My rough notes from the webcast. Recorded in haste, so no guarantee is offered for accuracy in interpretation.
The dip in lower margin sales from older orders experienced in 1Q18 is essentially over.
Working with Pegasus to minimise their costs. Chemistry is on the water for 6-8 weeks to reach China, which abnormally extends the sales cycle. Payment terms are longer than the normal 30 days.
Regulatory changes over last month (CPFC) will be very beneficial to Alexium. Fear of liability is driving changes by current manufacturers to seek safer chemistry earlier than regulations require. The regulatory background can alter the methods employed for development testing.
We have some new near-term customers. Near-term customers are those in final stage of acceptance where a suitable prototype has been developed and approved. Contract timing then is in the hands of the customer.
For product development we are no longer delivering bespoke chemistry for individual customers but are operating on a product platform basis. This makes it easier to move into markets outside textiles.
There is a significant new PCM product under development that we can’t talk about yet.
Alexiflam for wood is a key area for future growth. A new Alexiflam NF product is under development specifically for this large market.
Complexity is reduced for mattress finishers with multiple manufacturer clients if they are able to work with only one chemistry, and Alexium products are being favoured. This business is growing organically through existing customers but also new customers are coming in. There is still a lot of room for growth in the mattress market.
Drivers for the second half of the fiscal year. A lot of businesses scale up in the second half year, and several current customers will be scaling up then. Definitely a back-weighted year for sales.
Breakdown of FR/PCM mix. Currently around 30/70, but FR is expected to balloon in 2HY18 and mix will be around 50/50.
Non-woven market is massive, particularly in the healthcare area, where products are disposable and sterility and comfort are important. Excited by this potential here.
Revenue is close to 100% recurring with customers being retained and renewing orders, except for orders relating to trials for potential new customers (less than 2% of revenues).
Concentration is placed on platform products that can be applied to satisfy a range of different customers. New FR chemistry is being developed for polyester products (largely in the entertainment industry). UN tents are 50/50 polyester/cotton. A new FR derivative is being applied to this market.
We are looking at new derivatives of Alexiflam NF, including for polymers produced through extrusion.
A new transformative chemistry has been developed for the electrical markets. The IP for this is currently being secured. It is likely that details of this product will be available for discussion in the next webcast.
Not looking seriously at the transport industry. We are unlikely to concentrate on the carpets market. For UN tents and recreational tents we are working with customers so that they better understand their final products.
Alexium’s FR competitors don’t appear to be pulling their products off the market yet as a result of the recent regulatory changes.
Rapid growth is expected in the second half of the fiscal year, with revenue and margins continuing to grow.
We have now built the right team to get the product to the customer.
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Alexium has truly developed and is selling a next generation product.
AJX Price at posting:
37.5¢ Sentiment: Buy Disclosure: Held
