EcoSynthetix Inc.ecosynthetix.com/pdfs/EcoSynthetix_Investor_Deck_Q4_2015.pdfEcoSynthetix’ Proven...

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Jeff MacDonald, Chief Executive Officer Robert Haire, Chief Financial Officer EcoSynthetix Inc.

Transcript of EcoSynthetix Inc.ecosynthetix.com/pdfs/EcoSynthetix_Investor_Deck_Q4_2015.pdfEcoSynthetix’ Proven...

  • Jeff MacDonald, Chief Executive Officer

    Robert Haire, Chief Financial Officer

    EcoSynthetix Inc.

  • Certain statements contained in this document and any amendment or supplement hereto constitute forward-looking statements. All statements other than statements of historical fact may be forward-looking statements. These statements relate to, but are not limited to, future events or future performance, our expectations regarding the Company’s growth, results of operations, estimated future revenues, requirements for additional capital, production costs, future demand for latex-based products, business prospects and opportunities. Forward-looking statements are often, but not always, identified by use of words such as “may”, “will”, “should”, “could”, “seek”, “anticipate”, “contemplate”, “continue”, “expect”, “intend”, “plan”, “potential”, “budget”, “target”, “believe”, “estimate” and similar expressions. Such statements reflect the Company’s current views and beliefs with respect to future events, are subject to risks and uncertainties, and are based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements.

    Specific forward-looking information contained in this document includes, among others, statements regarding: (i) the price of oil and SB Latex; (ii) the demand for the Company’s products including the Company’s ability to guarantee successful mill trials; (iii) the Company’s competitive advantages and ability to compete successfully; (iv) the nature and characteristics of the Company’s intellectual property; (v) the Company’s ability to expand production capacity; and (vi) general economic conditions.

    With respect to forward-looking information contained in this document, the Company has made material assumptions regarding, among other things: (i) that the general business, economic and competitive conditions remain favourable; (ii) that our intellectual property rights are adequately protected; (iii) our ability to obtain the materials necessary for the production of our products; (iv) our ability to market products successfully to our customers; (v) that we will continue to face no direct competition; (vi) changes in demand for and prices of our products or the materials required to produce those products; (vii) labour and material costs remaining consistent with our current expectations; and (viii) that we do not and will not infringe third party intellectual property rights. Some of our assumptions are based upon internal estimates and analyses of current market conditions and trends, management plans and strategies, economic conditions and other factors and are necessarily subject to risks and uncertainties inherent in projecting future conditions and results.

    Some of the risks that could affect the Company’s future results and could cause those results to differ materially from those expressed in the forward-looking information include: (i) an inability to protect, defend, enforce or use our intellectual property and/or infringement of third-party intellectual property; (ii) our dependence on certain customers and changes in customer demand; (iii) the availability and price of natural feedstocks used by us in the production of our products; (iv) the inability to effectively expand our production facilities; (v) variations in our financial results; (vi) increase in industry competition; (vii) the risk of volatility in global financial conditions, as well as significant decline in general economic conditions; (viii) our ability to effectively commercially market and sell our products; (ix) our ability to protect our know-how and trade secrets; (x) company growth and the impact of significant operating and capital cost increases; (xi) changes in the current political and regulatory environment in which we operate; (xii) the inability to retain key personnel; (xiii) changes to regulatory requirements, both regionally and internationally, governing development, production, exports, taxes, labour standards, waste disposal, and use, environmental protection, project safety and other matters; (xiv) enforcement of intellectual property rights; (xv) a significant decrease in the market price of petroleum; (xvi) a shortage of supplies, equipment and parts; (xvii) the inability to secure additional government grants; (xviii) a deterioration in our cash balances or liquidity; (xix) the inability to obtain equity or debt financing; (xx) the ability to acquire intellectual property; (xxi) the risk of litigation; (xxii) changes in government regulations and policies relating to our business; (xxiii) losses from hedging activities and changes in hedging strategy; (xxiv) insufficient insurance coverage; (xxv) the inability to expand technology; (xxvi) the impact of issuance of additional equity securities on the trading price of the Common Shares; (xxvii) the impact of ethical, legal and social concerns relating to genetically modified organisms and the food versus fuel debate; (xxviii) the risk of business interruptions; (xxix) lack of a public market; (xxx) fluctuations in the market price of the Common Shares; (xxxi) our intent to retain earnings; (xxxii) the costs of being a reporting issuer; (xxxiii) the company is a holding company; (xxxiv) tax risks; (xxxv) the impact of changes in interest rates; (xxxvi) the impact of changes in foreign currency exchange; and (xxxvii) credit risk. There may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. These factors are not intended to represent a complete list of the risk factors that could affect us. Risk factors should be considered carefully and prospective investors should not place undue reliance on forward-looking information.

    Should one or more of these risks or uncertainties materialize, or should assumptions underlying those forward-looking statements prove incorrect, actual results may vary materially from those anticipated in such forward-looking statements.

    Although the forward-looking statements contained herein are based upon what the Company believes to be reasonable assumptions, the Company cannot assure that actual results will be consistent with these forward looking statements. Accordingly, readers should not place undue reliance on forward-looking statements.

    Forward-Looking Statements increasing

    2

  • To be one of the world’s leading developers and marketers of bio-based chemical solutions

    VISIONOUR

    3

  • ADHESIVES

    INSULATION

    PRINTER INK

    COATED PAPER

    PERSONAL CARE

    CARPET BACKING

    PAINTS & COATINGS

    PACKAGING

    BUILDING MATERIALS

    Items commonly

    used in industrial

    manufacturing:

    Polymers are Everywhere

    4

  • EcoSynthetix’ Proven Bio-Alternatives

    >150M lbsEcoSphere sold to-date

    EcoSphereTM

    Advanced-stage industrial scale trials

    Economic

    Performance

    Sustainability

    Commercial relationships with many of the

    industry’s largest manufacturers

    Health and ecological

    Performance

    Economic

    Advancing through the supplier qualification

    process with multiple large-scale potential

    customers

    DuraBindTM

    5

    Bio-based alternative to petroleum-based

    latex coatings

    Binder with no-added formaldehyde for

    building materials

  • Resorcinol

    Representing a Significant Market Opportunity

    PF(28%)

    MUF (29%)

    UF

    (34%)

    Paper &

    paperboard

    pMDI

    Soyad >4B lbsglobal paper & paperboard latex market

    >32B lbsglobal wood composites binder market

    Wood Composite Binder Volume Paper & Paperboard Volume

    6Source: Transparency Market Research

  • $80*SB Latex $/100 lbs

    $26*$ / oil barrel

    *As of January 2016

    Challenging Market Conditions Continue

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    Chart3

    SB Latex ($ per 100 lbs)40179402104023840269402994033040360403914042240452404834051340544405754060340634406644069540725407564078740817408484087840909409404096941000410304106141091411224115341183412144124441275413064133441365413954142641456414874151841548415794160941640416714169941730417604179141821418524188341913419444197442005420364206442095421254215642186422174224842278423094236942370101.33357525174635104.14587680304818110.22407693005533114.85076657897125116.52907556926426118.07130545223623118.84242039372222113.17245758867823111.63022770570625108.45504853488161107.82001270071669114.8961262814116118.11666515467658124.01342647192234129.00299374036106136.48734464301916144.60673137984216147.69119114578609153.99618978499501152.90755692642657152.68075841422481138.30173274063321123.78662795972059115.80332033021863118.61562188152047128.00508028667332141.20475369681574145.19640751156672141.61299101877893126.00925337929785117.39090991563094119.47745622788715118.66098158396082119.56817563276785120.02177265717138118.38882336931871119.15993831080469120.65680849133631123.83198766216094122.51655629139073119.15993831080469117.16411140342919113.6714143155221104.73555293477274105.23450966161663107.72929329583599109.77047990565183108.22825002267986111.35806949106414115.75796062777827119.38673682300644118.20738455955731116.98267259366779114.8961262814116113.26317699355893116.03011884242041112.62814115939399110.49623514469747105.55202757869908104.3726753152499493.84922434908827483.28041368048626282.10106141703710182.3732196316792286.00199582690737590.85548398802504391.62659892951103393.03274970516194791.21836160754786284.41440624149505883.41649278780731482.50929873900028679.606277782817742Oil Prices $ (WTI)4017940210402384026940299403304036040391404224045240483405134054440575406034063440664406954072540756407874081740848408784090940940409694100041030410614109141122411534118341214412444127541306413344136541395414264145641487415184154841579416094164041671416994173041760417914182141852418834191341944419744200542036420644209542125421564218642217422484227842309423694237072.8979.6683.7686.1573.9775.6378.9571.9279.9781.43000000000000784.1189.8492.1496.97106.72113.52102.795.4295.788.8179.293.19100.3698.83100.24102.25106.19103.3394.782.4187.9394.1394.5189.4986.5388.2594.8395.3293.0592.0794.895.8104.61106.57106.29100.5293.8697.6394.62100.83100.8102.07102.18105.79103.5996.5493.2184.478.56952.6949.5749.5950.0959.1560.256.96300000000000147.124544.8340.79999999999999733.6426.5

    Sheet1

    North AmericaEuropeAsia Pacific

    SB Latex ($ per 100 lbs)Oil Prices $ (WTI)CornSB Latex with $0.4 adder SB Latex with € 400 adder SB Latex with $0.3 adder

    Jan-10$ 101.33$ 72.93.67$ 2,2341406$ 2,167$ 1.01

    Feb-10$ 104.15$ 79.73.54$ 2,2961397$ 2,174$ 1.04

    Mar-10$ 110.22$ 83.83.56$ 2,4301553$ 2,211$ 1.10

    Apr-10$ 114.85$ 86.23.53$ 2,5321615$ 2,286$ 1.15

    May-10$ 116.53$ 74.03.64$ 2,5691612$ 2,142$ 1.17

    Jun-10$ 118.07$ 75.63.46$ 2,6031568$ 2,047$ 1.18

    Jul-10$ 118.84$ 79.03.65$ 2,6201591$ 1,990$ 1.19

    Aug-10$ 113.17$ 71.93.93$ 2,4951594$ 1,984$ 1.13

    Sep-10$ 111.63$ 80.04.64$ 2,4611615$ 2,042$ 1.12

    Oct-10$ 108.46$ 81.45.21$ 2,3911543$ 2,201$ 1.08

    Nov-10$ 107.82$ 84.15.4$ 2,3771570$ 2,223$ 1.08

    Dec-10$ 114.90$ 89.85.7$ 2,5331589$ 2,289$ 1.15

    Jan-11$ 118.12$ 92.16.11$ 2,6041672$ 2,365$ 1.18

    Feb-11$ 124.01$ 97.06.745$ 2,7341767$ 2,527$ 1.24

    Mar-11$ 129.00$ 106.76.655$ 2,8441834$ 2,579$ 1.29

    Apr-11$ 136.49$ 113.57.37$ 3,0091833$ 2,866$ 1.36

    May-11$ 144.61$ 102.77.205$ 3,1881998$ 2,968$ 1.45

    Jun-11$ 147.69$ 95.47.25$ 3,2562060$ 3,078$ 1.48

    Jul-11$ 154.00$ 95.76.96$ 3,3952076$ 3,186$ 1.54

    Aug-11$ 152.91$ 88.87.28$ 3,3712160$ 3,031$ 1.53

    Sep-11$ 152.68$ 79.26.9$ 3,3662088$ 2,586$ 1.53

    Oct-11$ 138.30$ 93.26.33$ 3,0491921$ 2,232$ 1.38

    Nov-11$ 123.79$ 100.46.38$ 2,7291806$ 2,208$ 1.24

    Dec-11$ 115.80$ 98.86.09$ 2,5531731$ 2,597$ 1.16

    Jan-12$ 118.62$ 100.26.365$ 2,6151823$ 2,784$ 1.19

    Feb-12$ 128.01$ 102.36.5$ 2,8221989$ 3,057$ 1.28

    Mar-12$ 141.20$ 106.26.62$ 3,1132089$ 2,955$ 1.41

    Apr-12$ 145.20$ 103.36.505$ 3,2012105$ 2,674$ 1.45

    May-12$ 141.61$ 94.76.41$ 3,1222123$ 2,264$ 1.42

    Jun-12$ 126.01$ 82.46.485$ 2,7781963$ 2,350$ 1.26

    Jul-12$ 117.39$ 87.97.9$ 2,5881754$ 2,468$ 1.17

    Aug-12$ 119.48$ 94.18.315$ 2,6341865$ 2,304$ 1.19

    Sep-12$ 118.66$ 94.57.905$ 2,6161881$ 2,380$ 1.19

    Oct-12$ 119.57$ 89.57.685$ 2,6361882$ 2,307$ 1.20

    Nov-12$ 120.02$ 86.57.515$ 2,6461855$ 2,236$ 1.20

    Dec-12$ 118.39$ 88.37.275$ 2,6101848$ 2,326$ 1.18

    Jan-13$ 119.16$ 94.87.32$ 2,6271854$ 2,451$ 1.19

    Feb-13$ 120.66$ 95.37.26$ 2,6601830$ 2,530$ 1.21

    Mar-13$ 123.83$ 93.17.425$ 2,7301866$ 2,258$ 1.24

    Apr-13$ 122.52$ 92.16.69$ 2,7011828$ 2,229$ 1.23

    May-13$ 119.16$ 94.87$ 2,6271791$ 2,245$ 1.19

    Jun-13$ 117.16$ 95.87.14$ 2,5831763$ 2,136$ 1.17

    Jul-13$ 113.67$ 104.60.6565$ 2,5061661$ 2,136$ 1.14

    Aug-13$ 104.74$ 106.66.275$ 2,3091589$ 2,212$ 1.05

    Sep-13$ 105.23$ 106.35.035$ 2,3201650$ 2,329$ 1.05

    Oct-13$ 107.73$ 100.54.37$ 2,3751615$ 2,377$ 1.08

    Nov-13$ 109.77$ 93.94.26$ 2,4201594$ 2,254$ 1.10

    Dec-13$ 108.23$ 97.64.29$ 2,3861600$ 2,260$ 1.08

    Jan-14$ 111.36$ 94.64.28$ 2,4551625$ 2,277$ 1.11

    Feb-14$ 115.76$ 100.84.465$ 2,5521649$ 2,221$ 1.16

    Mar-14$ 119.39$ 100.84.79$ 2,6321647$ 2,132$ 1.19

    Apr-14$ 118.21$ 102.15.03$ 2,6061656$ 2,167$ 1.18

    May-14$ 116.98$ 102.24.935$ 2,5791662$ 2,119$ 1.17

    Jun-14$ 114.90$ 105.84.555$ 2,5331621$ 2,197$ 1.15

    Jul-14$ 113.26$ 103.63.87$ 2,4971670$ 2,267$ 1.13

    Aug-14$ 116.03$ 96.53.78$ 2,5581669$ 2,194$ 1.16

    Sep-14$ 112.63$ 93.23.6$ 2,4831631$ 2,175$ 1.13

    Oct-14$ 110.50$ 84.43.465$ 2,4361621$ 2,031$ 1.10

    Nov-14$ 105.55$ 78.53.65$ 2,3271581$ 1,843$ 1.06

    Dec-14$ 104.37$ 69.03.9$ 2,3011459$ 1,592$ 1.04

    Jan-15$ 93.85$ 52.73.865$ 2,0691245$ 1,537$ 0.94

    Feb-15$ 83.28$ 49.63.845$ 1,8361172$ 1,646$ 0.83

    Mar-15$ 82.10$ 49.63.86$ 1,8101277$ 1,810$ 0.82

    Apr-15$ 82.37$ 50.13.805$ 1,8161467$ 1,934$ 0.82

    May-15$ 86.00$ 59.23.66$ 1,8961495$ 1,937$ 0.86

    Jun-15$ 90.86$ 60.23.68$ 2,0031513$ 1,964$ 0.91

    Jul-15$ 91.63$ 57.04.07$ 2,0201503$ 1,698$ 0.92

    Aug-15$ 93.03$ 47.13.75$ 2,0511428$ 1,660$ 0.93

    Sep-15$ 91.22$ 45.03.84$ 2,0111458$ 1,578$ 0.91

    Oct-15$ 84.41$ 44.83.9$ 1,8611262$ 1,546$ 0.84

    Nov-15$ 83.42$ 40.83.79$ 1,8391226$ 1,496$ 0.83

    Dec-15$ 82.51$ 33.63.79$ 1,8191233$ 1,507$ 0.83

    Jan-16$ 79.61$ 26.53.78$ 1,7551205$ 1,531$ 0.80

    SB Latex ($ per 100 lbs)40179402104023840269402994033040360403914042240452404834051340544405754060340634406644069540725407564078740817408484087840909409404096941000410304106141091411224115341183412144124441275413064133441365413954142641456414874151841548415794160941640416714169941730417604179141821418524188341913419444197442005420364206442095421254215642186422174224842278423094236942370101.33357525174635104.14587680304818110.22407693005533114.85076657897125116.52907556926426118.07130545223623118.84242039372222113.17245758867823111.63022770570625108.45504853488161107.82001270071669114.8961262814116118.11666515467658124.01342647192234129.00299374036106136.48734464301916144.60673137984216147.69119114578609153.99618978499501152.90755692642657152.68075841422481138.30173274063321123.78662795972059115.80332033021863118.61562188152047128.00508028667332141.20475369681574145.19640751156672141.61299101877893126.00925337929785117.39090991563094119.47745622788715118.66098158396082119.56817563276785120.02177265717138118.38882336931871119.15993831080469120.65680849133631123.83198766216094122.51655629139073119.15993831080469117.16411140342919113.6714143155221104.73555293477274105.23450966161663107.72929329583599109.77047990565183108.22825002267986111.35806949106414115.75796062777827119.38673682300644118.20738455955731116.98267259366779114.8961262814116113.26317699355893116.03011884242041112.62814115939399110.49623514469747105.55202757869908104.3726753152499493.84922434908827483.28041368048626282.10106141703710182.3732196316792286.00199582690737590.85548398802504391.62659892951103393.03274970516194791.21836160754786284.41440624149505883.41649278780731482.50929873900028679.606277782817742Oil Prices $ (WTI)4017940210402384026940299403304036040391404224045240483405134054440575406034063440664406954072540756407874081740848408784090940940409694100041030410614109141122411534118341214412444127541306413344136541395414264145641487415184154841579416094164041671416994173041760417914182141852418834191341944419744200542036420644209542125421564218642217422484227842309423694237072.8979.6683.7686.1573.9775.6378.9571.9279.9781.43000000000000784.1189.8492.1496.97106.72113.52102.795.4295.788.8179.293.19100.3698.83100.24102.25106.19103.3394.782.4187.9394.1394.5189.4986.5388.2594.8395.3293.0592.0794.895.8104.61106.57106.29100.5293.8697.6394.62100.83100.8102.07102.18105.79103.5996.5493.2184.478.56952.6949.5749.5950.0959.1560.256.96300000000000147.124544.8340.79999999999999733.6426.5

    Sheet2

    Sheet3

  • 8

    8

    Conditions support ECO’s growth strategy

    Generally soft demand dynamics

    Pricing pressure

    Mill closures

    Continued softness in coated paper

    Challenged coated paper

    market expected to continue

  • Building Products: Regulatory and consumer pressure driving

    change

    Consumer awareness driving

    change

    CARB expanding voluntarily

    beyond California No Added

    Formaldehyde

    (“NAF”)

    Solutions are

    the future

    9

  • Patented Formula Patented Process Patented Product

    Proprietary Continuous

    Manufacturing ProcessEngineered

    Biopolymer

    Sustainable feedstocks

    + Chemicals

    Proprietary Technology

    10

    10

    Reactive

    Twin Screw

    Extrusion

  • EcoSynthetix Suppliers & CustomersUniversities

    Products ApplicationsTechnology

    Fundamental

    Research

    Open

    InnovationApplied

    Research

    Centre of InnovationBurlington, OntarioIn-house scientists, engineers

    and technicians

    Strategic partnerships with

    leading suppliers &

    customers

    *This is not a complete list

    Global Collaborative Partnerships

    World-class technology eco-system to accelerate R&D

    into market relevant offerings 11

  • Technical expertise in the production of formaldehyde-based resins

    Application of resins in manufacturing particleboard, fibreboard, plywood, & others

    Engineering and procurement of turnkey plants producing formaldehyde and resins

    36 years experience licensing technologies in 37 countries

    Wood Composite Development & Support Partner

    1 12

  • Disciplined Resource Allocation on High-Priority Projects

    75% Resource Allocation 25% Resource

    Allocation

    New building products

    applications

    Paper & Paper-board

    New platform technologies

    Wood Composites

    13

  • Our products have a compelling value proposition

    Performance Sustainability

    Economics

    Engage Thought

    Leaders

    Bio-based

    Solutions

    Global

    Delivery

    14

  • The market

    The Opportunity

    Wood composites

    The Opportunity

    Pg. 7

    Robust capacity utilization levels indicate healthy market

    DuraBind’s compelling, multi-faceted value proposition gaining traction with industry

    Momentum towards commercialization

    Multi-shift trials

    Conversion on opportunities expected in the near term

    Expanded customer support

    Filed for key patent

    15

  • 0 4,000 8,000 12,000 16,000

    Kronospan M&PKaindi

    Egger

    Swiss Krono Group

    Sonae Industria

    Louisiana-Pacific

    Arauco & Flakeboard

    Norbord

    Georgia-Pacific

    Duratex

    Pfleiderer

    Globally Concentrated Wood-Based Panel & Paper Markets

    Top Global Wood-Based Panel

    Manufacturers Based on production capacity (‘000m3)

    Source: Sonae Industria corporate presentation, March 2015

    Case Study

    Source: Fishersolve

    Potential to accelerate plant conversions due toindustry concentration 16

    0 50,000 100,000 150,000 200,000 250,000 300,000 350,000

    Sappi

    APP

    UPM

    Verso

    Stora Enso

    Burgo

    Nippon

    Oji

    Shandong

    Lecta

    Top Global Paper & Paper-board

    Manufacturers Based on latex usage ($000)

  • USD millions(except gross margin)

    Q42015

    Q4 2014

    FY2015

    FY2014

    Net Sales $3.0 $4.5 $14.6 $18.8

    Gross Profit $0.3 $0.7 $2.1 $3.2

    Gross Margin 10.9% 16.6% 14.3% 16.8%

    Gross Marginadjusted for manufacturing depreciation 18.7% 21.6% 20.3% 22.3%

    Financial Summary

    18

  • Operating costs

    19

    Selling, General & Administrative (USD, millions)

    Research & Development(USD, millions)

    $-

    $0.5

    $1.0

    $1.5

    $2.0

    $2.5

    $3.0

    $3.5

    Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 $-

    $0.2

    $0.4

    $0.6

    $0.8

    $1.0

    $1.2

    $1.4

    Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

    Strict financial discipline with targeted investment in high growth areas

    Selling, general and administrative expenses and research and development expenses excludes share-based compensation, depreciation and amortization, provision for termination benefits, impairment loss on PP&E and foreign exchange losses

  • USD millions

    FY2015 Q4 Q3 Q2 Q1

    FY2014 Q4 Q3 Q2 Q1

    Adjusted EBITDA (loss)1

    $(8.3) $(2.3) $(1.6) $(2.0) $(2.1) $(12.6) $(2.9) $(3.6) $(3.3) $(2.8)

    Cash Balance(as of Dec 31, 2015)

    $60.7 M with no debt

    Adjusted EBITDA – cost control reducing burn

    20

    1) Adjusted for the provision of termination benefits, unrealized foreign exchange translation losses.

    Adjusted EBITDA is defined as consolidated net income (loss) before interest, income taxes, depreciation, amortization, accretion, and other non-cash charges deducted in determining consolidated net income (loss).

    $1.4 million: cash burn in Q4

  • Robust balance sheet – foundation to drive growth

    235 million pounds of production capacity

    Expanding product line in paper and paperboard

    Entering new markets in building products

    Well positioned to drive growth

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