Zotefoams generating record revenues and profits ahead of initial expectations

Zotefoams plc (LON:ZTF), a world leader in cellular material technology, has announces its unaudited preliminary results for the year ended 31 December 2022.

Financial highlights
Group revenue£127.4m£100.8m+26%
Gross margin30.4%26.4%+400bps
Operating profit1£13.9m£8.1m+71%
Profit before tax (PBT)1£12.2m£7.0m+74%
Basic EPS120.61p9.01p+129%
Cash generated from operations£23.0m£12.8m+80%
Net debt£27.8m£34.3m(19%)
Leverage ratio21.2x2.1x
Final dividend34.62p4.40p+5%

1 This is a reported number under UK adopted IAS and is after the deduction of amortisation of acquired intangibles amounting to £0.258m in 2022 and £0.232m in 2021

2 Leverage is that defined under the bank facility, with net debt at the end of the period divided by the preceding 12 months’ EBITDA, adjusted for the impact of IFRS2 and IFRS16

3 Final dividend is subject to approval at the May 2023 Annual General Meeting

Results highlights

Record Group revenue of £127.4m, with strong growth across all business units
– Polyolefin Foams sales up 25% to £70.1m (2021: £56.2m) or 21% in constant currency
– High-Performance Products (HPP) sales up 29% to £54.4m (2021: £42.3m) or 16% in constant currency
– MuCell Extrusion sales up 23% to £2.8m (2021: £2.3m) or 13% in constant currency
Profit margins much improved
– Gross margin increased 400bps to 30.4%, with operating margin up 280bps to 10.9%
– Improved mix with faster relative growth in high-margin HPP and price rises implemented successfully in Polyolefin Foams
– Absorbed £1.9m of continued investment in the ReZorce® mono-material barrier packaging opportunity
– Strong cost management and operational execution
– Profit before tax up 74% to £12.2m, a Group record, with EPS up 129% to 20.61p
Excellent cash generation
– 80% increase in cash generated from operations, with free cash flow of £14.0m (2021: £3.9m)
– Net debt reduced from £34.3m to £27.8m, with year-end leverage ratio down significantly to 1.2x

Strategic progress

Rapid recovery in Polyolefin Foams margins through price increases demonstrates strength of the product offering, and structural growth prospects exist in this important business unit, underpinned by the megatrends of environment, regulation and demographics and facilitated by the Group’s well-invested global capacity
Further HPP growth in footwear products, where we have worked closely with our partner to develop more long-term opportunities, good first steps to recovery in aviation and strong signs that T-FIT insulation products are generating increased recognition and interest
Good progress in developing ReZorce, which offers society a truly circular packaging solution using existing recycling infrastructure

David Stirling, Group CEO, said:

“2023 has started well, with demand for our AZOTE® polyolefin foam products in line with the previous year but with higher revenue from price increases implemented over the past twelve months. Sales of high-performance products are showing strong growth in the first few months, mainly due to the timing of shipments compared to the prior period. Sales across both businesses continue to benefit from a stronger US dollar. 

“The environment for input costs is less acute, with both energy and polyolefin polymer prices reduced from the peaks seen last year but remaining well above their long-term average. Prices for energy and energy-intensive commodities such as nitrogen remain uncertain, with forward-market pricing at a significant risk premium to spot. We are closely monitoring input costs and our pricing in the polyolefin foams business in particular.

“Whilst uncertainty persists, we currently expect that, for the year as a whole, polyolefin foams volumes will be at a similar level to last year, with more challenging conditions in the UK and continental Europe offset by growth in North America and other geographies. Our High-Performance Products business should see further growth in footwear and continued strong growth in both our ZOTEK® F and T-FIT® insulation products. Within our MEL business unit, focus has progressed to commercialisation trials for ReZorce cartons.

“Overall, the Board remains confident about the future prospects for our business”.

An introduction from our Chair

Strong sales growth and improved margins generate record profits alongside continued strategic delivery

Performance and results

2022 saw the Group record a second year of strong sales growth, up 26% on 2021 following a 22% increase in the previous year. This was driven by effective pricing actions in Polyolefin Foams, a stronger US dollar and significant High-Performance Products (HPP) volume increases across Footwear, ZOTEK® F (primarily aviation) and T-FIT® insulation. A focused programme of price increases was implemented in Polyolefin Foams to recover margin loss from the severe input cost inflation that had materially impacted 2021 margins and that continued in 2022. Group revenue for the year was £127.4m (2021: £100.8m) and operating profit was 71% above the previous year at £13.9m (2021: £8.1m), a record for the Group, with operating margins expanding from 8.1% to 10.9% despite a significant increase in MuCell losses as we continue to invest in the ReZorce® circular packaging opportunity. Basic earnings per share was up 129% at 20.61p (2021: 9.01p). The balance sheet remains strong, with leverage significantly reduced during the year and ending at 1.2x (2021: 2.1x), the lowest it has been since 2018 when the Group embarked on its now complete capacity expansion programme.

Strategic progress

Our strategy is focused on delivering strong and sustainable organic growth and improved operational efficiencies. Zotefoams has a portfolio of differentiated products based on unique and environmentally friendly technology and intellectual property. We work with our partners to optimise our materials for their needs and have developed a portfolio of high-performance products that further enrich our product mix, adding more value for customers and to our business. Alongside this, we have established a diversified international manufacturing footprint to ensure there is sufficient capacity to meet growing demand across a range of attractive end markets. We seek to improve operating margins and returns through the investment cycle. We are also pursuing a transformative opportunity at MuCell Extrusion LLC with ReZorce, a mono-material barrier packaging solution which can be used for beverage and food packaging, uses recycled materials and is easy to recycle again (is “circular”) using existing waste collection and recycling infrastructure.

We have made good strategic progress this year. Our largest business unit, Polyolefin Foams, converted the increased volumes of 2021 into improved margins in 2022. We continue to see structural growth prospects in this important business unit, underpinned by the megatrends of environment, regulation and demographics and facilitated by our new global capacity. In our HPP business, we delivered another year of strong growth in Footwear and worked closely with our partner to develop further long-term opportunities. Additionally, the start of a post pandemic recovery in aviation resulted in demand for ZOTEK® F technical foams growing strongly, with T-FIT® insulation products also developing well as the brand continues to gain traction. The long-term growth outlook for these HPP markets remains compelling. We also made significant progress at MuCell Extrusion LLC with ReZorce mono-material barrier packaging, investing significantly in its development, running scale-up trials and commencing the search for a strategic investor to allow full realisation of the technology’s potential. Whilst acknowledging that we are still at an early stage of commercial development, this remains a high-reward opportunity and we expect to update stakeholders on progress during 2023.


The Board is proposing a final dividend of 4.62p (2021: 4.40p) which, if approved by shareholders, would make a total dividend for the year of 6.80p (2021: 6.50p), an increase of 5%. This reflects the Board’s continued confidence in the Group’s future and is in line with its progressive dividend policy, recognising the importance to our shareholders of the dividend as part of their overall return. If approved, the final dividend will be paid on 2 June 2023 to shareholders on the register on 5 May 2023.

Our people

We know that our people are key to the Group’s success and 2022 was another year that highlighted their importance. While in most regions the impacts of the pandemic have receded, this was not the case everywhere, with our China staff particularly impacted by shutdown and significant travel restrictions. Elsewhere, reduced restrictions have enabled the return of direct interactions between teams in different locations after at least two years of forced separation, and we see how important and valuable this is for the individuals themselves and the Group as a whole. The spiralling cost environment has placed challenges on our staff both from a work and a personal perspective and, with regard to the latter, we implemented a number of mitigating initiatives. High levels of business activity and a need to respond quickly requires resilient and committed staff, and we have again experienced this in our people, who have been outstanding and have ensured that the needs of customers continue to be met.

Having the right people at Zotefoams, who understand and promote our culture, act at all times with integrity, safety-consciousness and dedication and possess the right knowledge and skills, continues to be critical to our future success. I would like to welcome the new employees who have joined us around the world during the past twelve months. I would also like to thank those who have helped all our new colleagues integrate successfully and thank, once again, all our hard-working employees and their supportive families who have helped the Group continue to make good strategic progress during these very challenging times.


Our purpose is to provide optimal material solutions for the benefit of society, reflecting our belief that, used appropriately, plastics are frequently the best solution for the sophisticated, long-term applications typically delivered by our customers. The Board is focused on the importance of sustainability and the evolving debate around the use of plastics by society. It considers both in relation to the future desired outcomes for all stakeholders. Accordingly, our strategy incorporates the consideration of climate change in terms of financial and operational impacts. Good progress was made in 2022 towards our sustainability targets.

The Board and Chair succession

There were no changes to the experienced and engaged Board during the year. By the time of the Annual General Meeting (AGM) in May 2023, however, I will have been on the Zotefoams Board for almost nine years and it will be time for me to step down. Doug Robertson, our Senior Independent Director, has led a process to find my successor and in early January 2023 we appointed Dr Lynn Drummond as a Non-Executive Director and Chair Designate. I am delighted to welcome Lynn to the Board; she will take over as Chair after our AGM. On a personal note, it has been a pleasure to serve on the Zotefoams Board and be part of the exciting transformation and significant progress that the business has made since I joined in 2014. I am confident this success will continue.


The Board leads an ongoing programme to ensure the highest standards of corporate governance and integrity across the Group and has remained abreast of developing governance standards. The Board’s interactions and communications with executive management continue to be excellent and, as a result, the Board is well-placed to challenge, guide and support executive management in the delivery of the growth strategy. During the year, we continued to pay particular attention to the provision of a safe working environment for our staff across all global locations and maintained the improved visibility and quality of safety performance data across the business. I thank all employees at Zotefoams for their efforts throughout the year to identify and remove risks and keep each other safe. We continue to support and empower our employees and are meeting our commitment to enhancing the employee voice in the boardroom through the position of J Carling, Independent Non-Executive Director, as Board representative for workforce engagement. The Board also acknowledges the benefits of diversity, including that of gender and ethnicity, and is committed to setting an appropriate tone from the top in all diversity and inclusion matters.

The Board considers that it has fully applied all the principles and provisions of the UK Corporate Governance Code during 2022, with the exception of Provision 38 in respect of the Company’s pension contribution for the Group CEO.

Looking to the future

Zotefoams is well positioned with well invested, differentiated assets and a clear strategy for delivering profitable organic growth through the cycle. We have committed, capable and passionate people and a strong pipeline of new opportunities, and while we remain mindful of the uncertain external environment, with high inflation, higher interest rates, the continued war in Eastern Europe and remaining concerns over COVID-19 and its variants, we are confident about our future prospects for growth, margin improvement and cash generation.

S P Good


21 March 2023

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