Zotefoams CEO on record profits, extended Nike agreement and market scale-up (LON:ZTF)

Zotefoams plc (LON:ZTF) Chief Executive Officer David Stirling caught up with DirectorsTalk for an exclusive interview to discuss financial highlights, record profit in the foams business, extending the exclusive Nike agreement, ReZorce progress and what investors can expect from the company this year.

Q1: David, first off, congratulations on a strong set of results. Could you just talk us through the financial highlights?

A1: Thank you first of all. We have a business that we think of in two components, one is our foams business, which is growing, well invested, and profitable and then we have a development side of new materials technology for the beverage carton industry.

Overall, revenue is around the same level as 2022 but our operating profit increased 9% to £15.1 million and our profit before tax up to £12.8 million from £12.2 million last year.

Within that the foams business was up to £17.2 million so up 22% and obviously the difference between the foams business growth and very strong profitability and the investment side in the carton business. We have increased the investment in the carton business, which is pre-revenue and really measuring progress on that, on how far we are, how close we are to market trials there which should happen very soon this year.

Q2: You mentioned the foams business, it’s produced record profit but what was that down to?

A2: Well, firstly, the product mix, operating efficiencies, the teams in the main facilities in the UK, in North America and Poland have done really a great job in getting the right price products to the customers and driving operating efficiencies within the business.

So, that’s the main reason we’ve seen the overall profitability increase in the business.

Q3: Now, the Nike exclusive agreement, that’s been extended to the 31st of December 2029, could you expand on that for us and the company moving into the basketball category?

A3: Zotefoams has an exclusive agreement with Nike where we only supply to them foams for the footwear industry, other than medical footwear, and it’s been very very good for us both.

So, we extended that agreement mid-year last year which allows us to work you know very closely together looking into new technologies, performance improvements, sustainability improvements in the materials.

Really, I think that’s a classic example of a very close partnership to the point now where we have started supplying into the basketball category. It’s not yet a huge part of our business, at least in 2023, but the products that’s been launched been well received, the first product they have made. And they have other products in the pipeline.

So, very optimistic about a relationship with Nike in general.

Q4: ReZorce is making significant progress, can you talk us through that side of the business and how it is progressing?

A4: So, as I said earlier it is a development project, we’ve assembled a whole of industry experts to help us on the journey from engineers, quality, and commercial people, all through the supply chain and we’re making really good progress.

We signed we signed an agreement last year with a world-leading package of beverages and the plan is with them to do a market trial in the very near future and that’s something which is progressing well. We should hopefully update the market on that reasonably soon and have product which would be then going into Western European retailer for the final market trial of the product. So, really really pleased about that, it’s a really big, massive market.

What we’re offering is a clear different product with better sustainability credentials which is ultimately fully recyclable and circular because the product we make uses recycled materials today and that’s something that as far as I’m aware is absolutely unique on the market.

Q5: Finally what can investors expect from Zotefoams this year?

A5: More of the same, I think.

We see growth in the foams business, we see clear progress on the resource side, the market trial is a very important milestone and that should position us very well for market scale up. We are looking for a strategic partner to do that with, given the very clear demand signals we’re getting from the market, we see that operating with a strategic partner here is in our best interest to get the maximum coverage for the resource products.

So, a very exciting time and we’re obviously looking forward to seeing those milestones.

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