Symphony Environmental Technologies Plc share price, company news, analysis and interviews
Symphony Environmental Technologies plc (LON:SYM) is a world leader in the development of additives to make ordinary plastic biodegradable and protective technologies to enhance plastic products.
Its technology is sold into nearly 100 countries around the world, with applications in retail, medical and manufacturing industries with a focus on the defence of both environmental and human health.
The company develops biodegradable plastic solutions to help combat the problem of microplastics in the environment, by turning ordinary plastic, at the end of its service-life and in the presence of oxygen, into biodegradable material. It is then no longer a plastic and can be bio-assimilated by bacteria and fungi on land or sea. The technology is branded d2w® and its logo appears on many thousands of tonnes of plastic packaging and products around the world.
Biodegradable Plastic Technology
Plastic products made with d2wlook and feel like conventional plastic and can be recycled if collected. However, if they escape collection and end up as litter in the open environment, they will degrade and biodegrade – just like nature’s waste.
Designed to Protect
Designed to Protect – d2p is a family of masterbatches for plastics which provide cost-effective protection to products and surfaces in applications as diverse as food packaging and processing to flame retardants and pest control.
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Sustainable plastics design offers solution for UN Global Plastics Treaty says Symphony Environmental (VIDEO)
Symphony Environmental Technologies Plc (LON:SYM), global specialists in technologies that make plastic and rubber products “smarter, safer and sustainable”, has announced receipt of a convertible loan from Sea Pearl Ventures Limited, based in the Bahamas. Key terms of the Loan are:
· Loan principal: £1 million (unsecured)
· If not repaid before expiration, conversion at 1 year and 30 days (no earlier)
· Conversion price: 80% of the volume-weighted average share price for the 3 months prior to conversion at 1 year and 30 days
· Interest: 7% per annum, payable as accrued on repayment and/or conversion
· Symphony able to repay the loan in full or in part before conversion at its discretion
The proceeds of the Loan will be used to strengthen the Group’s cash position for ongoing working capital purposes and will further support the Group to deliver on its many commercial opportunities during the year.
Sea Pearl is currently interested in 17.4% of Symphony’s issued share capital and is therefore considered a substantial shareholder under the AIM Rules. Being a substantial shareholder, provision of the Loan is considered to be a related party transaction under the AIM Rules for Companies. The board of directors of the Company consider, having consulted with the Company’s nominated adviser, that the terms of the Loan are fair and reasonable insofar as the Company’s shareholders are concerned.
EU Case Hearing Date
The Group advises that a hearing date at the General Court of the EU in Luxembourg has been set for 20 March 2023. The legal action is for financial damages against the Commission, Parliament and Council of the EU having been advised by three specialists in EU law that Article 5 of the EU Directive 2019/904 is unconstitutional. The date of the judgment is not known, but the Company is advised by its legal advisors that it is expected to be delivered 12 to 15 months after the hearing, and without prior notice.
2022 Revenue Update
Group revenue for the financial year ended 31 December 2022 (“FY-22”) is now expected to be £6.2 million, being lower than the £6.5 million previously indicated. This is purely a consequence of timing differences over the year end with final shipment consignments (for revenue recognition purposes), primarily of deliveries from the new plant in the Middle East, falling into January 2023. The foregone contribution from these sales will also impact losses reported in FY-22. However, the new plant has been operating well and in line with management expectations during this first quarter of 2023.
Michael Laurier, CEO of Symphony Environmental, commented;
“We are pleased with the continuing support from Sea Pearl as demonstrated through the provision of this £1 million convertible loan. We have an extensive pipeline of exciting projects which this money will help progress.”
Symphony Environmental Technologies Plc (LON:SYM), the global specialist in technologies that make plastic and rubber products smarter, safer and more sustainable, has announced that its USA distributor of d2w biodegradable plastics technology for nutritional supplement bottles, Better Earth LLC has signed an exclusive supply agreement with TricorBraun for its BioBottles™ brand of polyethylene bottles for the nutraceutical industry.
TricorBraun is a global packaging company, and North America’s largest distributor of primary packaging. It operates from more than 100 locations across the Americas, Europe, Asia, and Australia. TricorBraun sold over 8 billion containers in 2022 and is working jointly with Better Earth, supporting its exclusive Agreement with a sales and marketing campaign in the US and Canada.
Symphony entered into a two year exclusive USA-focused, d2w supply contract with Better Earth in February 2022. Better Earth subsequently launched its nutritional supplement bottles, caps, and scoops using Symphony’s d2w biodegradable technology under Better Earth’s BioBottles™ brand “Plastic IQ™ Technology”. In November 2022, Symphony and Better Earth entered into a supplementary d2w supply contract extending the product scope to nutraceutical products, and expanding authorised geographies to include Canada.
Michael Laurier, CEO of Symphony Environmental, said:
“I am delighted to report that sales of d2w to our strategic partner Better Earth are expected to increase significantly in 2023 and beyond. Working with partners such as Better Earth and – by extension – with global packaging leader TricorBraun – Symphony is well placed to capture a share of the US and Canadian bottle markets, with additional verticals in the bottle market still available to target.”
“More generally, partnerships such as these speak to an increased awareness in key markets of the efficacy of our d2w biodegradable technology.“
The owners of Better Earth, Adam Ackerman and James Van Brocklin, said:
“Our mission is to develop technologies that turn ordinary plastic products into earth-friendly materials at the end of their useful lives and we plan on doing this one product at a time. That‘s whywe are delighted to be growing our commercial relationship with Symphony. By incorporating Symphony‘s d2w biodegradable technology in our BioBottles™ we are able to deliver positive change in the bottling industry and look forward to delivering sustainable bottling solutions for our key customers such as TricorBraun.”
“We are focused on offering sustainable packaging options for our customers-solutions that help protect both our customers’ products and the planet. We are pleased to partner with Better Earth and Symphony to deliver a sustainable yet cost-effective solution.”
Symphony Environmental Technologies Plc (LON:SYM) global specialists in technologies that make plastic and rubber products “smarter, safer and sustainable”, has announced a trading update for the year ending 31 December 2022, subject to final deliveries to be shipped before year-end and completion of the audit.
Group revenue for FY-22 is expected to be approximately £6.5 million (2021: £9.2 million). This follows, as previously advised, a soft first half of the year with results affected by short term logistics and resource issues, temporary destocking issues, and a change to our glove strategy. Whilst the second half of the year has been stronger, the Middle East destocking issue has still not been resolved mainly due to delays in receiving the requisite government certifications for our partner’s new factory in the UAE, which finally became fully operational in December. It is anticipated that this will be fully resolved during Q1 2023.
Pleasingly, strong momentum in d2p sales continues with revenue in FY-22 expected to be approximately £0.8 million, representing at least 80% year-on-year growth (2021: £0.4 million). The increase in FY-22 d2p sales has mainly been due to continued conversion of higher value d2p anti insect (“AI”) product.
This lower FY-22 revenue figure is expected to result in a Group loss after tax of approximately £2.5 million in FY-22 (2021: £1.4 million).
However, and continuing that reported in the Group’s interim results (announced on 29 September 2022), these financial results for FY-22 do not reflect the operational progress made during the year, and the outlook for the Group remains as positive as previously described, albeit with further significant steps towards commercialisation having been achieved. Based upon the Group’s trading performance in December 2022 and that trending for Q1-23, the Board expect Symphony to move back into profitability during this period. This confidence is underpinned by:
– Symphony India commenced commercial supply of d2p bread technology and is also on track to reach £250k of d2w revenues monthly by the end of Q1-23. This increase is being driven by the Plastic Waste Management Rules 2022 (as amended on 6 July 2022) which permits government-approved biodegradable plastic products to be exempted from restrictions that would ban most plastic film products unless they are more than 50-microns thick, and 120 microns for carrier bags. Symphony’s d2w technology has been tested by Intertek India, an Indian government approved laboratory, and whilst Symphony India continues to wait for official approval that plastic producers using d2w technology will be become certified suppliers, customers have recently commenced placing orders, and in increasing volumes.
– New Middle East factory became fully operational in December. Locally produced products are cheaper and also preferred by the market and our customers in the region. Accordingly, we expect to deliver substantially increased volumes into the region in H1-23 and beyond
– Improved gross margins achieved during Q4-22 due to a sustained reduction in raw material prices
Additionally, and as advised within the Group’s interim results, the Board remains confident it will achieve a £14m annualised run-rate revenues during H1-23 where, after many years of R&D and product development, commercialisation of several near-term active pipeline opportunities (excluding India) is expected in the very near term. The current segmental analysis of expected revenue growth is as follows:
Initiative (excluding sundry items)
FY-21 revenue
FY-22 revenue
Near term annualised expected revenue
d2w biodegradable (excluding India)
£7.2m
£5.2m
£9.0m
d2p AM bread technology
–
£0.1m
£2.5m
d2p AI technology
£0.1m
£0.5m
£1.0m
d2p general pipeline
£0.2m
£0.2m
£1.0m
d2p gloves
£1.0m
£0.0m
£0.5m
Our medium to long term sales pipeline remains substantially higher than our near-term annualised sales pipeline of £14 million.
Symphony Environmental is acutely aware that these multi-year projects do not fit neatly into reporting periods. Whilst the returns on these projects will be highly profitable, the Company’s financial performance in any given reporting period is affected by the timing of these projects, particularly so in respect of FY-22.
The near-term commercialisation of our projects and resultant sales are significant, with profitability anticipated within Q1-23 we are increasingly confident in delivering positive updates in this regard during 2023.
Symphony Environmental Technologies Plc (LON:SYM), the global specialists in technologies that make plastic and rubber products smarter, safer and more sustainable, has announced it had progressive and advanced engagement with potential customers and possible strategic suppliers at the recent K Show. The K Show is the world’s largest plastic and rubber trade fair and was held in Düsseldorf, Germany from 19th to 26th October 2022. The K Show, held every three years, convenes leading suppliers and innovators from the international plastics and rubber industry.
Illustrating the scale of the business development opportunity attending this event represents for the Company, the (previous) 2019 edition of the K Show attracted 224,000 visitors from 169 countries and 3,330 exhibitors from 63 countries. The Symphony team attending the 2022 edition of the K Show numbered 15, comprised of Company leadership, sales executives, technical executives and Symphony’s global distributor network.
Symphony delegates met with over 250 potential new customers and 10 strategic partners over the event, potentially delivering significant commercial outcomes for the Company. New d2w and d2p business was progressed and the Company is optimistic that a number of these discussions will swiftly progress to the Group’s active project pipeline and thereafter convert into meaningful revenues.
The potential customers met by the Symphony team over the eight days hailed from a diverse range of industries including automotive, pharmaceutical, medical, agricultural, hygiene and waste management. This sectoral diversity illustrated in turn the very wide range of applications for Symphony’s d2w and d2p technologies and the ease and cost efficiency with which Symphony’s technologies can be incorporated into users’ existing supply chains.
Michael Laurier, CEO of Symphony Environmental, said;
“We were delighted to return to the 2022 edition of the K Show after a three-year period in which the global issues of plastic waste and plastic pollution, safeguarding human health and food insecurity have become increasingly problematic.
“Against that challenging global backdrop, it was therefore timely that we as a Symphony team were able to re-introduce our proven d2w and d2p technologies to a diverse range of global customers and strategic partners.
“These proven technologies provide solutions to some of the key challenges of our times: d2w, in combatting plastic waste and plastic pollution by rendering plastic treated with it as biodegradable; and d2p which has a range of applications, in particular protecting plastic packaging from viruses, fungi and bacteria and separately combatting food insecurity by enhancing the properties of plastic packaging and thereby prolonging the useful life of food.
“Our conversations with customers at the K Show also confirmed, after the significant and continued investment in R&D made by the Company, that our solutions are increasingly being regarded as an ESG toolkit, capable of fast and cost-efficient deployment by public and private sector entities alike.”
Symphony Environmental Technologies Plc (LON:SYM), a global specialist that makes plastic and rubber products smarter, safer and sustainable, has announced its interim financial results for the six-month period ended 30 June 2022.
Financial highlights
· Group revenue of £3.0 million (H1-2021: £4.9 million) softer than prior year due to short term logistics, regulatory and resource issues, which have since resolved, and timing on the delivery of key contracts, temporary destocking issues and a change to our glove strategy
· d2p revenue increased c.200% to £0.3 million (H1-2021: £0.1 million) with continued conversion of higher value d2p anti-insect (“AI”) opportunities
· Gross profit of £1.1 million (H1-2021: £1.9 million)
· Loss before tax of £1.4 million (H1-2021: £0.6 million)
· Basic loss per share of 0.73 pence (H1-2021: 0.29 pence)
· Cash used in operations £0.8 million (H1-2021: cash generated £0.3 million)
Operational highlights
d2p
· Supply Agreement with Grupo Bimbo, the western world’s largest bread producer for the Group’s FDA-approved d2p anti-microbial (“AM”) bread packaging technology
· Continued progression of our d2p pipeline commercialisation with positive test results received for d2p AM, d2p AI and d2p flame retardant (“FR”) that are expected to result in orders during Q4
· Change in glove strategy – revenues awaiting regulatory approvals
d2w
· Two-year contract with Better Earth, a US packaging company, to use d2w in nutritional supplement bottles
· d2w regulatory confirmation in Peru
· Positive regulatory progress in several key Central and South American countries
Post period-end highlights
· Significant increase in sales and activity in India due to new regulation which allows exemptions for biodegradable products
· New d2p AI orders ($340,000) with Rivulis Irrigation Ltd with further orders anticipated during Q4
· Middle East – manufacturing agreement for d2w masterbatch, with volume production expected to commence in October 2022 following successful start-up trials
· Balance sheet strengthened by £1.0 million – Sea Pearl shareholding increased to 17.4%
· New Mexican biodegradable standard applicable to d2w
· Expect to achieve a minimum annualised run-rate revenue of £14.0 million between Q4 2022 and H1 2023, through the conversion of a number of our active near-term pipeline opportunities
Michael Laurier, CEO of Symphony, commented on the results and business:
“I am very pleased to report that we expect to achieve a minimum annualised run-rate revenue of £14.0 million between Q4 2022 and H1 2023, through the conversion of a number of our active near-term pipeline opportunities.
Excellent progress has been achieved with our d2p antimicrobial technologies for use in bread and other food packaging for the North and South American markets as well as for insecticidal technologies in agricultural applications for Europe and the Middle East. As a whole, both India and the Middle East are expected to add significant revenues in the near term as we have strong partners, proven products, and market readiness after many years of investment. Beyond this, our medium to long term sales potential is therefore substantially higher than the above £14 million.
This year so far has been one of continued development to which we are seeing low-cost biodegradable technologies growing in favour globally, and there is increasing acceptance of, and commercial interest in, our d2p suite of products. We, together with our partners, are now moving into a very positive commercial phase.”
Chairman’s statement
I am pleased with the progress the Group has made in the first half of the year as we continued to lay solid foundations from which to build our commercial success. Although revenues were softer than the same period last year, we reported on 1 August 2022 that this was primarily down to various logistical, regulatory, and stocking issues which have now been rectified. Additionally, the several new contracts and other positive developments achieved during the period had not yet translated into revenues. These new contracts and developments significantly underpin many of our growth initiatives for both d2w and d2p in the near to medium term.
We were delighted to achieve a significant commercial supply agreement for d2p antimicrobial (“AM”) technology with Grupo Bimbo, the western world’s largest bread manufacturer. This agreement followed FDA and Health Canada approvals of our d2p AM bread technology. The size of the US bread market in 2018 was estimated at $20 billion (source: Global Markets Insights) and, as the only FDA-approved AM technology for this type of packaging application, we believe that we are well positioned to capture substantial market share in the medium to long term. Initiatives are also in progress with bread manufacturers in Latin America and other parts of the world. Our strategy is to capture a substantial part of these new markets that we estimate will result in annualised revenues of at least £2.5 million in the near term with strong growth over the medium to long term.
Symphony India, our joint venture company in India owned by Symphony and Indorama Corporation, received a prestigious sustainability award for our d2w biodegradable technology. As further set out in the Chief Executive’s report, new legislation in India requiring minimum thickness of certain types of plastic products unless certified by the Government as biodegradable, resulted in Symphony India achieving a significant increase in sales and marketing activity for d2w technology.
d2w revenues are also anticipated to show substantial growth in other markets in the near term because of several factors, including: the establishment of local manufacturing in the Middle East and a reset of regional stock levels; legislative enforcement in Saudi Arabia which is an ongoing process that started accelerating in recent weeks; and Latin American legislative and standards initiatives, which are expected to continue progressing in the right direction following recent positive developments in Peru and Mexico. We are also very happy with progress made outside of regulatory drivers, especially the United States where we signed a contract earlier in the year for nutritional supplement bottles.
We have shown a c.200% growth of d2p sales during the period based on our successful anti-insect (“AI”) technology for use in agricultural applications. Current dialogues indicate that this will grow and expand globally. In addition to the above, flame retardant (“FR”) and odour absorbent (“OA”) technologies are close to completion on several initiatives. This is all within our current d2p pipeline of over 60 projects. Revenues for AI are anticipated to reach £600,000 in 2022 and are expected to more than double during 2023.
Group revenues for H1-2022 of £3.0 million (H1-2021: £4.9 million) were lower primarily due to a change in protective glove strategy, moving away from commodity gloves to higher value EU certified products, with regulatory approvals currently in process, together with materially lower sales of d2w in the Middle East due to temporary destocking by our distributor and logistical issues, which I’m pleased to note most of which have now been resolved.
The near-term annualised revenue run-rate, including the initiatives described above, which we expect will be achieved between this year’s Q4 through H1 2023, exceeds £14 million. Undoubtedly the Group’s opportunities are significant and real, but the Board and I are acutely aware that these multi-year projects do not fit neatly into reporting periods. Whilst the returns on these projects will be highly profitable, the Company’s financial performance in any given reporting period is affected by the timing of these projects. This financial year is no different, and whilst the Board remain of the view that full year market expectations are achievable, if certain projects are delayed, this may impact results.
Finally, I am pleased that we have been able to strengthen the Board during the period, with the appointment of The Hon. Alexander Brennan, and look forward to the coming months with growing confidence.
Chief Executive’s review
The financially slow period during the first half of the year does not reflect the significant underlying progress being made across the business on several fronts. We now have a very strong joint venture partner in India and a highly motivated and growing team, building an increasing network of strong, high quality and well-connected hub-distributors, with demand being further driven by positive regulatory change. In addition to this, the Middle East is also showing great promise as plastic regulations and compliance are gaining traction, and there is growing interest in customer-evaluation trials for our other d2p technologies.
Financial
Revenue for the 6 months ended 30 June 2022 was £3.0 million (H1-2021: £4.9 million).
The H1-2022 revenue performance was softer than normal, affected by short-term logistical and resource issues, slow and complex d2p regulatory approvals, temporary d2w destocking at our Middle East distributor, and a change to our glove strategy. The short-term logistical and resource issues are resolving as anticipated, and we are seeing restocking at our Middle East distributor.
As previously advised, having focused our glove strategy on higher value EU certified gloves and moving away from commodity gloves, near-term revenues were negatively affected by c.£1.0 million during the period. We are awaiting regulatory approvals for our gloves, which is anticipated later this year. Once regulatory approvals are received, we will recommence the sales and marketing initiative. Based on feedback from the market through our potential customers, we anticipate there will be high demand for these certified gloves and will benefit from greater protection from competitors, as the regulatory process is time-consuming, costly, and complex, creating a strong barrier to entry.
Gross margins also softened during the period due to high raw material and shipping costs which have recently been reduced closer to historical levels. In particular, distribution costs due to global vessel and container shortages, are now easing, with c.20% reductions since the peak during the first half of the year. These are expected to continue falling throughout the rest of 2022.
As previously advised, we continue to incur costs in relation to supporting d2w advocacy communications in the UK, Middle East and Latin American markets. In addition, regulatory and other IP related costs continued for new d2p products for the EU and US markets.
The Company continues to invest in its sales and other operating functions to better manage its strong and growing pipeline and also in its quality control systems and service-levels as these form the basis of our brand value.
The Group’s share of Symphony India’s joint venture start-up loss for the period was £23,000 (H1-2021: £nil). The Group’s 46.5% interest in the Indian company is recognised as a joint venture investment in our financial statements using the equity method.
This additional strategic investment in key resources, together with the above-described factors resulted in a net loss before tax of £1.4 million (H1-2021: £0.6 million).
An R&D tax credit of £119,000 was received during the period (H1-2021: £127,000). The Group reports a loss after tax of £1.3 million (H1-2021: £0.5 million).
The loss per share for the period was 0.73 pence (H1-2021: 0.29 pence).
Post period-end we were also pleased to see our balance sheet strengthened following a £1.0 million equity fundraise from Sea Pearl Ventures Limited, increasing their shareholding to 17.4% and demonstrating their ongoing support and optimism around the potential of the Group.
d2p “designed-to-protect”
d2p revenues for the period were up c.200% to £345,000 compared to £111,000 for the same period last year due primarily to d2p AI growth. Since the period-end Rivulis placed a record order of $340,000 for new d2p AI product which was shipped in Q3 2022. There were several positive laboratory and field test results for d2p AM, d2p FR and d2p AI initiatives in several of our markets, which we believe, following discussions with our distributors and potential customers, will lead to a number of material new orders during the second half of 2022 and into 2023. This is all within our current d2p pipeline of over 60 projects.
Most significant is the d2p AM bread technology where we expect the sales process with Grupo Bimbo to start in Q4 of this year. Initiatives are also being undertaken in Latin America and other parts of the world.
d2w biodegradable technology
Post period-end we signed a manufacturing agreement with Ecobatch Plastic Factory in the UAE, for the production and supply of d2w into the Middle East. The manufacturing facility is expected to start operations in October. This facility, being financed and operated by our local partners, will reduce reliance on expensive and unreliable freight from our Far East facility, where most of our products for supply to this region are currently made. In preparation for the switch from imports to locally made products in the Middle East, stocks and orders were temporarily reduced in the period – which had a short-term but material negative effect on H1 performance. These sales have not been lost, but delayed to H2-2022. We anticipate improved sales and sales and supply efficiency, as well as improved Group cashflow and operating margins, following the switch to this facility.
We continue with advocacy in Latin America, UK, and the EU. The regulatory clarification in Peru, resulting in a clear distinction being officially acknowledged between oxo-degradable and oxo-biodegradable, will help generate revenues in the region. Further, the Mexican Ministry for the Economy published a new Mexican Technical Standard with positive commercial implications for d2w, acknowledging and validating the technology for the accelerated biodegradation of plastic. We anticipate further positive news from other Latin American markets during Q4 2022.
We are confident that many of our markets will produce significant growth as the environmental drive for better alternatives to non-biodegradable plastics has become an increasingly urgent issue for Governments and brand-owners to resolve.
India
As announced in November 2021, Symphony became a 46.5% joint venture shareholder in Symphony India, with Indorama Corporation holding 46.5% and the MD, Arjun Aggarwal holding 7%.
Symphony India received a prestigious sustainability award for our d2w biodegradable technology during the period and sales traction is gaining rapid momentum. The increase in sales is being driven by the Plastic Waste Management Rules 2022 (as amended 6.7.22) which permits government-approved biodegradable plastic products to be exempted from restrictions that would ban most plastic film products unless they are above 50-micron thickness, and 120 microns for carrier bags, (which generally means an increase in cost by more than two to three times). Producers and brand owners using certified biodegradable plastic materials will be free from this obligation, thus providing Symphony’s d2w technology with a competitive advantage in a country with a population of c.1.4 billion.
Based on current enquiry and order activity, sales of d2w by Symphony India are expected to increase to levels of over £250,000 per month from early 2023.
EU Action
As previously announced, Symphony commenced a legal action against the Commission, Parliament and Council of the EU having been advised by three specialists in EU law that Article 5 of the Directive 2020/904 is unconstitutional. We are currently waiting for the court to fix a date for an oral hearing in Luxembourg. This is expected in Q4 2022 or Q1 2023.
The Defences did not reveal anything unexpected, and Symphony’s legal team remain confident that the EU acted unlawfully in imposing a ban on a material which they call “oxo-degradable plastic” in Article 5 of the Directive. In any event, Symphony does not accept that the ban applies to oxo-biodegradable plastics, which are made by incorporating Symphony’s d2w masterbatch into ordinary plastic, and do not have any of the undesirable characteristics listed in Recital 15 of the Directive.
Confidence that our product is not included in the ban has been reinforced by new legal Advice from Josh Holmes KC a leading Barrister at London’s Monckton Chambers, who specialises in EU law.
Eranova
As announced in October 2020, The Group entered into an exclusive distribution agreement and made an investment representing 1.6% of the enlarged capital of Eranova SAS (£123,000 including costs) as part of a €6 million pre-industrial plant project. The pilot plant was completed on schedule during October 2021 and is operational and processing small-volume commercial orders. We expect further positive developments during 2022.
Balance sheet and cashflow
The Group had net borrowings of £0.7 million at the end of the period (30 June 2021: net cash of £0.7 million). Net cash of £0.8 million was used in operations (H1-2021: generated in operations £0.3 million).
The Group has an invoice discounting facility of £1.5 million to assist in funding outstanding receivables. Since the period end £1.0 million of new equity was issued, further strengthening the Group’s balance sheet. The Board believes that the Group has sufficient working capital to support the business and its current opportunities going forward.
The increasing strength of the US dollar as against the UK pound is beneficial for the Group, as we generate most of our revenues in US dollars.
Outlook
After many years of R&D and product development, commercialisation of some key product lines is now expected in the very near term with substantial sales growth anticipated. Further, we are encouraged by the level of positive trials and sales activity in many areas of the business worldwide, covering a wide range of different product applications and technologies.
We expect to achieve a minimum annualised run-rate revenue of £14.0 million between Q4 2022 and H1 2023, through the conversion of a number of our active near term active pipeline opportunities, and is made up as follows, compared to FY 2021:
Initiative
2021 revenue
Near term annualised expected revenue
d2w biodegradable (excluding India)
£7.2m
£9.0m
d2p AM bread technology
–
£2.5m
d2p AI technology
£0.1m
£1.0m
d2p general pipeline
£0.2m
£1.0m
d2p gloves
£1.0m
£0.5m
It should be noted that the above necessarily excludes d2w projects in Symphony India. This is because of Symphony’s ownership of 46.5% means that from an accounting perspective, we cannot consolidate Symphony India revenues into the Group results – we are instead required to equity account for Symphony India which means we can only recognise our share of the profits made by Symphony India in our Group consolidated accounts. Accordingly, it would be misleading to present Symphony India revenue opportunities above, but as further set out in the India Operations Update, released at 7:01am on 29 September 2022, these are considerable.
Our medium to long term sales pipeline is substantially higher than our near-term annualised sales pipeline of £14 million. To meet this financial year’s market expectations, the Group is relying on timing of the key areas as described. Whilst the Board remain of the view that full year market expectations are achievable, there is, for the above reasons, risks outside of management’s control, in these numbers.
Our opportunities are real and significant, and we look forward with growing confidence.
Michael Laurier, Symphony Environmental Chief Executive
Symphony Environmental Technologies Plc (LON: SYM), the global specialist in biodegradable and anti-microbial technologies which make plastics and rubber smarter, safer and sustainable, has reported that the Mexican Ministry for the Economy (Secretaría de Economía) has published a new Mexican Technical Standard in the Federal Gazette (Diario Oficial de la Federación) (the “Technical Standard”) with positive commercial implications for Symphony’s d2w biodegradable technology (the “Technology”) in Mexico and the Latin America region.
This Technical Standard is similar to ASTM D6954 (a US standard for exposing and testing plastics that degrade in the environment by a combination of oxidation and biodegradation) and acknowledges and validates the technology including Symphony’s d2w masterbatch for the accelerated biodegradation of plastic if it gets into the open environment as litter. Mexico now joins other countries with a similar standard in Latin America including Peru, Costa Rica, Ecuador and The Dominican Republic, as well as the UK, France and Sweden in Europe. Also, the United Arab Emirates and Saudi Arabia in the Middle East, where compliance with their similar standards are compulsory for a wide range of plastic products made in or imported into, those countries.
The Technical Standard will come into effect on 29 October 2022 and marks another positive regulatory outcome in Latin America for Symphony’s d2w biodegradable technology and further vindicates Symphony’s long-term investment in advocacy in Mexico and Latin America, where it continues its transparent and technically-led engagement with customers and legislators.
Michael Laurier, CEO of Symphony Environmental, said: “Mexico is a key market for Symphony, and we are pleased to see that the Mexican Government has issued the correct standard for testing and certifying our d2w biodegradable technology. We are confident that this new Technical Standard will provide plastic packaging converters and end users with additional reassurance, as they will be using a technology that is fully compliant with the Mexican Standard for biodegradation in the open environment.
We also believe that this new Mexican Standard will help create further momentum for d2w’s commercial growth in Mexico and in Latin America and shows official acceptance of d2w technology, which turns ordinary plastics into biodegradable materials.”
Symphony Environmental Technologies Plc (LON:SYM) global specialists in technologies that make plastic and rubber products smarter, safer and sustainable, has announced the completion of a manufacturing agreement with Ecobatch Plastic Factory in the UAE.
As reported on 1 August 2022, this Agreement is for production of our biodegradable d2w masterbatch, primarily for supply into the Middle East, but the factory can also supply our other markets if desired. Production should commence during Q3 of this year after ESMA (UAE) and SASO (Saudi Arabia) certification.
Ecobatch, which is owned within the same family as the Group’s distributor in the region, Ecopolymers, has received state funding to set up this masterbatch manufacturing facility, which is already producing white, black and coloured masterbatch products for the plastics industry in the UAE and Saudi Arabia. This also fits in with Symphony’s capital-light model.
The Middle East is one of our prime markets, and the operation of this Agreement is anticipated to improve stock availability and control throughout the supply chain, reduce cost, improve efficiencies and increase sales, as locally-made products are usually preferred by customers. Importantly, this is entirely compatible with our ESG strategy and in particular minimising Co2 emissions through lengthy transport systems.
Ecobatch has sufficient capacity to support a substantial increase in demand in the region, which is anticipated due to wider enforcement of regulations which support the d2w type of biodegradable technology.
Michael Laurier, CEO of Symphony Environmental said “We are delighted to be using Ecobatch to improve our supply chain and have been working with the owners for many years now in developing the market for our products, which we believe is primed for further growth.”
Symphony Environmental Technologies Plc (LON:SYM) global specialists in technologies that make plastic and rubber products “smarter, safer and sustainable”, has announced a trading update for the six months ended 30 June 2022 (“H1-2022”).
Highlights
· Group revenue of £3.0 million (H1-2021: £4.9 million), showing softer revenues than prior year due to short term logistics and resource issues, which have since resolved, and timing on the delivery of key contracts, temporary destocking issues and a change to our glove strategy
· d2p revenue of £345,000, representing 300% growth on H1-2021 (H1-2021 £111,000) with continued conversion of higher value d2p anti insect (“AI”) opportunities and significant step change anticipated during H2
· Board remains confident that the results for the year ending 31 December 2022 will be in line with market expectations
Operational Highlights
d2p
· Supply Agreement with Grupo Bimbo for our FDA approved d2p AM bread technology
· Other bread trials, outside the exclusivity territory granted to Grupo Bimbo, are progressing well
· Recent new d2p AI orders ($340,000) with Rivulis Irrigation Ltd with further orders anticipated during H2
· Continued progression of our d2p pipeline commercialisation with positive tests results received for d2p AM, d2p AI and d2p FR that are expected to result in orders during H2
d2w
· d2w regulatory confirmation in Peru
· Positive regulatory steps expected in other Central and South American countries
· New production agreement for d2w agreement in the Middle East during H2 will create significant new sales
· Contract wins for d2w with two US companies with orders for H2 and further orders anticipated
H1-2022 trading
As reported on 30 March 2022 our financial performance does not yet reflect the transformational effort and successes that have very recently been achieved in many of our high value development projects. The new contracts and legal win shown above and separately announced to the market, are also very recent and have not impacted our H1 sales but will lead to higher sales during H2.
In addition, H1-2022 performance has been softer than normal affected by short-term logistical and resource issues, slow and complex regulatory approvals, temporary destocking at our Middle East distributor and a change to our glove strategy. I am pleased to report that the short-term logistical and resource issues have started to dissipate as anticipated and we anticipate the destocking at our Middle East distributor to reverse during H2 as discussed further below.
Also, as a result of focusing our glove strategy on high value EU certified gloves and moving away from commodity gloves, short-term revenues have been negatively affected, which were £nil in H1-2022 compared to £1.0 million of commodity type gloves revenues for the same period last year. We are awaiting regulatory approvals for our gloves, which is anticipated later in the year as previously advised, however, once regulatory approvals are received, we will be able to start supply. Based on feedback from the market through our sales leads, we anticipate that these certified gloves will have a high demand and will benefit from greater protection from competitors as the regulatory process is time-consuming, costly and complex, creating a strong barrier to entry.
Furthermore, sales of d2w in the Middle East in H1-2022 were materially down on previous years because of a temporary destocking initiative referred to in more detail below. Group revenues for H1-2022 were therefore £3.0 million (H1-2021 – £4.9 million).
d2p growth
d2p revenues for the period were up 300% to £345,000 compared to £111,000 for the same period last year. However, growth would have been even higher but for additional material new sales for d2p technologies moved from H1 into Q3 2022. This was due to the need to complete revalidation trials and adjusting product manufacturing processing. These teething issues are anticipated to be less impactful moving forward as the roll-out process matures. In proving the continued momentum, we have achieved the following significant results: 1) d2p anti-microbial (“AM”) bread technology supply contract with Grupo Bimbo; 2) Rivulis placing a record order of $340,000 for new d2p AI orders for Q3 2022 delivery; and 3) Positive laboratory and field test results for several d2p AM, d2p flame retardant (“FR”) and d2p AI initiatives in a number of our markets which we believe, following discussions with our distributors and potential customers, will lead to a number of material new orders during the second half of 2022 (“H2-2022”).
d2w momentum for H2-2022
The Middle East is an important market for d2w, and we have been negotiating with local partners for some time to create a local manufacturing facility. I am pleased to report that we recently reached agreement to proceed. When operational, this facility, being financed and operated by our local partners, will reduce reliance on expensive and unreliable freight from our Far East facility, where most of these products are made. In preparation for the switch from imports to locally made products, stocks, and orders were temporarily reduced in the period which had a short-term but material negative effect on H1 performance. These sales have not been lost but delayed to H2-2022. We expect to announce the completion of the manufacturing agreement during August for a production start date during Q3, which we anticipate will restore stock levels, improve sales and sales efficiency, benefit Group cashflow and improve operating margins.
The recent regulatory clarification in Peru will help revenues in the region and we anticipate further news from other Latin American markets during the second half of the year.
Finally, we are confident that many of our markets will produce significant growth as the environmental drive for better alternatives to non biodegradable plastics have become an urgent issue for Governments and brand-owners to resolve.
Outlook
As outlined above, the Group’s trading for H1-2022 was softer than anticipated due to short-term impacting events, but with the recent contract and order wins, and improving legislative environment, we are confident these will start to take effect during H2 2022. The Board expects to deliver strong revenue growth in H2-2022 and remain confident of meeting full year market expectations.
Symphony has developed a range of additives, concentrates and master-batches marketed under its d2p® (“designed to protect”) trademark, which can be incorporated in a wide variety of plastic and non-plastic products so as to provide protection against many different types of microbes, and insects and rodents, and against fire. d2p products also include odour, moisture and ethylene adsorbers as well as other types of food-preserving technologies. Symphony has launched d2p anti-microbial household gloves and toothbrushes and is developing a range of other d2p finished products for retail sale. See www.d2p.net
Symphony has also developed and continues to develop and market, a biodegradable plastic technology which helps tackle the problem of litter and microplastics by turning ordinary plastic at the end of its service-life into biodegradable materials. It is then no longer a plastic and can be bioassimilated in the open environment in a similar way to a leaf. The technology is branded d2w® and appears as a droplet logo on many thousands of tonnes of plastic packaging and other plastic products around the world. In some countries, including Saudi Arabia, Jordan, Bahrain and the UAE oxo-biodegradable plastic is mandatory. See www.d2w.net
The Group has complemented its d2w biodegradable product range with d2c “compostable resins and products” that have been tested to US and EU composting standards.
Symphony has also developed the d2Detector®, a portable device which analyses plastics and detects counterfeit products. This is useful to government officials tasked with enforcing legislation, and Symphony’s d2t tagging and tracer technology is available for further security.
Symphony has a diverse and growing customer-base and has established itself as an international business with 74 distributors around the world. Products made with Symphony’s plastic technologies are now available in nearly 100 countries and in many different product applications. Symphony itself is accredited to ISO9001 and ISO14001.
Symphony is a member of The BPA (www.biodeg.org) and actively participates in the Committee work of the British Standards Institute (BSI), the American Standards Organisation (ASTM), the European Standards Organisation (CEN), and the International Standards Organisation (ISO).
Symphony Environmental Technologies plc (LON:SYM) CFO Ian Bristow joins DirectorsTalk Interviews to its financial results for the six-month period ended 30 June 2022.
https://vimeo.com/756294416
Ian takes us through the key financial highlights, explains what has happened during the period operationally, post period end and what we can expect from the company over the coming months.
Symphony Environmental Technologies (LON: SYM) is a world leader in the development of additives to make ordinary plastic biodegradable and protective technologies to enhance plastic products.
Symphony Environmental Technologies plc (LON:SYM) CFO Ian Bristow joins DirectorsTalk Interviews to discuss its trading update for the six months ended 30th June 2022.
https://vimeo.com/735857087
Ian talks us through the key financial highlights, operational progress made, the investment from Sea Pearl, use of funds and connection with Indorama.
Ian also discusses the manufacturing facility in the middle east, what is means for the company, the H2 pipeline and what investors can expect over the coming months.
Symphony Environmental Technologies plc (LON:SYM) is a world leader in the development of additives to make ordinary plastic biodegradable and protective technologies to enhance plastic products.
Symphony Environmental Technologies plc (LON:SYM) is the topic of conversation when Head of Corporate Broking & Sales at Hybridan, Niall Pearson joins DirectorsTalk Interviews to discuss a prestigious award for Symphony’s contribution to sustainability.
Niall explains what the company does, talks us through the important news that the company announced, explains how the company faired during the pandemic and what we can expect from the company going forward.
https://vimeo.com/703149442
Symphony Environmental Technologies plc (LON: SYM) is a world leader in the development of additives to make ordinary plastic biodegradable and protective technologies to enhance plastic products.
Symphony Environmental Technologies plc (LON:SYM) CEO Michael Laurier joins DirectorsTalk Interviews to discuss a prestigious award for its contribution to sustainability.
Michael provides us with an update on operations in India, reminds us about the masterbatch technology, explains what this prestigious award means for Symphony and what we can expect from the company over the coming months.
https://vimeo.com/701551262
Symphony Environmental Technologies plc (LON SYM) is a world leader in the development of additives to make ordinary plastic biodegradable and protective technologies to enhance plastic products.
Symphony Environmental Technologies plc (LON:SYM) Director Michael Stephen caught up with DirectorsTalk to discuss the UN’s International Plastics Treaty, why people are against plastic and using d2w as a solution.
Q1: Michael, as you know, the United Nations is promoting an International Plastics Treaty and the steering committee is likely to be meeting in November. What are your thoughts on this?
A1: Well, this could be very good if the committee understands how useful and important plastic is in the everyday lives of people everywhere in the world, not least in packaging to protect their food and water from contamination and to prevent food waste and disease.
It could however be very bad if the committee pays too much attention to the anti-plastic campaigners who seem to have an emotional hatred of plastic and want to deprive every one of the benefits of plastic products for no sufficient reason.
Q2: Why do you think they’re against plastic so much?
A2: They’re against plastic, not because it’s defined as litter because paper and other materials are also defined as litter but the special thing about plastic is that it will not biodegrade rapidly and will create microplastics and will lie or float around for decades. We’ve all seen the pictures of ocean garbage patches and the turtle with the plastic bag around his neck.
But if the plastic could be made to biodegrade much more quickly, if it gets into the open environment, there will be no necessity to ban short life plastic ponds. There’s no need to spend millions of dollars on research into new plastics because there’s already a technology available, it’s called d2w. It’s sold to factories all over the world as granules which they then put into their ordinary plastic production at little or no extra cost.
Q3: If that’s the case then, why are the campaigners not campaigning to make this technology mandatory for short life plastic products? As you said, it’s already in some countries in the Middle East?
A3: It’s because some of them are mistakenly thinking that the technology does not work quickly or completely or that it contains heavy metals or that it creates microplastics or toxic residues. None of which is true.
Some of the others know that it’s not true, but they attract a lot of money for their anti-plastic campaigns and don’t want one of the wheels to come off their bandwagon.
Q4: Are there any other groups who be lobbying the UN?
A4: Yes, I think so. The big German and Italian companies who make plastic partly from agricultural crops and describe it as compostable, they’ve been running an anti-competitive campaign against d2w for many years because they see it as a threat to their market share. It’s not actually in competition with their product because theirs is intended to biodegrade rapidly in an industrial composting facility and d2w is intended to biodegrade rapidly if it gets into the open environment.
I think the UN should not agree to promote their product because there is actually no such thing as compostable plastic. The EU standard 13432 and the American standard D6400 for this type of plastic both require it to convert into CO2 gas, not into compost, and there are better things to do, I think, with plastic than to waste it by converting it into CO2 gas. There’s nothing wrong with composting, but plastic of any kind has no place in this process, in fact, many of the industrial composters and local authorities don’t want it, even for transporting food waste to their facilities.
Now, even more important, it’s obvious that this type of plastic does not address the real problem, which is plastic in the open environment from which it cannot realistically be collected and taken to a composting facility. It’s therefore a distraction, but still far too many opinion formers think it’s the answer to the problem.
Q5: Is there a case for banning plastic because it’s made from fossil resources?
A5: Not really, and this is because it’s made from ethylene and ethane, which are by-products of the extraction of oil and natural gas to make fuels, which will be extracted even if plastic did not exist. So, it therefore makes sense until the day, if ever, when these fuels are no longer required to use these by-products instead of using scarce land and water resources, and fossil fuels as well, to grow crops to make plastic.
Q6: Is there anyone else who might be trying to influence the UN process?
A6: Yes, of course, the big oil companies who make the polyethylene and the polypropylene. Make no mistake, they have provided enormous benefits for mankind and I don’t agree with people who denigrate them by calling them big oil. But they and the plastics industry who use their materials to make plastic products, they know that plastic can lie or float around for decades if it gets into the open environment, and they know that this is the reason why so many people are against their products.
The problem is that they made a mistake in policy decision about 20 years ago and seemed reluctant to change it, the decision was to try to persuade the public that plastic was not a problem because it will all be recycled. Now, of course, recycling shifts responsibility for the proper disposal of plastic products onto consumers and society but it’s plain that this approach alone is not working. Recovering and recycling of all plastic waste in the near or even the foreseeable future is simply not going to happen.
So, unless the technology behind the manufacture of short life plastic products changes, these sticking plasters in the form of recycling or awareness-raising campaigns or refillable campaigns or beach clean-up campaigns won’t resolve the issue. Plastic will continue to accumulate in the oceans by accident or by irresponsible behaviour, either in its original form or as microplastics.
Q7: So, with that said, what’s your conclusion on all of this?
A7: Well, my conclusion is that short life plastic products must themselves be made sustainable by design, and in my view, the UN must promote the manufacturer of plastic products with a technology which acts as a safeguard. So, that if the plastic ends up in the environment, it quickly biodegrades and causes as little harm as possible.
Symphony Environmental’s d2w biodegradable plastic technology offers an environmentally responsible solution for your plastic product, film or packaging.
Symphony Environmental Technologies plc (LON:SYM) Chief Financial Officer Ian Bristow caught up with DirectorsTalk to discuss its financial results, d2p & d2w operations, post period activity and what investors should be looking out for.
Q1: Ian, results for the six month period for Symphony Environmental. Can you just talk us through the financial highlights?
A1: Well, financially, revenues for the period to the 30th of June was £3 million, softer than previous periods due to a couple of areas, primarily our glove strategy has changed. We were selling lower value commodity gloves before, these are safety gloves and we’re now looking for EU certification on those gloves for various aspects, and that’s going to take a bit longer to get. As such, our gloves were £0 for the period, and we hope to start selling those later on this year and into next year.
There’s also some regulatory and resource issues in a number of our markets which has been overcome, and there’s also been some logistical issues. Freight rates have been very high since COVID and certain logistics, freight container timings have been quite difficult to deal with. That’s also softening up now, and we’re seeing in the second half of the year much more logistics much easier, and also the costing and the pricing coming down. That’s also in terms of more materials as well so if we look at our gross profit margin which fell slightly during the period, again, there was high raw material costs, and we’re seeing those coming down second half of the year.
So, the second half on reflection, those numbers actually is going to be much, much better.
In terms of our expenses, we continue with the same overhead base as in the previous periods, and within that, there’s a lot of investment in personnel, supply chain sales, R&D technical and you can see the benefit of that in terms of the pipeline and the opportunities that we’re developing. Also, with our external consultancy advocacy costs, and again, the benefit of that we can see with the legislative frameworks that’s being developed in Latin America, Middle East etc. which is now moving in our direction.
So, it just resulted in a loss of about just £1.4 million and that’s really the first half summary for you there.
Q2: What’s happened operationally across d2p and d2w?
A2: Quite a lot. The main agreement is with Bimbo, Bimbo is the western world’s largest bakery and we’ve got an agreement to supply them with our d2p antimicrobial bread technology. This technology has got FDA and Health Canada approval. Where we are at the moment, we’re just going through various tests and trials in a number of locations with them, and it’s looking very favourable in terms of the commercial start of that, hopefully starting very, very soon. We’ve indicated that in our pipeline expectations as well, which I’ll come to a bit later. We are also active in all parts of the world with this technology as well so it’s not just with Bimbo in parts of America, it’s in other companies in India, in Africa, and those parts of the world.
In terms of what we call pipeline, this is our d2p anti-insect, flame retardant and antimicrobial, a number of successful trials within the pipeline. This pipeline has got over 60 customer-led projects, again, global, in India, Pakistan, Africa, Latin America, Europe, the whole of the Americas as well, it’s nicely spread. So, again, we’re seeing some great test results, great trial results so again, we’re very hopeful for near term conversion of those results. Again, it’s within our pipeline, this £14 million pipeline, that we’ll come to.
For d2w, there’ve been some contract winds in the US for d2w, there was cosmetic bottles, which is very, very exciting in the US so that’s not regulatory led, but in terms of regulatory, we’ve had the confirmation in Peru that the d2w is approved there, as an approved product within the framework there. We’re seeing positive movement in the rest of Latin America and also the Middle East with d2w in the biodegradable aspect, and again, we’re hoping for some more news if you like, in the second half of this year.
Q3: What can you tell us about activity post period end?
A3: Post period end, India is the prime market post period end, we released an Indian RNS at the same time as the interim statement.
So, India, they’re seeing a substantial growth in sales so the joint venture which is with Indorama Corporation started trading in February and they’re seeing, in recent weeks, peaks in revenue and they’re expecting revenue to reach £ 250,000 a month from January 2023. This is led by new rules and regulations that’s come into place which is banning effectively thin gauge products; films, packaging products, but you can be exempt from this if your product is biodegradable. Now, where Symphony is on this and where the customers in India see Symphony on this, as us being the answer to this because we have Indian accredited standards that fulfil biodegradability and also eco-toxicity as well, we’re biodegrade safe and sustainable for the soil. So, the customers are placing orders with India.
What we’re waiting for is actual certification so we’re expecting to get a specific certification for our d2w products in India, which will then pull the whole thing together. Customers are buying at the moment regardless, because they have to, they have no choice, if they don’t show biodegradability in their products then, they’ve got to make thicker films, if you like, and that will add two to three times to their costings. So, that’s very exciting.
In addition, post period end, our insecticidal business, primarily with Rivulis but we are in negotiations with other companies globally so they places some sizeable orders for delivery, and they’ve been dispatched now. With Rivulis, we’re expecting that to grow into other regions where Rivulis trade, and as I said, there’s other players as well in that market so very, very exciting.
Again, with the d2w, following on from the Latin American advocacy, that Peru win for d2w, Mexico themselves has developed a standard. The standards are very, very important because they give legislators a framework and this standard is advantageous to d2w.
Really, the final part of our outlook, our post period end, is our near term pipeline. So, we expect a running rate to be achieved between now and sometime during the first half of next year of about £14 million of annual sales. This is a near term expectation, and that expectation we’ve broken down into:
Growth in d2w so if you look at last year’s revenues of £7.2 million, we expect that to grow to £9 million. We feel that’s quite modest, easily achievable with the legislative frameworks in place,
With our bread technology, again with the western world’s largest producer, we’re looking that being around £2.5 million per annum.
The insecticidal, we should get to £1 million per annum, and
General pipeline, which is the conversion of these 60 or so projects, we should at least get to £1 million pound as a running annual rate for the business.
I actually missed Middle East in all of this, there’s been so much going on here. In the Middle East, our partners have started manufacturing there and that’s coinciding with what we can see as better enforcement because within the Middle East, it’s Saudi Arabia and UAE, they actually have legislation in place, which is favourable to our d2w products.
So, all of those things together, we’ve got very, very, exciting near term opportunity and then the longer term opportunity is a multiple of that, we feel.
Q4: With all these projects going on and everything that you just told me about post period, it must give you confidence looking forward?
A4: Exactly.
Q5: With that in mind, what should investors be looking out for next from Symphony Environmental?
A5: It’s very difficult predict timing of things, but I think with India, with the bread, Middle East in particular, there will be over the near term, positive events that we see, and also, with our general pipeline as well. Again, because that’s in a number of areas and I’ll say 60 items in the pipeline but some of those are quite large and some of those are bimbo-esque, if you like, in their potential or Rivulis-esque in their potential as well.
So, I think all across the board really, any of these areas in the pipeline that we’ve indicated near term, is something that investors could see updates to between now and next year.
Symphony Environmental Technologies plc (LON:SYM) Chief Financial Officer Ian Bristow caught up with DirectorsTalk for an exclusive interview to discuss the key highlights from their latest trading update, operational highlights, the investment from Sea Pearl, the manufacturing facility in the Middle East and what we can expect from the group in the remainder of the year.
Q1: A six-month trading update just issued. Ian, what were the key highlights?
A1: We had a soft trading in the first six months of this year, we’re a very, very busy, diverse company, we’ve lots of opportunities globally for us and a number of the opportunities were still being developed effectively during the first six months, primarily gloves and also a change in our Middle East position.
That’s primarily meant that some of the revenues fell out of half one compared to previous periods and those particular revenues will fall into H2 so that’s the main revenue headline and, obviously, we can go into more detail on the H2 position.
Within our revenues though, we had an exciting increase in our d2p business which grew 300% during the period and overall, we’re confidence still of our overall full year market consensus position for the business.
So, we’ve a very, very exciting and busy H2 coming up.
Q2: Operationally, what’s been happening over the last six months?
A2: Operationally, I can split those into our two main product areas, which is d2w which is our biodegradable technology, and we’ve been supplying that for 20 years now, and our much newer d2p design to protect range of technologies.
So, with the d2w in particular, there’s been a lot of regulatory work going on, we work quite heavily with various regulators around the world and, in particular, we’ve invested in advocacy in Latin America so for Mexico all the way down to Argentina. Operationally, we won a court case in Peru which gave our product a particular approval within the current regulation, and we are seeing, hopefully during H2, some further wins in that part of the world for d2w. Not just in that part of the world, actually, so globally as well, we’re seeing a much strengthening position for our technology in terms of biodegradable.
Also, working in the Middle East as well so we’re currently in the process of signing a new agreement in the Middle East which we’ve gone into in great detail in the trading update, but there’s a lot of pre-work gone on with that.
We had some extra contract wins with d2w so although our d2p has been a main news item for us over the last couple of years, the d2w which is our main revenue source for the business, two particular US wins during the period, which we’ll see revenues into H2.
For our d2p, we negotiated and won a supply agreement with Grupo Bimbo which is the Western world’s largest bakery and there’s a lot of work going on behind the scenes in various countries, in Latin America, primarily Mexico down to Argentina again, there’s lots of commercial trials going on. A lot of those trials are finished now and hence why the agreement’s been signed and it’s just a case of seeing how that flows through into revenue during H2 which we’re working on, there’s other bread trials going on around the world so it’s not just in the Bimbo side of things, there’s trials in Africa, trials in the Far East as well.
Rivulis Irrigation was something we announced fairly recently so they’re a large Israeli company and they manufactured a lot of agricultural and other products, and our antimicrobial anti-insecticide goes into the irrigation drippers, which is big business, insects actually quite like biting into plastic, believe it or not, and we have an anti-insecticide that prevents that from happening. So, these irrigation drippers actually have a much longer life, and you can imagine how we can spread that into many, many other agricultural products, which is what we’re working on.
We then have our massive day d2p pipeline, so we’ve got 70 plus projects going on globally, insecticidal, antimicrobial, flame retardant and we’re very excited about those things coming on online.
Q3: This week you announced the investment from Sea Pearl can you just tell us a little bit more about them, the use of the funds and the connection with Indorama?
A3: Well, Sea Pearl has taken over the interests of Vincel and Vincel came in a number of years ago now, and they’ve bought in the market in the past and they’ve up warrants, and they’ve placed fairly recently as well with us, so Sea Pearl have taken over those interests.
Sea Pearl is owned by the daughter of SP Lohia and he’s the main owner of Indorama Corporation. Indorama Corporation are a very large conglomerate into many, many materials in industrial sectors in India, Indonesia, parts of Africa also in Mexico as well. What’s really exciting about this relationship is they’re a very supportive company, not just financially but also in terms of our business, and you may recall that we have this joint venture in India we announced in the earlier part of this year and that joint venture is with Indorama.
So, with them, operationally, we’ve got a very exciting situation going there, the second most populous country in the world, we’ve already been supplying product into there on a small scale, but our technologies aligned with Indorama and their contacts and their business, we feel very excited about that.
So, in terms of this funding, they’re obviously very confident in us, excited by what we’ve got, not just in India, but globally with our technologies and our prospect, and, really, it’s just some extra money there for really some of the opportunities to make sure we can capitalise on those. So, we’ve already gone through a lot of those opportunities, so we really want to make sure that if we need to capitalise on those, for any reason, be it capital requirement or R&D requirement or any sort of facilities or resource that we need to make those things really sort of push them home then it’s this funding really to enable us to do this during this year.
Q4: Now, you mentioned earlier that you’re going ahead with the manufacturing facility in the Middle East. What does this mean for the company?
A4: What it means is we’re still capital-light so this facility is not a Symphony-owned facility, it’s a facility that is run by our partners in the region and what it will mean is it will, operationally, allow product to be made much more efficiently than shipping from the far east so we’re saving on freight costs, logistic costs, and we’re saving on all those risks that go with freights and logistics, which the last two years of COVID the risks have been very, very high and very expensive. It enables us to control better the manufacturing, it also enables us to have locally produced products, which is, in any market, being locally produced is a big plus factor. So, in terms of working capital, resources, locally produced manufacturing, we can see it really heightening the opportunity there and heightening the growth in products.
What’s actually happened in that region is we’ve allowed it to destock effectively so it’s taken away our revenue of H1 as a short-term loss, if you like, but in terms of H2, that will completely be reversed. Not just reversed, it will allow greater revenue growth during H2 and into next year, having the facility local.
In addition, you may recall that Saudi Arabia and UAE are pro oxo-biodegradable, they’re pro d2w, they’ve got regulations legislations in place, and we believe that will strengthen during this period as well so we believe the market will expand for our product in H2 and going into next year.
Q5: You touched on this already but what can you tell us about the pipeline for H2?
A5: The pipeline is very strong for H23 so in terms of d2w, we’ve just gone through the Middle East which should show significant growth, and then we’ve gone through the Latin American situation there with regulatory moves in our favor and then we’ve got the joint venture with Indorama in India as well, which is a d2w and a d2p scenario so we believe that should deliver meaningful results in H2.
With our d2p, that’s really underpinned by the Grupo Bimbo agreement, which we believe will start delivering inH2 and also the pipeline itself and areas of the pipeline include Rivulis which has already grown threefold in the first six months of this year and then we’ve got these large orders that have already been placed for quarter three.
We believe there’ll be further orders during the year, there are companies as well that we’re working with and within our pipeline with the insecticide, with the bread antimicrobial so that’s really what’s underpinning our H2 positivity, you like.
Q6: Is there anything else that we can expect from Symphony Environmental Technologies over the remainder of the year?
A6: No, I think we’ve pretty much covered it really.
So, from India, Middle East, Latin America, with bread, with anti-insecticide, flame retardant, d2w regulatory environments, there’s a lot there with the business and there’s a lot more underneath that as well.
A lot of these developments we’re working on, their customer-led developments, we’re working in partnership with customers, we work with them with our distributors as well so although we’re a small company, we’re able to do large things by having these large resources around the world that are working with us with a common goal.
Symphony Environmental Technologies plc (LON:SYM) is the topic of conversation when Hybridan’s Director of Corporate Broking Niall Pearsoncaught up with DirectorsTalk for an exclusive interview.
Q1: For those that have not yet come across Symphony Environmental, could you just tell us a little bit about them?
A1: The company are quoted on the AIM market, they’ve been around for a number of years. Their bread and butter is essentially an additive technology that goes into materials such as plastic that can really change the speed of that product decay. Ultimately, the end result is making it 100% biodegradable in the open environment so oceans, rivers and land.
The technology as you can imagine is incredibly high tech, it’s really underpinned by over four decades of scientific data behind it so it’s certainly well proven. The way it works, it’s very small quantity so just 1% of their additive is introduced into the manufacturing process of products before they hit the supermarket sells for example. These products with the additive in it can have numerous applications, anything covering from antiviral or antimicrobial and of course 100 biodegradable.
As I’m sure you can probably ascertain, it’s an incredibly regulated market and the company certainly ticks a lot of boxes in that respect, they’ve got their US FDA approval and also similar approval in Canada as well.
Q2: Now, they had some important news out this week about their operations in India. Can you tell us about that?
A2: It was a very important update and I think it certainly reinforces to investors that the company has a global footprint, the market certainly saw and understood that. Their shares had a good rally up 20% so it’s always good to see messages resonating in this current environment.
They have a great relationship with their JV partner Indorama which, of course, is a global chemical company and that JV forged really that major expansion into India, it’s moving along very nicely, it only really completed in February.
I think India is a great example of how a country which has a very real plastic problem but I think more importantly is doing something very logical and realistic about how to manage their solutions. So, India has nearly have about 10 mega tonnes of plastic waste annually which is huge, a mega tonne is a million tonne, and I think more importantly, 40% of that waste is not collected and to manage that the government have really put out some pretty aggressive targets as part of their plastic pact to ban single use plastic.
It’s good to see the adoption of big companies such as Amazon and Coca Cola have signed up so mandating that all plastics have to be biodegradable, coupling that with SYM having a foot in the door of that country, really opens up a wealth of commercial opportunity. So it’s a very exciting time for them.
Q3: How has the company faired through the COVID situation?
A3: I think they’ve been incredibly resilient through the pandemic and just the general market backdrop, I think COVID has certainly changed the narrative on hygiene. Consumers are starting to realise that the paper bags we were told to all buy actually produce more waste than plastic bags, they’ve got a worst carbon footprint in the production process and those cotton shopping bags sold at £10 pounds are actually a real hotbed for bacteria and COVID.
So, the rhetoric is becoming less around banning plastic altogether, but more around how do we manage the plastic problem better which is their sweet spot. The company were incredibly nimble in their product offering, obviously they’ve been experts in biodegradable plastics for a number of years, we had lots of PPE coming through into hospitals, and they were thinking why can’t we expand our technology to make that equipment, antimicrobial, antiviral such as gloves which they manage to add their technology in those products to kill COVID in less than 10 minutes. That level of innovation in such a short space of time is quite staggering really. Again, the market reacted quite well to them, shares were up 50% last year, and the year before that in 2020, in the midst of COVID, there were up nearly 150%.
The challenges that they’ve had haven’t really been COVID-specific, they’ve been more widespread and not really unique to the company so what we’re seeing across all small companies right now is high shipping costs, logistical delay, we’re seeing a lot of knock on effects in small caps.
Saying that, the company have done a great job in trying to manage that, they’ve done a lot of investment in their logistics team to try and get ahead of the curve and anticipate those issues before they happen. Those challenges aren’t going to last forever, we’d expect them to subside soon, I hope.
Q4: Finally, what can investors look forward to in the future for Symphony Environmental?
A4: Well, all the news flow that’s been coming out from the company over the past few months, I think the market is really starting to understand that they’re at a real inflection point and certainly have been doing a great job in laying the foundations for mass commercial adoption of their technology.
Having all the necessary regulatory approvals in place, such as the FDA, takes time, there’s a lot of hoops to jump through and then you have big customers going to trials, working along in unison with those regulatory approvals.
So, the company have said to the market that they have several of these deals nearing closure with major products in the mix so it’s a very exciting time for them as they’re moving to create a commercial scale.
Symphony Environmental Technologies plc (LON:SYM) has announced new orders and a global expansion of d2p anti-insect technology sales to Rivulis, a global leader in drip irrigation products and solutions. The company has placed orders valued at more than $340k this month which follows sales in 2021a of $65k, and $130k during H1 2022e. Rivulis is using d2p for anti-insect protection for pipework. This announcement follows the supply agreement signed late last month with Grupo Bimbo, a large bakery group, for d2p additive applied to bread packaging film. For the moment, given the uncertain macro environment and inflationary headwinds we leave our estimates unchanged, but clearly commercial momentum is accelerating. We will update estimates as needed with the half year earnings due in September. Our DCF-based valuation is 35p, indicating good potential upside to the current share price of 17.5p.
Ramp-up in orders for d2p anti-insect technology – Rivulis (www.rivulis.com) is a global leader in drip irrigation products and solutions. The company has placed orders for d2p “AI” exceeding $340k this month which follows sales in 2021a of $65k, and which doubled to $130k during H1 2022e. SYM’s collaboration with Rivulis started in December 2017 after the Group’s R&D department created a masterbatch with anti-insect properties which could be put into plastic products at the point of manufacture. Since then, SYM’s technical team has supported Rivulis in the development of a reportedly unique range of irrigation pipes for farmers and growers. Plastic irrigation pipes and drip-tapes are an effective way to deliver water to growing plants, but valuable water was being lost because insects were puncturing the pipes. By incorporating d2p AI into its products, Rivulis has significantly reduced the damage caused by insects, and the amount of water being lost. This is particularly of benefit in dry areas of the world. SYM expect Rivulis to place further orders for d2p AI before the end of the year. SYM’s innovative d2p AI technology can be used in water pipes, and in any plastic articles and surfaces in homes, schools etc. to defend against insects, many of which can spread diseases.
Recap on d2p product supply agreement with Groupo Bimbo – SYM announced an exclusive supply agreement for its d2p antimicrobial technology with Grupo Bimbo (grupobimbo.com) on 28 June. In part this agreement stems from the exclusive regulatory approval secured from the Food and Drug Administration in the USA in 2020 and from Health Canada in 2021, for use of d2p in bread packaging plastic films. Grupo Bimbo has asked SYM to supply d2p for its nominated bread packaging manufacturers across the American continent for a period of three years. Anticipated revenue has not been disclosed but we believe, given the size of Grupo Bimbo’s operations (i.e., $17bn of annual revenues, and probably 20% share of the USA packaged bread market), there is potential for significant additional sales for SYM over the coming years.
Outlook and Zeus estimates – Symphony Environmental reported full year results in late March (see: Solid progress despite challenges, 31 March 2022). At the time, the outlook statement was cautious but positive. Management stated that trading had started to improve following a slow start to the year. Continuing high shipping costs and delays remained a concern but some raw materials costs had started to reduce. Overall, the Board stated that it was confident that commercialisation and financial performance would be much stronger in 2022e. We think the announcement today and for Grupo Bimbo a week ago are validation of this positive outlook on commercialisation and the pipeline.
Symphony Environmental Technologies plc (LON:SYM) has announced an exclusive supply agreement for its d2p (designed-to-protect) antimicrobial technology with a major customer. Grupo Bimbo (NASDAQ: BIMBOA) is one of the largest bread manufacturers globally. The company has conducted extensive trials of d2p for its plastic bread packaging, with the aim of extending the life of products, improving hygiene, and reducing waste. The company has asked SYM to supply d2p for its nominated bread packaging manufacturers across the American continent for a period of three years, which can be extended by agreement. Given the size of Grupo Bimbo’s operations (i.e., $17bn of annual revenues) there is potential for significant sales for SYM over the coming years. We will update our estimates as more information on the phasing of d2p product rollout becomes available, but this agreement signals to us that risks are now on the upside. Our DCF-based valuation is 35p, indicating good potential upside to the current share price of 16p.
Agreement with Groupo Bimbo – Symphony Environmental Technologies has announced an exclusive supply agreement for its d2p antimicrobial technology with Grupo Bimbo. In our view, the agreement represents a significant commercial advance for the d2p product range. Grupo Bimbo is one of the largest bread manufacturers globally (grupobimbo.com). The company has probably 20% share of the USA market for packaged bread products, with revenues of $17.2bn and EBITDA of $2.4bn reported in 2021a.
A long-standing customer relationship and technology underpinned by FDA approval – Grupo Bimbo has a 10-year relationship with Symphony which initially focused on d2w technology, helping to make bread packaging oxo-biodegradable and recyclable. Following extensive trials of d2p for bread packaging over the past two years, Grupo Bimbo has requested supply of d2p antimicrobial masterbatch for its nominated packaging manufacturers across the American continent. The supply of d2p in the USA (the West’s largest bread market), Canada, and Mexico will be exclusive, and Grupo Bimbo has first-refusal for other countries in the Americas. We believe future revenues from this agreement could be highly significant for SYM. To recap, in part this agreement stems from the exclusive regulatory approval secured from the FDA in the USA in 2020 and from Health Canada in 2021, for use of d2p in bread packaging plastic films.
Peru ruling on d2w products and microplastics – Separately, on Monday, SYM announced that its distributor in Peru had won its case with the Peruvian Government on adoption of d2w oxo-biodegradable products. The Peruvian Ministry of Production has now acknowledged that there should be no impediment to usage of oxo-biodegradable technology, and that there is a clear distinction with other biodegradeable technologies which can generate harmful microplastics. This ruling is supported by independent scientific studies which show that d2w allows plastics to degrade into harmless residuals. We believe that this is an important step in supporting wider adoption of d2w technology across Latin America and elsewhere.
Outlook and Zeus estimates – Symphony Environmental reported full year results in late March (see: Solid progress despite challenges, 31 March 2022). At the time, the outlook statement was cautious but positive. Management stated that trading had started to improve following a slow start to the year. Continuing high shipping costs and delays remained a concern but some raw materials costs had started to reduce. Overall, the Board stated that it was confident that commercialisation and financial performance would be much stronger in 2022e. We think the announcements yesterday and today are validation of this positive outlook on commercialisation and the pipeline.
In Analysts’ corner, DirectorsTalk brings you exclusive professional opinions from five of the leading equity research analysts on five companies listed on the London Stock Exchange.
Symphony Environmental Technologies plc (LON:SYM) is a world leader in the development of additives to make ordinary plastic biodegradable and protective technologies to enhance plastic products.
Surface Transforms plc (LON:SCE) is a highly innovative company, with its own patented materials technology and a team of PhD-qualified scientists and degree-qualified engineers who are continually developing new processes for the production of carbon-ceramic materials and new products for various applications.
Cerillion plc (LON:CER) is a leading provider of billing, charging and customer management systems with more than 20 years’ experience delivering its solutions across a broad range of industries including the telecommunications, finance, utilities and transportation sectors.
Dialight plc (LON:DIA) is the world leader in LED industrial lighting technology with millions of LED fixtures installed worldwide. The company’s LED products are providing the next generation of lighting solutions that deliver reduced energy consumption and create a safer working environment and support its customers’ ESG agendas.
CyanConnode Holdings Plc (LON:CYAN) is a world leader in the design and development of Narrowband RF mesh networks that enable Omni Internet of Things (IoT) communications. With a wealth of expertise and experience in smart technology, the Group provides customers with long-range, low-power, end-to-end networking solutions and high-performance applications that help them enhance service delivery, improve business efficiency and save energy.
Symphony Environmental plc (LON:SYM) has provided a pre-close update for the full year. Results missed our estimates mainly due to one-off factors outside of the Group’s control. Hence, sales were c.£2.2m lower than we predicted. Consequently, the Group will report a small operating loss (c.£800k) vs. our previously estimated £170k profit. SYM expect to book c.£1.8m of delayed 2021a sales in 2022e. In contrast to short-term challenges, good strategic and commercial progress was made with both d2p and d2w products, and with new strategic partners in China and India. Management state for the first time that they now have pipeline opportunities equivalent to over $40m (c.£30m) of recurring annual revenues. But timing on delivery is always somewhat uncertain and acknowledging that SYM is in a build-out phase with several commercial opportunities, we now take a more cautious view of profitability in 2022e and 2023e. That said, given the potential for better returns over the medium-term, our DCF based valuation of 35p is unchanged.
Trading update for 2021a – Revenue is expected to be c.£9.8m (2020a: £9.8m) with an operating loss of c.£800k (2020a: c.£390k loss). By product type, Symphony Environmental reported a 5% increase in d2w oxo-biodegradeable masterbatch sales and a 29% increase in d2p protective technology products. However, finished good sales, particularly of PPE/gloves were lower. A total of c.£1.8m d2p masterbatch and PPE/glove revenues, originally expected to be recognised in 2021a has been delayed to 2022e. As previously reported, the Group made significant investments in R&D and distribution during the year. SYM should report a small net debt position.
Business developments and Zeus estimates – Despite near-term headwinds, SYM has made strong strategic and commercial progress. The new business pipeline of d2p technologies and PPE/gloves reportedly totals over 100 projects. Management estimate, if successfully commercialised, these could generate over $40m (c.£30m) of recurring annual revenues. Notably, the Group’s new d2p glove product has a kill rate of 99.99% of coronavirus within 10 minutes; management believe this is market leading. SYM expects regulatory approvals for this product in the EU and the USA in Q2 2022e. On d2p products and USA FDA & Canadian approved bread-packaging technology, following successful initial trials, small commercial product sales have started in Latin America with a large bakery. Separately, bread packaging products made with d2p have now been produced for evaluation by customers in Canada, USA, Middle East, Pakistan, and South Africa. On Meditech China, in August 2021, SYM entered into agreements to expand sales in the Far East and globally. Management is pleased with progress and alongside Meditech, are upgrading current EU CE certification and US FDA registrations. On d2w masterbatch, sales increased across Latin America, the Middle East, and some parts of Asia during 2021a, partly due to the positive impact from advisory and advocacy work as well as increased enforcement of legislation by the relevant authorities. In India, as announced on 23 October, SYM formed a distribution JV with Indorama. Agreement has also been reached for product-development and manufacturing with an Indian manufacturing group, Bihani. SYM is optimistic that these new relationships will provide good revenue opportunities in this large market for d2w and d2p products during 2022e.
Zeus Capital estimates – The Group has an expanding pipeline but is also continuing to build the platform to support higher growth. Moreover, timing of sales for new products can be somewhat uncertain. We now assume Symphony Environmental will report earnings at about break-even for 2022e before a significant ramp-up in 2023e. To conclude, 2021a has been a positive but transitional year, with some challenges. SYM now appears well placed to generate improved returns over the medium-term.
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