Carbonxt Group Limited – FY24 Results Announcement

Carbonxt Group Ltd (ASX:CG1) (‘‘Carbonxt” or “the Company”) has released its Appendix 4E Preliminary Final Report.

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• Revenues for the group were essentially stable (decreased by 2.2% in FY24 compared to FY23). During the year, the team was able to renegotiate multiple of its current powdered carbon contracts to increase pricing, much of which will be realised in the next fiscal year.
  
• In May 2024, the group announced a forward sale for $4.2M to a major utility provider and Carbonxt’s largest AC pellet customer, with the cash received prior to year-end.
• Adjustments to optimise existing operations across the group’s two production facilities at Arden Hills and Black Birch, along with forward-looking production planning, have reduced the average cost of production with savings expected to flow through to future periods
• Logistics efforts with carriers and shipping vendors resulted in improvements in shipping rates with additional shipping lanes.
• Annual gross margin was 38%, compared to 30% in FY23.
• Underlying EBITDA for FY24 was a loss of $2.7m, compared to FY23 EBITDA of a $2.3m loss.
• Post balance-date in July 2024, the Company made another material revenue announcement with confirmation of a 4-year, $24m contract extension with a major waste to energy provider.
• In line with strong market conditions for Powdered Activated Carbon (PAC) products in the US market, PAC sales made up an increased percentage of group revenues for the third straight year

Activated Carbon Pellets

• Pellet sales represented 59% of revenue in FY24, down from 66% of revenue in the prior period.
• This decrease was driven by the strategic decision to reduce production of vapor phase CTC pellets, as the forthcoming commissioning of the Kentucky JV facility will be able to produce AC pellets at higher margins for the business in the near future.
• Tolling activities remained strong for the fiscal year, as a result of the management team’s ability to optimize production efficiencies and increase selling volumes of this product line by over 59% from the previous fiscal year.

Powdered Activated Carbon

• The utilization of recovered wood-based char material from local Georgia based lumber sawmills to create a renewable powdered activated carbon continues to support strong margins in our powdered carbon business.
• Powdered carbon sales accounted for 41% of revenue and 61% of sales volume, both an increase from the previous reporting period (34% and 55% respectively).
• The group was able to extend a growing contract with a major waste to energy provider which is expected to see in excess of 25% increase in annualized group revenue, commencing in October 2024. In addition, the group renegotiated multiple of its current powdered carbon contracts to increase pricing, much of which will be realised in the next fiscal year.
• The group is looking in 2025 to invest in additional redundancy for the present mill to provide capacity for up to 5,000 tons per annum of incremental PAC volume. Additionally, renegotiations of the Carbon Concepts lease agreement are ongoing and expect to be concluded in 1H25.

FY24 GROWTH OPPORTUNITIES

Company Outlook

Growth from existing operations will be underpinned by the new contract win with a major waste-to-energy provider, which is expected to see an increase of over 25% in annualized revenue. This does not include any additional contribution from the commencement of the Kentucky investment mentioned below. We expect gross margins to exceed 40% as the portfolio-wide price increases and operational improvements flow through. In turn, with the commencement of the Kentucky plant, we expect to see a step change in the scale of Carbonxt’s business in FY25.

Update on Kentucky JV – NewCarbon Processing LLC.

The construction of the new activated carbon plant in eastern Kentucky, USA is nearing completion. The plant will have an initial capacity of 10,000 tons per annum, with the ability to expand to 20,000 tons per annum for a small additional investment.

The investment in NewCarbon Processing, LLC (“NewCarbon”), is alongside our US partner KCP. Carbonxt currently holds a 35.5% ownership interest in NewCarbon, with options to invest a further USD $4.5m to move to 50% ownership interest.

Appendix 4E and Annual Report

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