Cleantech Building Materials: Annual Results to 31 December 2022
28 April 2023
CLEANTECH BUILDING MATERIALS PLC, NASDAQ FIRST NORTH GROWTH MARKET, COPENHAGEN
TICKER: CBM
ISIN: GBOOBD1LVD21
Cleantech Building Materials PLC
Annual Results to 31 December 2022
Cleantech Building Materials PLC (“CBM” or the “Company”) presents its results for the twelve months ended 31 December 2022. The audited financial statements are appended to this announcement and are available on the Company's website at: http://www.cbm-plc.com/investor-relations/reports-and-documents/
Chairman’s Statement
CBM and its subsidiary companies (together the “Group”) are now in a stronger position for transformative growth in the coming years, despite the logistical challenges arising from the pandemic between 2020 and 2022. In 2022, CBM’s subsidiary company, Diamond Wood China Limited (“DWC”), was able to progress on its strategy to build an Accoya® Wood factory in China with its Joint Venture (“JV”) partner, Nantong Acetic Acid Company (“NTAAC”). NTAAC is amongst China’s top speciality chemical companies, serving global multinational food and beverage producers in the US and Europe. NTAAC is listed on the Shanghai Stock Exchange with a market capitalisation of approximately €620 million.
In August 2022 CBM appointed Colin McKendrick as Group Chief Executive Officer and to the Company’s board of directors. Colin is an international business leader with over 35 years of global experience with Shell, heading wholly owned and joint venture chemicals businesses, including the construction, start-up, and operational phases of new chemical production facilities in China, Asia and globally. Having started his career at Shell Research in 1984, Colin has subsequently fulfilled a variety of roles at Shell Chemicals, including as a director of Shell Chemicals Ltd, before leaving Shell at the end of 2020. Between 2014 and 2018, he was deputy-CEO of the US$10bn Shell-CNOOC CSPC joint venture, one of the largest Sino-foreign joint ventures in China. During his lengthy career, Colin has served as Shell’s shareholder representative and board member on numerous joint ventures in China and Asia. He has been posted in Beijing, Guangdong, Hong Kong, and Singapore. Colin has a PhD in chemistry from Edinburgh University and an MBA from Durham University.
Colin’s appointment builds on CBM’s recent appointments of senior executives as the Company progresses its strategy to become a global producer of high-performance, sustainable building materials. The Group expects to start construction of the first Accoya® Wood factory in China’s Jiangsu Rudong Yangkou Economic Development Zone in 2023 to support the country’s transition to a greener economy. It is anticipated that the first supply of China-produced Accoya® will be available for regional wholesalers and manufacturers of wood products in 2024/25. The factory will initially produce 40,000 m3 of Accoya® Wood, moving swiftly to 160,000 m3. Sufficient land has been reserved to support up to 480,000 m3 of annual production.
Under the investment agreement between the two parties, DWC is the majority shareholder in the JV company, Jiangsu Dragon Wood Limited (“JDW”). Additionally, DWC will receive a royalty on profits from JDW. DWC’s equity investments into JDW are being financed through CBM, which entered into a subscription agreement for €25.5m with a private family office in 2022. The DWC equity investment into the JV will be made from these funds.
Accoya® Wood is produced using a cutting-edge patented technology, enabling it to resist rot, defy the elements and stay strong for decades. Guaranteed for 50 years above ground and 25 years in ground or freshwater, the performance and properties associated with the Accoya® brand are sought by joinery manufacturers, architects, and builders worldwide. There are currently 108 Accoya process patents related to the manufacturing process, 85% of which have already been granted.
The following is a brief update of the JDW Accoya® Wood factory developments in China:
| • | The Accoya® Wood factory project debt provider, a leading Chinese bank, signed a Letter of Intent with JDW in April 2021, and subsequently in November 2022 the Chinese bank confirmed that they would be prepared to provide 50% of debt financing for a project costing up to €100m. This project includes common infrastructure for future capacity build out. |
| • | During 2022 Accsys Technologies PLC’s subsidiary, Titan Wood Ltd., (“Titan Wood”) provided DWC with technical information and support for its Accoya® basic engineering design and confirmed that DWC has been provided with the most updated proven Accoya® Wood technology. |
| • | The basic engineering design provided by Titan Wood was localised to Chinese building codes by a leading Engineering, Procurement and Construction firm, LBT Shanghai, resulting in a finalised Front End Engineering Design (“FEED”). After consultation with local government officials in 2022, JDW redesigned the FEED, including common infrastructure for a faster and less expensive future capacity build out. The revised FEED and corresponding +/-10% Cost Estimate were concluded in December 2022. |
| • | The land has been prepared for the construction of the Accoya® Wood reactor facilities. |
| • | A number of government permits have been received since the project commenced in 2021, including the following key approvals: |
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In 2022 DWC continued to invest in the development of its marketing and sales operations in China and the ASEAN countries through the import and sale of Accoya® Wood throughout the region. Offtake agreements have been entered into with manufacturers and wholesalers in the region, who have committed to purchase significant volumes of Accoya® Wood once the DWC China Accoya® factory is in production. These agreements, and the ongoing business with DWC’s existing base of distribution partners, attest to a strong and increasing demand for Accoya® Wood in the region.
The Group revenues in 2022 were €nil (2021: €1,014,000), due to the transfer of the commercial operations to JDW. The Group loss for the 12 months ended 31 December 2022 was €5,427,000 (€4,891,000 in 2021). The increase in loss is largely due to higher share-based payments.
I would like to take this opportunity to again express my sincere gratitude to my fellow Directors and staff for their hard work and commitment over the past year.
I look forward to providing you with further updates at our next Annual General Meeting in June 2023.
Paul Richards
Chairman
28 April 2023
Strategy and Objectives
The Group’s primary strategic objectives for 2023 are:
| 1. | To continue advancing on the construction of the Accoya® Wood manufacturing facility in China; |
| 2. | Work together with the Group’s chemical industry joint venture partner, NTAAC, to ensure that the Accoya® Wood manufacturing facility is constructed on time and on budget, and operated efficiently; |
| 3. | To build relationships with large-volume wood product manufacturers through testing and trials in anticipation of Accoya® Wood being produced in the Group’s own factory; and |
| 4. | To further expand the Group’s wholesaler network throughout China and the ASEAN markets with a strong focus on infrastructure projects throughout Asia. |
Financial Review of the Business
The Group’s revenues for the year ended 31 December 2022 were €nil (2021: €1,014,000). As described in Note 5 on page 26 and Note 15 on page 31 of the financial statements, since September 2021 DWC’s commercial operations have been transferred to JDW, and DWC’s interest in JDW is now measured using the equity accounting method.
The Group realised a net loss of €5,427,000 for the year to 31 December 2022 (2021: €4,891,000). As at 31 December 2022, the Group had cash and cash equivalents of €128,000 (2021: €158,000) as well as an available loan facility of approximately €3.4m (“Loan Facility”), and an equity commitment to finance the JV of €25,500,000. The Group has net current liabilities of €745,000 (2021: €322,000).
Once the Group is producing its own Accoya® Wood in China, the Board believes the financial performance of the Group will be radically transformed.
Going Concern
As described in Note 2 on page 20 of the financial statements, the Directors have considered the future liquidity of the Group in light of the net loss of €5,427,000 (2021: loss of €4,891,000) during the current year and the net current liabilities as of 31 December 2022 of €745,000 (2021: €322,000) and the material uncertainty regarding the Group’s ability to execute the Group’s business plan.
The Directors have reviewed the Group’s cash flow projections prepared by management covering a period of twelve months from the date of the approval of the financial statements. Management’s projections make key assumptions with regard to (i) the anticipated cash flows from the Group’s operations, (ii) the availability of future funding from the Loan Facility, (iii) the financing from the Investor, NTAAC and a leading Chinese bank and (iv) the commitment to contribute further equity financing to JDW for the construction of the Accoya® Wood factory.
Based on these cash flow projections, the Group and the Company will have sufficient financial resources in the twelve months period from the date of approval of the financial statements to meet its financial obligations as and when they fall due.
Accordingly, the Directors consider that it is appropriate to prepare the financial statements on a going concern basis.
Should the Group and the Company be unable to continue as a going concern, adjustments would have to be made to restate the value of assets to their recoverable amounts, to provide for further liabilities that might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities. The effect of these potential adjustments has not been reflected in the financial statements.
Future Developments
The Group expects JDW to commence construction of the Accoya® Wood manufacturing facility during 2023.
CBM plans to hold the AGM on 23 June 2023 and publish the Company’s next financial report which will be its unaudited accounts for the six months to 30 June 2023 in September 2023.
THE DIRECTORS OF CLEANTECH BUILDING MATERIALS PLC ACCEPT RESPONSIBILITY FOR THE CONTENTS OF THIS ANNOUNCEMENT
Further information may be found at the Company's website at www.cbm-plc.com or by contacting:
| Cleantech Building Materials plc Adrian Wyn-Griffiths | info@cbm-plc.com +44 20 3934 6630 |
| Keswick Global AG (Certified Adviser) | info@keswickglobal.com +43 1 740 408045 |
| IFC Advisory Limited (Financial PR) Tim Metcalfe Zach Cohen | +44 20 3934 6630 |
The information communicated in this announcement is disclosed in compliance with the Nasdaq First North Growth Market Rulebook.
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