Basically, whatever these guys have planned 4-5 years out... they could break ground in year one.
The capital would also take pressure off to be so profitable at such a small scale. For instance, we know they are the lowest priced zinc oxide in the sun care market, but it's still pricier than chemicals and overall penetration is maybe 2% or less. I believe Lev stated at the AGM that they want to be cheaper than chemicals, and something to the effect of they are expecting prices to go down a lot, maybe 50% over time but expect to still be very profitable. We know thanks to
@vestro that the incremental margins are very high as the input costs for material are maybe 10% of sales.
An influx of capital would enable the company to scale proven operations much faster, which would flip the market regardless of FDA decisions and speed up the process of flipping the market outside of the US. With such a high proportion of sales to North America... perhaps they should be making this stuff in the Nevada desert or somewhere like that to cut logistics expense. They could build 10x capacity there, cement their dominance in the US, then use Brisbane to address the rest of the world. Ultimately they could benefit from a facility in EU as well.
The risk to not scaling as fast as possible is that switching costs are high. We see other zinc players ramping up capacity due to unmet demand. Ramping more slowly and their product is more costly, yes, but it's harder work to take share away from them later than to never let them get it in the first place. I'm sure management sees that this is not like homebuilding, where economies of scale are local and you have to be very careful about trying to expand outaide of your territory. This is a global business, and eventually you either have to scale to be the biggest or you die.
When I think of the battery tech, which to be honest I don't know much about, I sense that scale will be very important to long-term success. They will need a ton of capital if this works on a small scale. If not, then they will just pay out dividends to keep ROE high... Zinclear, Alusion, and maybe other zinc oxide applications could reach sales and profits in the hundreds of millions with invested capital in the hundreds of millions.
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