Biosphere = Intersection of: Atmosphere Hydrosphere Lithosphere Pedosphere Together = Ecosphere.
EcoSynthetix Inc.ecosynthetix.com/pdfs/EcoSynthetix_Investor_Deck_Q4_2015.pdfEcoSynthetix’ Proven...
Transcript of 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.
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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
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To be one of the world’s leading developers and marketers of bio-based chemical solutions
VISIONOUR
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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
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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
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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
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$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
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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
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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
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Patented Formula Patented Process Patented Product
Proprietary Continuous
Manufacturing ProcessEngineered
Biopolymer
Sustainable feedstocks
+ Chemicals
Proprietary Technology
10
10
Reactive
Twin Screw
Extrusion
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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
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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
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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
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Our products have a compelling value proposition
Performance Sustainability
Economics
Engage Thought
Leaders
Bio-based
Solutions
Global
Delivery
14
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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
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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)
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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
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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
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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
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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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