管理層發言
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Loop Industries Fourth Quarter 2024 Corporate Update Call. My name is Carla, and I will be coordinating your call today. This conference call is being recorded today, May 30, 2024, and the press release accompanying this conference call was issued last evening, May 29, 2024. On our call today is Loop Industries' Chief Executive Officer, Daniel Solomita; and Fady Mansour, Chief Financial Officer; and Kevin O'Dowd, Head of Investor Relations. I would now like to turn the conference call over to Kevin to read a disclaimer about the forward-looking statements.
Thank you, operator. Before we get started, let me remind you that today's meeting will include forward-looking statements within the meaning of security laws. These forward-looking statements relate to, among other things, current plans, expectations, events and industry trends that may affect the company's future operating results and financial position. Such statements involve risks and uncertainties in future activities and results may differ materially from these expectations. Additional information concerning these statements and related risks and uncertainties is contained in the Risk Factors and Forward-Looking Statements section of our latest annual report, Form 10-K, and our quarterly report and 10-Q filed with the SEC yesterday and yesterday's press release. Copies of these documents are available at sec.gov or from our Investor Relations department. At this time, I'd like to turn the call over to Daniel Solomita, Chief Executive Officer of Loop Industries. Please go ahead, Daniel.
Thank you, Kevin. Good morning, everyone. Thank you for joining our call. It's been a very eventful quarter and year-end. We have made great strides towards the commercialization of our technology. This morning, I will be outlining our partnership with Ester Industries, which combines Loop's monomer and specialty polymer business with low-cost manufacturing. I'll be updating you on our progress at Ulsan with our partnership with SKGC, an update on our status of the Reed financing, and finally, our On Shoes partnership, which showcases Loop's ability to recycle polyester textile waste. So let's get started with the Infinite Loop India, which combines the monomer business opportunity with low-cost manufacturing. The monomer business model is filling a market need for sustainably produced DMT and MEG and high-margin specialty polymers. This is complementary to our PET business. The monomer business is addressing a huge underserved market for sustainably produced DMT and MEG.
Today, the market opportunity is greater than $20 billion annually. DMT and MEG are used worldwide as intermediate chemicals to supply the automotive, cosmetics, packaging and other industries. Today, there's a global shortage in DMT. And this is how we developed the business model. We've been receiving a lot of calls from chemical companies asking if Loop can supply them with DMT. As per Wood Mackenzie, virgin petroleum-based DMT is selling for $1,950 per metric ton, and MEG is selling at $835 per metric ton for a combined price of $2,785. This is with no sustainability-linked premiums. This is for virgin petroleum-based products. In talking to potential customers who are the large petrochemical companies, we feel comfortable that a 15% premium can be applied for sustainability and Loop's product. The DMT and MEG that are produced through Loop's depolymerization technology are drop-in replacements to the petroleum-based DMT and MEG, which is extremely important.
This means that our customers do not have to modify anything in their production facilities to replace their current supply. The Infinite Loop India facility will produce 70,000 metric tons of DMT and 23,000 tons of MEG made through Loop's depolymerization technology. The Indian market offers an abundance of low-cost waste polyester fiber that can be depolymerized using Loop's technology and turned into the DMT and MEG. Many of our customers in the textile manufacturing industry have production facilities in India and neighboring countries such as Bangladesh. So it's very close to our customer supply chain. The CapEx estimate for India is $165 million. Therefore, the equity commitment for Loop is in the $25 million to $30 million range, which our partners at Reed and a government agency are fully on board to fund. The partnership with Ester is a 50-50 joint venture. Loop receives a 5% royalty fee on all revenue generated from the facility, which is estimated at $8 million per year.
Loop is solely responsible for all sales and marketing of the final product, which is to be sold through the joint venture, all sold under Loop's brand. The expected EBITDA for the Indian facility is $70 million per year, of which Loop owns 50%, and a 35% unlevered IRR. Therefore, the economics of low-cost manufacturing, coupled with the monomer business model, provide very attractive shareholder returns. Our partners in India, Ester Industries, have been working with Loop for the past five years. Today, in Terrebonne, we depolymerize waste polyester and PET into DMT and MEG. We then ship those chemicals, the DMT and MEG, to Ester in India for polymerization. Examples of some of the products we've launched using this partnership with Ester include, most recently, our shoes with the Swiss shoe brand On Shoes, Evian water bottles, which are for sale in South Korea, and the L'Oreal skincare products, which are on sale at all stores in the United States.
So we have a long-standing relationship with Ester, and we are fully aligned on our partnership and views for the future. This is a 50-50 joint venture and the partners are fully aligned on the execution and the strategy. As I said before, Loop is exclusively responsible for all sales of the DMT, MEG, and specialty polymers, such as PBT, PTT, PETG. Specialty polymers offer a high-margin business, which today is really in need of sustainability. And Loop's DMT allows for sustainability to now reach the specialty polymers, which today cannot be sustainable because there are no monomers available to be used as the base building blocks. The Infinite Loop India project leverages Loop's existing engineering package and has the same major equipment suppliers as the Canadian facility we have running here in Terrebonne. The Terrebonne facility has been operational for the past four years, and those four years have allowed us to secure all of the major equipment that we need for the facility.
So we have had four years of experience running all of these pieces of equipment and are therefore very comfortable with all of our suppliers. So this project leverages our existing, very mature engineering package and all of our key equipment suppliers. Loop and Ester have hired a global leading engineering firm to secure land for the project, which we're expecting to be in the Hyderabad area, and they will be providing all of the local engineering support for the project. We expect to break ground on the facility by the end of this fiscal year. This partnership is in line with Loop's strategy of deploying capital to low-cost manufacturing countries such as India to enhance shareholder returns. We will move to a more asset-light business model focused on licensing our technology in higher-cost manufacturing countries. As far as the Ulsan update goes, Loop and SKGC are negotiating with the Korean government for grants and subsidies for the project.
We are currently also studying the possibility of setting up a monomer plant in Ulsan. The other significant aspect of the monomer business model is that it significantly reduces CapEx and increases financial returns. In the monomer business model, we do not need the polymerization section. So about 40% of the CapEx is not needed because we are selling the chemicals rather than repolymerizing them into PET. So this is something that we're studying in Ulsan as well. Again, this is a huge market opportunity, and we're filling a market need that exists today because of this tremendous underserved market. Additionally, India represents a high-growth opportunity as the Indian economy is the fastest-growing economy in the world, with 1.5 billion people and a growing population. Many of our customers are moving away from China or finding alternative solutions and relocating their manufacturing into India, especially in the textile sector, including large clothing companies.
Low-cost manufacturing and labor rates are significantly cheaper in India. I read an EY presentation on the specialty chemical markets indicating that labor costs for operators in a chemical plant in India are 80% less than what they are in China today. Therefore, we believe Asia will be the main driver for demand over the next several decades, which is why the Indian project is so crucial for us. The monomer business model in Korea is also very exciting due to its location. A quick update on the Reed financing: Over the past several months, Loop and Reed have been working diligently to complete our joint venture partnership and secure mainly non-dilutive financing for Loop's global expansion of our technology. Reed has hired several independent firms to conduct thorough due diligence on all aspects of Loop's business, including technology, financials, legal, and ESG practices, and all independent firms have completed their due diligence successfully.
The joint venture with Reed aligns with our business model, allowing us to invest capital in low-cost manufacturing countries and transition to a more asset-light business strategy based on licensing in higher-cost manufacturing countries, such as Europe. The partnership with Reed is Europe-specific, enabling Reed to partner with Loop as our financial partner. Any equity commitments or funding commitments needed to develop our technology in Europe will be split evenly between Loop and Reed. Any licensing revenue and engineering revenue goes directly to Loop. So, again, this is a more asset-light business model where Loop splits equity side obligations but retains the licensing revenue, which is standard at a 5% share of sales. The financing with Reed, which is largely non-dilutive, coupled with support from other partners, will fund 100% of Loop's capital commitment for India and leave extra funds available for Loop's head office.
The completion of the agreement is imminent. We had hoped to finalize everything for this call, but we are very confident about signing and announcing the final agreements by the end of this week. Lastly, this quarter, we launched a partnership with On Shoes, the Swiss shoe manufacturer, who launched a Cloudeasy Cyclon shoe on May 21. The upper part of the shoe is crafted from polyester fiber made from Loop's facility here in Terrebonne, Canada. It's a 100% recycled fiber using our technology. We began with waste polyester fiber, broke it down into DMT and MEG, purified them, and sent them to Ester. Our partners at Ester Industries produced the polymer, which was then delivered to On Shoes, who used it to create the upper part of the shoes. The program operates on a subscription basis, allowing users to access the shoe with a monthly fee. When the shoe is returned, On Shoes will remove the upper portion, send it back to us to recycle, and then return it.
This demonstrates complete circularity for textiles and running shoes. This is the first shoe launched by On using Loop's fiber-to-fiber recycling technology, setting a precedent for sustainability in the footwear and textile markets. With that, I'll hand it over to Fady to go through the financials.
Thank you, Dan, and good morning to all, and thank you for joining. Exciting times. I've performed many business cases in my life, but I've never encountered anything close to the risk-return profile this India opportunity presents for us. We are thrilled about the potential, especially given India's favorable demographics and growth profile. A lot of migration is occurring into India, attracting significant capital. The supply-demand dynamics of the monomer business we're undertaking, along with our partnership where we have full alignment of roles and responsibilities, creates synergy for the joint venture. Naturally, as the CFO, I'm very enthusiastic about the financial metrics. As Daniel mentioned, we are expecting $70 million of EBITDA at the joint venture level, which will translate to about $35 million for our share based on a $25 million equity check, well within our expectations.
Capital intensity continues to be a topic of discussion; the $165 million of capital for $160 million of revenue results in nearly a 1:1 ratio. In terms of EBITDA, it's just over 2.3. These are very favorable economics. Daniel mentioned our IRR expectations, which is over 30% to 35%. The payback on the equity is projected to be under two years. So this captures a lot of favorable aspects for Loop. Our estimations indicate that each plant we build with our partner, Ester India, could contribute $8 of stock price growth, depending on the metrics utilized. Allow me to walk you through our calculations derived from both price-earnings and enterprise value perspectives. Using the $70 million EBITDA figure, if we impute an interest expense of around $11 million, with an estimated 5% on the $165 million CapEx translating to approximately $8 million, we arrive at just over $50 million of pretax income.
After applying a tax rate of 25%, we calculate approximately $40 million. Our share, as you know, is 50%, which yields about $20 million. Adding the royalty that Daniel mentioned, which we estimate at $8 million pre-tax or $6 million after tax, brings us into the $26 million range. After factoring out the financing costs for our equity raise, which we estimate at about $3 million after tax, we project a comprehensive pro forma of $23 million of net income for one plant. If we apply that over a dilutive number base, we are currently just south of 50 million shares, which translates to about $0.40 of EPS. As of today, the S&P is trading just above 21, so that equates to around $8 per share. If people apply a discount, based on expectations, estimates might sound more like $6 to $7. If we're considered high-growth, high-tech due to the royalty itself, we might be closer to $9 to $10. So in terms of estimates, we think around $8 is fair.
Similarly, from an enterprise value standpoint, using the $70 million and applying an S&P multiple of just above 14 yields an enterprise value close to $1 billion. Once we deduct debt, just over $100 million results in about $900 million. Our share of that at 50% amounts to about $450 million. We see that our royalty contributes to around $8 a share. Thus, both valuation metrics converge around the $8 share price mark for any plant we build in India. This means we won't be stopping at just one plant; we aim to establish multiple plants in the future, emphasizing value accretion from this opportunity. As Daniel indicated, the strategy is asset-heavy for low-cost countries and more asset-light for high-cost locales by leveraging more royalties from the latter, which go directly to the bottom line. As for financing, as Dan mentioned, we may not have finalized it when we had planned, but it is certainly worthwhile.
We are at the end stage, it is our top priority in the coming weeks. Now, please allow me to walk through the financial statements. Reviewing our P&L, total research and development costs were $3 million for the quarter ended February 29. There were adjustments affecting the baseline, including a write-down of $817,000 and non-recurring project-related expenses of $500,000 concerning our French project. This means that the $3 million reported reflects a baseline adjusted to $1.7 million, giving us a 23% decrease compared to the prior period. We're focused on R&D spending while maintaining a strong innovation pipeline at Loop. As for G&A expenses, in the last comparative quarter, we had a one-time stock-based compensation adjustment for forfeitures amounting to $200,000. If normalized, our G&A would have decreased by 10%. The total expenses for the quarter were $5.1 million. Backing out non-cash expenses, which include the $800,000 write-down and non-cash stock-based compensation of around $300,000 along with non-cash depreciation of $100,000 and project costs in Ulsan and Europe of $800,000 for the quarter, our total cash burn rate is approximately $3.1 million for the quarter, which averages to around $1 million per month.
This is well within target between $1 million and $1.2 million, and we strive to maintain this baseline. From a liquidity perspective, as of February 28, we reported $7 million in cash, totaling $9.5 million in available liquidity. We have enough runway for funding until we finalize our financing, which, as Daniel mentioned, is nearing completion in upcoming weeks. I anticipate cash burn for fiscal 2025 will remain between $1 million and $1.2 million. The first quarter of 2025 may be slightly higher due to significant legal expenses associated with the Ester agreements and nearing the finalization of the Reed agreements, but it should revert to the longer-term mean thereafter. That's all for my section, and I'll turn it back over to Dan for concluding remarks.
Thank you very much, Fady. In conclusion, I think the monomer business and low-cost manufacturing model really showcase Loop's agility and ability to operate effectively within market constraints. It's a tremendous market opportunity in an underserved market. As I mentioned, the combined price of DMT and MEG sold separately today is significantly higher than if they were recombined into PET. We need to leverage these market conditions to our advantage. We are genuinely excited about our partnership with Ester and the collaboration with Reed, focusing on finalizing our financing and moving into the next phase of commercialization for the company. With that, I'll turn it over to questions.
分析師問答
Thank you. Our first question comes from Gerard Sweeney from ROTH Capital Partners.
Good morning, Daniel, Fady. Thanks for taking my call.
Hi, Gerry.
Thanks. Could we go over the economics real quick on the India plant? I got most of it, but so 70,000 metric tons, DMT, could you go over how many pounds for DMT and MEG and the pricing per pound or ton, I should say? If you could do that quickly.
So today – yes, thank you. So the model right now is 70,000 metric ton of DMT and 23,000 tons of MEG, which is the total output of the facility. According to Wood Mackenzie, virgin petroleum-based DMT is selling at $1,950 per metric ton and MEG is selling at $835 a metric ton.
That's what I missed. Got it. Okay. And you're looking at $70 million of EBITDA from that client plant, correct?
Yes. Correct.
Got it. Okay. The question I have is on DMT and MEG. They are commodities; they fluctuate. I mean, this looks very appealing. But I'm just curious if we could maybe even – if you could maybe give a little background on some of the drivers behind the pricing of these chemicals. I mean, are there any current market dynamics creating excessive pricing, or is this pricing for DMT and MEG relatively stable overall?
Yes. If you look at the last five years, MEG pricing has been very stable. Currently, MEG pricing aligns with historical values over the past five years. DMT pricing, however, is slightly above the five-year average of around $1,550 to $1,600. The pricing spike is primarily due to a major DMT plant being taken offline in Europe following an earthquake, and there are no current plans to bring it back online. Another factory was shut down in Germany due to the onset of the war with Russia. These incidents have contributed to a global shortage and slight fluctuations in DMT pricing. Nevertheless, even considering the five-year averages for DMT and MEG, the low-cost manufacturing in India will enable us to deliver favorable returns.
That's helpful. And fair. Got it. And the other concern I do have is CapEx pricing. You mentioned $165 million of CapEx. That's considerably lower than the Ulsan project, but I recall the Ulsan project started off with a much lower estimate. How can we be sure that CapEx pricing doesn't escalate to a much higher level with the India project, as we saw with Ulsan?
Regarding the Ulsan project, while the initial estimate was around $400 million, the final cost ended up closer to $500 million. The good news is that we've completed the engineering work and gathered preliminary data. We have established pricing based on our Ulsan facility, and our partners at Ester, who have experience in operations, have also completed a polymer plant in 2021. Furthermore, we have engaged a global engineering firm to handle the project's engineering work. For equipment selection, such as distillation columns, pumps, and piping, we will utilize costing methods correlated to Ulsan. Careful considerations have been undertaken over the years, such as analyzing construction costs in India, which are substantially lower than in South Korea. Given that India maintains labor rates that are 80% lower than those of much higher-cost countries, we are very confident that the $165 million estimate is both reasonable and achievable at this time.
Got it. Now that you're making monomers, DMT and MEG, does this change your marketing strategy? Previously, we were marketing fully recycled PET. If I understood you correctly, DMT and MEG could serve as pure drop-ins. I understand the significant advantage here, but does transitioning to DMT and MEG affect your marketing, or does it create any headwinds?
No, this doesn't change our marketing or branding efforts. We are marketing chemicals now instead of the final products. However, our branding remains intact. Many customers in our supply chain, specifically in the textile industry, require materials derived from textile waste, which is abundant in India due to local sewing factories. We have already secured over 50% of the necessary feedstock coming from cutting waste in sewing factories. The supply chain is robust in India and neighboring countries. Thus, the low-cost availability of feedstock aligns perfectly with our customer needs, and we can leverage significant marketing and branding opportunities around this approach. This fiber-to-fiber recycling technology, showcased in our collaboration with On Shoes, demonstrates a compelling narrative for sustainability, appealing to these brands.
Got it. One last question from me. And I'll step back; I don't want to monopolize the floor. But regarding financing, I believe you mentioned Reed and government financing. Would you confirm that the Reed financing is expected to complete this week or in the near future? Are there any remaining hurdles that we should be aware of?
We are indeed in the final stages of signing all the binding agreements. There is a closing condition, and we anticipate finalizing the entire financing package within the upcoming weeks.
Got it. I appreciate it. Thank you.
Thanks, Gerry.
As we currently have no further questions, I will hand back over to Kevin O'Dowd for final remarks.
Thank you, everyone, for joining us today to discuss Loop Industries' fourth-quarter results. Before we conclude, I'd like to express our appreciation for your continued support and interest in Loop. If you have any questions or need any additional information, please feel free to reach out. Thank you again for your time today. We look forward to continuing our dialogue and updating you on our future developments. Have a great day.
Thank you, everybody.
This concludes today's call. Thank you for joining. You may now disconnect your lines.