Zotefoams Q&A “recovery in many of our core markets” (LON:ZTF)

Zotefoams plc (LON:ZTF) Chief Executive Officer David Stirling caught up with DirectorsTalk for an exclusive interview to discuss their preliminary results, measures taken to demonstrate resilience and flexibility, their Poland facility, plans for resource for the mono-material barrier packaging solutions and delivering significant growth this year.

Q1: First off, congratulations on a solid set of pre-lim results today, could you just talk us through the highlights?

A1: Yes, we have, in our pretty difficult and uncertain world delivered pretty solid revenue, 2% up on last year. Our operating profit was a similar levels, we generated 21% more cash from operations than in 2019 and ended the year with about the same debt levels and leverage ratios as 2019.

So, all achieved against a fairy uncertain background and thanks to the staff for helping us get there because it’s a challenge for everyone.

Q2: Now, Zotefoams has shown resilience and flexibility over the past year. What measures were taken to demonstrate that?

A2: I think first and foremost, we have a business where we operate in a large number of markets and so an initial assessment of what the impact of COVID restrictions would be in those markets. The prioritization of staff safety but making sure that we understood which markets would be open and we could sell to and a very active sales programme development programme to rebalance the business.

Fortunately, we have flexible assets and as I said, we work across a number of sectors, so offsets from lower aviation, lower automotive, general industrial etc.

We grew our footwear business very, very well which was expected but we also helped one of our UK customers secure a government PPE contract and so that came in mainly in second half last year and that helped to balance the declines in other areas.

Q3: Just turning to the Poland facility, what will that add to the business?

A3: Well, first and foremost, it adds capacity. We have, over the last four years, added about 60% to our capacity, it also adds a third major site to the UK and the Kentucky in North America.

Poland is ideally placed to meet the demand of growing markets in central Europe and also service a lot of customer demand in Germany, it’s a great logistics hub, we bought the land and we’ve got plenty of space for inventory management.

So, we’re only just starting now, again COVID that slowed us down a bit or we deliberately slowed down as well because the demand wasn’t there but now the facility is operating currently on one shift and we expect to go to two shifts at some point later this year.

Q4: Now, you say that you’re taking the steps to assess and develop plans for resource for the mono-material barrier packaging solutions. Could you just expand on that for us a little?

A4: So, first and foremost, what resource is, is targeted to consumer packaging, it is a raw material that’s flexible, it can be made into cartons, such as apple juice cartons or milk cartons, it can be made into trays, pouches etc., and it provides a barrier to oxygen and moisture. That’s particularly important to keep foods from being spoiled and

Therefore, the way that’s normally done is a combination of different materials making up the packaging so if you think about an apple juice carton, often you’ll find in there, paper, plastic, aluminium, all in the same package which makes it very, very difficult to recycle and certainly, it’s not recycled into another apple juice carton.

Our material can be recycled just through common household recycling, put in the recycling bin, it’s a mano-material which means made from one single type of material which allows it to be recycled very, very easily, and it can be recycled back into the same type of packaging.

We’re already using and have designed the structure to incorporate recycled material and so we see it as providing the same functionality and convenience for the customer, for the retail or for the brand as existing packaging. For society, we have a much lower carbon footprint, we’ve had that benchmarked, we have more water usage, we have lower energy usage than existing systems and therefore, we see it as potentially very beneficial. It can be scaled quickly because people want solutions that are available pretty quickly, can be deployed on mass and this meets that requirement.

Q5: You mentioned that Zotefoams expect to deliver significant growth this year, how would that be achieved?

A5: We have had good growth expectations for a few years, obviously COVID has change the world but some of the markets we are involved in like high-performance footwear growing very, very well, our T-FIT insulation business, technical installation business, is well poised for growth and we see a recovery in many of our core markets so you start adding it all together.

We’ve also been on some longer term opportunities, such as with automotive, e-vehicles etc. and some of those are starting to show progress, a bit too early to call the major parts of our business, but certainly have potential.

I think that the portfolio of opportunities and the ability to go to where the action is, is a key part of how we operate.

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