Published On: April 25th, 2024
Figure 1: Carbonxt Group Limited
Carbonxt Group Limited (ASX: CG1) (“Carbonxt” or “the Company”) has announced its March 2024 quarterly updates. Customer receipts of AUD 3.6 million marked an impressive 8% increase from the previous quarter. A significant increase of 56% in Powdered Activated Carbon (PAC) sales has been observed compared to the last period, driven by higher sales in channels servicing non-coal-fired power stations. Carbonxt’s strategic emphasis on enhancing manufacturing efficiencies and increasing gross margins are the key contributors to this notable growth.
The Company’s Activated Carbon Pellets (ACP) sales also soared by an impressive 37% from the prior quarter, further solidifying its position in the market. These figures indicate a strong market demand for Carbonxt’s innovative products, setting the stage for continued success.
Carbonxt is a clean-tech Company specialising in developing and producing environmental technologies to ensure compliance with air and water emission regulations while eliminating harmful pollutants. The estimated size of the Activated Carbon global market stands at USD 4.4 billion in 2024, with projections indicating a growth to USD 8.4 billion by 2030, marking a Compound Annual Growth Rate (CAGR) of 9.8% during the forecast period (2024-2030). In the medium term, key market drivers include adherence to rigorous environmental standards in water treatment within the United States and the rising importance of air pollution control, particularly in mercury removal applications.
Figure 2: Activated Carbon Global Market Size
Carbonxt’s New Activated Carbon Plant in Kentucky
Carbonxt Group Limited is well placed in the market to cater for the rising global need for Activated Carbon. In a significant milestone, Carbonxt’s flagship Activated Carbon production facility in eastern Kentucky, USA, is nearing completion. The plant is set to commence operations in early Q3 FY2024. This state-of-the-art facility will initially produce 10,000 tons per annum, with the potential for expansion to 20,000 tons per annum with a minor additional investment.
Carbonxt has invested USD 5.5 million in NewCarbon Processing, LLC (“NewCarbon”), in collaboration with its US partner, KCP. Currently, Carbonxt holds a 35.5% ownership stake in NewCarbon, with the option to increase its investment by an additional USD 4.5 million, potentially reaching a 50% ownership interest.
Figure 3: Carbonxt’s Activated Carbon Pellet Plant
Rapidly Increasing Activated Carbon Prices
Strong demand for Activated Carbon, particularly in the powdered and pellet product segments, led to significant price increases over the past year. There is considerable intellectual property in making Activated Carbon to address individual use cases and pricing ranging from USD 2000 to USD 6000 per ton as per the quality. AC Granular demand is expected to rise due to the new EPA regulation. Carbonxt Group Limited is securing an average price above USD 4,000 per ton for Activated Carbon Pellets. Public announcements from other activated carbon groups in respect of price increases include:
- Calgon announced price increases of 15% -40% in Dec 2022 (See formal press release: https://www.calgoncarbon.com/12122piqdfgf/%20)
Figure 4: Florida Utility – PAC Winning Bid Over Time
The NewCarbon agreement positions the Company to play a central role in manufacturing and supplying Activated Carbon products, primed to meet the anticipated increase in demand for water treatment solutions in the US market. The project uniquely benefits from attractive development economics and a lucrative long-term cash flow generation outlook.
Carbonxt Poised to Benefit from New PFAS/PFOS Regulations
Per- and Polyfluoroalkyl Substances (“PFAS”) are widely used, long-lasting chemicals. Their components break down slowly and are found in soil, water, air, fish, and humans across the world. The US EPA has established National Primary Drinking Water Regulations for PFAS. To address PFAS pollution in the environment, the Biden administration intends to use the Clean Water Act permitting and regulatory programs established by the Environmental Protection Agency (EPA). As part of this initiative, the US Government has allocated USD10 billion under the Bipartisan Infrastructure Law to assist operators in meeting the enhanced standards and covering compliance expenses.At the federal level, an additional USD 12 billion is allocated for general drinking water enhancements under the law, which includes addressing contaminants such as PFAS.
On April 10th, 2024, the US EPA introduced the first-ever national drinking water standards for PFAS/PFOAs, marking a significant regulatory milestone. PFAS, with over 4,700 chemicals, are known for their lasting environmental presence and health risks from prolonged exposure.
In early 2023, the US EPA established new legal limits for six PFAs at 4 parts per trillion, representing a drastic 90% reduction from the previous limit of 70ppt. These stringent limits have been reaffirmed in the final rules.
Carbonxt has expertise in producing two products of Activated Carbon: Powdered and Pellets. Based on product specification, Carbonxt has a USD 300 million US market size to cater with a 5% market share. Recently, the number of regulatory changes done by the US Environmental Protection Agency (EPA) has increased the regulation of per- and poly-fluoroalkyl substances (“PFAS”). The facility will expand the Company’s addressable market by focusing on water treatment.
Figure 5: Carbonxt’s Product Total Addressable Market
Carbonxt Group will explore new opportunities in water utilities. Across the United States, there are 50,000 water utilities, and 4000 of them are servicing a customer base of over 10,000.
Figure 6: Data on United States Water Utilities
Managing Director Mr Warren Murphy Commented: “The March quarter marked another busy period for Carbonxt’s US team, as final construction activity at the flagship Kentucky facility approaches completion ahead of commissioning and first production. The new facility will provide the Company with a significantly expanded production capacity for Activated Carbon products in both granular and pellet form, marking an important step forward as part of our commitment to play a key role in the provision of market-ready products to improve the quality of US water supplies. The industry continues to enjoy strong policy and regulatory support at the federal government level, highlighted by the latest EPA announcement confirming the new legally enforceable standard for PFAS levels in US drinking water. We look forward to providing consistent updates on Kentucky in the June quarter as final construction works are completed ahead of the commencement of full production operations scheduled for early in the September quarter.”
Carbonxt’s Financial Performance Highlights Growth and Efficiency
Customer receipts increased 8% compared with the prior period. Powdered Activated Carbon (ACP) sales have shown annualised growth, driven by price hikes across the customer base and an expansion in new customer volume.
Activated Carbon Pellet (ACP) sales surged by 37% compared to the previous quarter. The inventory decrease noted during the last quarter’s report persisted into this quarter, as our primary pellet customer resumed operations after resolving mechanical issues at their plant.
Gross Margins have increased as excess inventories have been reduced over the last two quarters. Improved operational efficiencies from recent facility upgrades in late 2023 have driven down operational expenses and bolstered gross margins. These trends are anticipated to strengthen further upon full commissioning of the Kentucky plant.
However, the underlying cash flow from operations incurred a loss of AUD 0.6 million, primarily attributed to increased US health benefits by AUD 0.2 million and R&D expenses of AUD 0.15 million compared to the previous quarter.
Carbonxt’s Intellectual Property Rights
The Company is further expanding its intellectual property portfolio with the recent issuance of the following patents:
- US Pat App No 17/059,939 – Title: Magnetic Adsorbents And Methods Of Their Use For Removal Of Contaminants – Allowed and issue fee paid 04.5.2024; Issue date pending.
- US Pat. No 11,911,727; Title: Magnetic Adsorbent, Methods for Manufacturing a Magnetic Adsorbent and Methods of Removal of Contaminants from Fluid Streams – Issued 02.27.2024.
- US PAT No. 11,759,762; Title: High Mechanical Strength Sorbent Product, System, and Method for Controlling Multiple Pollutants from Process Gas –Issued 09.19.2023.
- US Pat No 11,603,315; Title: Water Resistant And High Strength Carbon Products – Issued 03.14.2023.
Market Outlook for Carbonxt Group
Carbonxt’s stock was traded at AUD 0.074 on April 24th, 2024, an increase of 34.55% from the previous session, with a trading volume of 382,808 shares. The 1-year return stands at an impressive 56.01%, highlighting investor confidence in the Company’s growth prospects. The Company has a market capitalisation of AUD 17.87 million as of April 24th, 2024, with 324.92 million ordinary shares outstanding.
Carbonxt Group Limited is a leading player with growth prospects in the rapidly evolving Activated Carbon market. The Company’s strategic investment in the upcoming Kentucky Activated Carbon Plant aligns with stringent PFAS regulations that position the Company ahead in the industry.
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