Spread the love

STOCKHOLM – Poor sales are expected to hit profits and cashflow in the remainder of 2023 at recycling technology business Renewcell. The company says sales volumes to fibre producers are behind levels previously forecast and are, “not likely to follow the volumes implied for 2023 by existing off-take agreements.”

In a concerning trading update, Renewcell said that up until the end of September, it had sold approximately 14,400 tonnes of Circulose, its core pulp product. Of this, around a third has been sold to fibre producers with the remainder sold to sales agents and held pending final onward sale.

For the volumes sold to sales agents, Renewcell says it has received 70 per cent of the final sales value, with the remaining 30 per cent being paid upon onward sale.

In a statement, the company said: “This arrangement, with a volume of Circulose held by the sales agent ahead of onward sale to the fibre producer, was expected to be short term but is now expected to continue during the fourth quarter and well into 2024. This has an impact on working capital and cashflow with Renewcell funding accounts receivable of approximately 55 MSEK at the end of September for the 30 per cent final payments which are not received until the onward sale to the fibre producer takes place.”

It added: “The ramp up of Circulose sales to fibre producers is taking a longer time than previously expected. Sales volumes to fibre producers are behind the levels previously expected and are not likely to follow the volumes implied for 2023 by existing off-take agreements. This has had an impact primarily on working capital and cash flow in Q3 and is expected to impact sales, profit and cash flow in Q4.”

In June, the company said that process changes implemented at its production base were “expected to enable Renewcell to reach break-even on a cash flow basis by year-end 2023.” The company now says that while production capacity is developing as forecast, lower sales levels in Q4 mean it is, “unlikely break-even on a cash flow basis can be achieved in Q4.”

Renewcell’s share price fell sharply this week and is down significantly in the year to date. Our information is that buyers are becoming increasingly price-sensitive in a sluggish market, making it hugely challenging for price-premium products such as Circulose.

One to watch with great interest as the rest of 2023 plays out.

Spread the love

Designed and Maintained by Your IT Crew