CalciTech sales tool for brokers:
Memo below is a PR memo from Nick Plumbridge (PR director) prepared as as sales aid for both meetings with prospective investment institutions as well to help independent brokers. My broker first received this a few weeks ago.
Very interesting with projected revenues, margins and EBITDA as well as construction costs, grants and financing amounts. This is the first time I have seen any estimates for the potential profits.
Also, a Belgium plant is mentioned as a second site. I assume the German plant reference is Luena.
The first part we have seen before.
The opportunity arises following the decision of US parent CalciTech Synthetic Minerals Ltd. to exploit the technology it has developed through a series of global joint venture companies (each with a defined area) rather than through the parent company itself.
CalciTech Synthetic Minerals Europe Ltd. (“CSME”), is a recently incorporated UK private company, that has been granted a 30 year exclusive license to exploit this new industrial technology in the materials field in Europe.
The Product
The product is a mineral pigment and specialty filler aimed at the high end segment of its markets, where Europe is, in the main, the world leader. Its end markets are multi-billion $ in mature sectors such as:
- Paper industry (Stora Enso, UPM, Norkse Skog);
- Plastics, polymer and sealant industries (Dow Corning, Kaneka);
- Food and pharmaceutical industries (Nestle, Danone);
- Paints (AkzoNobel, Crown Paints);
- Inks (Dubuit, Siegwerk)
The product has been extensively trialed and is proven to give the user improved finished product quality, reduced running costs, increased productivity and environmental credentials. Interest has been procured exceeding the off-take of the two immediate planned plants.
The initial two plant strategy enables the maximum utilisation of the product mix.
The Technology
The technology has been developed over a number of years and is fully proven and patent protected. This technology was developed with waste remediation in mind, specifically hazardous carbide lime, and has been further developed to recycle the waste produced by the paper recycling industry producing two high value sustainable products whilst absorbing CO2 emissions.
CSME has an exclusive license of a new international technology for the European territory relating to the “know-how” in the following:
§ a patent granted in December 1999 for the production of the product;
§ a patent filed in October 2009 enhancing the 1999 patent relating to the process used to produce the end product with exceptional features including, but not limited to, a unique morphology, a very narrow particle size distribution and exceptional purity; and
§ a patent filed in December 2009 for a technology that enables paper producers to recycle all the minerals used in paper.
The Process
CSME’s German branch has taken over the small-scale production plant that has been successfully using this technology and supplying samples for a number of years.
The manufacturing process has strong environmental credentials through the consumption of industrial waste, producing a sustainable product and consuming CO2.
Corporate Strategy
It is the Company’s intention to fund and build these first two plants and then roll-out an additional 6 plants, in its first phase, with a potential output of 400,000 tpa to service markets throughout Europe.
The Company is confident that it has interested clients that will achieve budgeted production at both planned facilities.
Plant Building
CSME will shortly complete heads of agreement to build a plant in Germany and one in Belgium producing a total of 80,000 tonnes per annum (tpa) expected to commence within two years. These plants have a useful working life potentially in excess of 20 years.
Funding Requirements
Projected revenues and EBITDAs for the plants are expected to be:
2012 2013 onwards
€ ‘000 € ‘000
Revenues 6,975 32,400
Margin 46.1% 44.6%
EBITDA €3,217 €14,439
Significant European grants and loans are available for this project which extends significantly the value of the initial investment.
Capex funding / equity requirement for these plants will be:
Capex €38 million
EU grant 26% €9.9m
Project finance / EIB participation 54% €20.5m
Equity 20% €7.6m
The Company is seeking to raise funding to entirely finance the non-grant portion of the German and Belgian plants, and working capital to take CSME through to revenue earning, totaling approximately €35m. To this end, a well known London Nomad has recently been approached and should be appointed shortly with a mandate to raise this proportion of the financing.
Additional pre-IPO funding of some €3million will also be sought, which will ensure that both plants are fully “shovel ready” by the end of June this year.
It is envisaged that this funding will be by way of a mix of equity and convertible preference debt with a coupon.
Strong Management Team
CSME has a strong management team with experienced professionals with extensive target markets backgrounds. It also has an experienced board of directors to provide good UK governance.
Summary
In summation, this presents an exciting opportunity for strong revenue-earning potential, using next generation green technology and sustainable materials, in large and mature end-markets. The specialty nature of the products brings premium value with cost savings to the end user.
