated with Shaws, we were there to capture mercury from coal fire power stations, that’s become less and less of our business as we advance into other markets. Just our pellet opportunity is over US$200 million, the granulated activated carbon market is a market the pellets can substitute into, that’s also over US$250 million, and our products typically sell for around US$3000 a ton.

For people who want to get a bit more of an insight into who we are, may I suggest on that second dot point they take a look at the advancement series on the website. We were on national US television about a month ago, it was a piece about what we’re doing to clean the planet, clean the air, clean the water, very much a piece that we’re proud of, and I think really has seen a lot of inbound traffic for us both from investor and customer potential.

So, going quickly through what we do, we started out manufacturing powdered activated carbon, we have a plant in Georgia in the USA that we built much cheaper than our competitors built comparable facilities, we have 10,000 tons, cost us to around US$3 million to build, says we’re about 50% utilisation, we are probably up to two thirds now and sitting on a bunch of inbound interest to sell the balance out, which we hope to be announcing in the due course shortly.

We are increasing our gross margins as pricing is well and truly on the up in the US. In terms of the activated carbon pellets, we’ve bought a plant in Arden Hills, it has six to 7,000 tons a year capacity, as I said, that sells for about US$3,000 a ton. That is completely sold out at this point in time, and we are sitting on a bunch of contracts waiting for the clear date when our new facility will be online and we’ll be then entering into those contracts.

All of what we do is about intellectual property, we have four PhDs on staff, the balance of everyone else is either environmental engineering or mechanical engineers of the like, and certainly a lot of chemistry grads and the like. We’re based in Gainesville, Florida. Why Gainesville? It’s home to the University of Florida, it’s one of the top five public universities in the US, but more particularly, its environmental engineering school is incredibly well regarded and considered one of the top three in the US.

As I said earlier, we started out and a lot of people know us for being in the coal power industry, but as we expand and as we develop new products, we’re branching out into other fields, we are very proud of what we’ve developed in our HydRestor product, this is a nutrient removal, the pellets effectively take the phosphorus and nitrogen out of the water and clean it up, that’s a massive problem for algae blooms, and in the US in particular in Florida is a major issue, and the Florida State government has passed specific legislation to capture this. This is all a homegrown, by us, palletized product in a branch of what we’ve been doing.

So, in terms of what we recently announced, we’re very proud of this, red tide is an algae bloom off the coast of Florida, it is a very big issue, causes tremendous damage to aquaculture, obviously as a tourism centre, it’s a real issue. We have been working on a solution for this, and what we’re showing in this slide is two laboratory exercises where we combine two different algaecides with our pellets. Our pellets are stopping the feed to allow to stop the algae from blooming, the algaecides actually kill it, if the algaecides were just used on their own the amount of algaecide you would need would be horrendous in terms of cost, but also the damage that it would do as a byproduct to the aquaculture.

What we’re looking to do here is to drive that very low dosage of somewhere around 0.1 grams per litter up to a hundred percent capture rate inside two hours, that’s what we’re trying to do. And what we’re very glad we showed here is that essentially in either treatment we were able to get that hundred percent component inside 24 hours, and in one case, at the very low dosage of 0.1, that’s a pretty exciting result to be well up into the seventies. We’re applying for another grant, we’re working in conjunction with world renowned Mote Marine laboratory in Florida, as well as government bodies.

Just sort of going through what we’ve done and where we’re going, because the pace in our business at the moment is tremendous. We accepted a US$3 million in total order across Q2 and Q3 of this financial year, we’ve been flat out meeting that, we are about to announce the commencement of construction on a Kentucky plant, when we do so we’ll start entering into contracts to deliver into the industrial pellet market.

We also should free up some capacity in Arden Hills as we transfer some of that through to Kentucky, and then we’ll be using that Arden Hills capacity to drive into higher value added activated carbon pellets. We’ll also be starting our first commercial pellet sales. We have a complete team, very highly technically regarded people in Florida, a number of PhDs, and a really good team in the laboratory as well.

Just rifling through this, just conscious of time, but if anyone wants to contact me, feel free to do so, can be reached on the mobile, we’ll take calls all the time, and can be reached on the Carbonxt address there.

Ends