Carbonxt Group Limited (ASX: CG1) (“Carbonxt” or “the Company”) has delivered a strong start to FY26, posting positive operating cash flow of $A583,000 and a 50% jump in quarterly revenue as its transformational Kentucky activated carbon facility edges closer to production.
The September 2025 quarter results mark a significant phase of operational progress for the US-focused cleantech company, which manufactures activated carbon products for air and water purification. As the Kentucky plant nears completion and regulatory momentum builds across the PFAS treatment industry, Carbonxt is strategically poised to leverage this favourable environment and meet the accelerating demand for high-quality, domestically produced activated carbon.
Kentucky Facility: A Game-Changing Asset
The headline development in the quarter was Carbonxt’s additional US$750,000 investment in New Carbon Processing, LLC, lifting its ownership stake in the Kentucky facility to 45.9%. The Company remains on track to secure a 50% position in what Managing Director Warren Murphy describes as a “major step forward” for the business.
Construction of the kiln has been finalised, with additional insulation installed to improve thermal efficiency and ensure external temperatures remain below 100°F. The kiln manufacturer has completed the installation of the refractory lining and commenced the necessary heat treatment process. Back-end systems, including bagging lines, conveyors and storage silos, are in the final stages of installation.
Mr Murphy commented, “The Kentucky plant represents a major step forward for Carbonxt. It expands our addressable market beyond air-phase applications and into the much larger liquid-phase segment, where demand is growing rapidly due to tighter environmental standards.”
The facility is expected to increase group sales by approximately 200% once operational, providing entry into the liquid-phase activated carbon market, which is several times larger than the air-phase segment Carbonxt currently services. The plant has been specifically designed to supply premium-grade product suited to PFAS filtration, wastewater treatment and industrial emission control.
Key milestones ahead include completion of refractory installation and kiln heat treatment in October, commissioning of power and back-end systems in November, commencement of sample production for internal testing and customer qualification, and progression to initial commercial output. First sales are anticipated in early 2026.
Figure 1: Kentucky Activated Carbon Facility Nearing Completion
Financial Performance Strengthens
The September quarter delivered improved financial metrics across the board, reflecting the Company’s ongoing cost discipline and operational improvements.
Key Financials:
- Customer receipts: $A5.45 million (up 50% from the prior quarter’s $3.64 million)
- Total revenue: $A4.5 million (8% increase quarter-on-quarter)
- Operating cash flow: $A583,000 (prior quarter: -$A266,000)
- Gross margins: 55% in Q1 FY26
- EBITDA: Positive in each month of 1QFY26
- Cash position: $A823,000 as at 30 September 2025
The turnaround to positive operating cash flow represents a significant achievement, driven by enhanced operational efficiencies, strategic cost management and improved sales pricing. Carbonxt has maintained EBITDA-positive operations throughout 2HFY25, establishing a solid foundation for future growth.
Strategic Capital Raising
During and shortly after the quarter, Carbonxt raised additional capital through multiple sources to strengthen its working capital position and advance the Kentucky plant investment.
In September 2025, the Company successfully completed a non-renounceable pro-rata entitlement offer of Loyalty Options, issuing 51.4 million options and raising approximately $A514,000 before costs. The offer was structured on a 1-for-6 basis to eligible shareholders, with an 18.3 million shortfall taken up under existing underwriting arrangements.
Post-quarter end in October 2025, Carbonxt secured an additional $A1 million in funding from major shareholder Phelbe Pty Ltd through:
- 400,000 Convertible Notes at $A1.00 each (convertible at $A0.08, maturing in two years)
- Share placement of 8 million shares at $A0.075, raising $A600,000
Each Convertible Note includes one free-attaching option with an exercise price of $A0.10 and a two-year term, subject to AGM approval. If approval is not obtained, the note interest rate increases from 9.5% to 20% and the term extends to five years.
The capital provides runway for the Kentucky commissioning and expansion of Carbonxt’s activated carbon product portfolio.
Operational Review: Core Products Performing
Activated Carbon Pellets (ACP): ACP sales increased 11% from the prior quarter, with tonnes sold up 6.9%. The Company forecasts ACP sales will remain around this level for the remainder of FY26, supported by the full recovery of major customer Wisconsin Public Service’s power station operations and elevated gas prices. ACP sales contributed 47.1% of total revenue in the quarter.
Powdered Activated Carbon (PAC): PAC sales remained steady in both volume and dollar terms compared to the prior quarter, supported by long-term contracts, including the four-year, $24 million ReWorld Waste contract. Regulatory momentum in PFAS contamination control continues to drive demand for PAC products.
EPA Regulations Create Structural Tailwinds
A significant regulatory development is bolstering Carbonxt’s market position. The US Environmental Protection Agency (EPA) recently confirmed it will retain strict Maximum Contaminant Levels (MCLs) for Perfluorooctanoic Acid (PFOA) and Perfluorooctane Sulfonic Acid (PFOS), two of the most persistent and hazardous PFAS compounds found in drinking water.
The EPA’s rule mandates that public water systems must monitor for these chemicals by 2027 and achieve full compliance with the new standards by 2031. This affects over 130 million Americans and creates substantial long-term demand for activated carbon treatment solutions.
The American Water Works Association estimates a minimum annual market size of $2.5 billion, representing approximately a 3x increase over the next five years to address PFAS compliance. PAC and granular activated carbon (GAC) remain preferred treatment options under these new standards.
In August 2025, the State of New Jersey announced a $2 billion settlement with DuPont and reaffirmed its commitment to PFAS standards, demonstrating state-level momentum alongside federal regulations.
Activated Carbon Market Fundamentals
The broader activated carbon market continues exhibiting strong fundamentals, with operators and industry analysts estimating a 5-9% compound annual growth rate (CAGR) in demand through 2030. Key drivers include:
- Tightening environmental regulations globally
- Growing PFAS remediation requirements
- Industrial emission control mandates
- Water treatment infrastructure upgrades
- Shift toward domestic supply chains
Figure 2: Global Activated Carbon Market 2025 – 2034
Industry estimates suggest that 20-25% of annual US demand (approximately 70,000-80,000 tonnes) is currently met through imports, primarily from China, India and Sri Lanka. Potential tariff expansions or strengthened “Buy American” policies would significantly favour domestic producers like Carbonxt.
As a US-based manufacturer with three production facilities (operational or nearing commissioning), Carbonxt is well-positioned to capture market share from imports and supply utilities and industrial clients seeking tariff-free, reliable supply chains.
Strategic Outlook
Murphy highlighted the Company’s improved competitive positioning: “The Kentucky facility will increase Carbonxt’s production capacity by approximately 200%, enabling entry into the liquid-phase market – a sector several times larger than the air-phase market that the Company currently supplies.”
The Company completes Q1 FY26 with:
- A restructured cost base and leaner operations
- Normalised ACP and PAC customer activity supported by regulatory tailwinds
- The Kentucky facility is nearing production readiness
- Significant opportunity in PFAS treatment markets
- Strong alignment with potential US trade policy changes favouring domestic production
Carbonxt maintains a secured loan facility of $15 million with Pure Asset Management at 9.5% interest, maturing on 31 May 2027, providing financial flexibility as the Kentucky plant comes online.
Investor Outlook
As of 28th October 2025:
- Carbonxt Limited shares trade at $A0.093, with a 52-week range of $A043 – $A0.110.
- The Company’s market capitalisation stands at around $A39.67 million.
Figure 3: Carbonxt Share Price Chart
The combination of positive operating cash flow, EBITDA profitability, imminent Kentucky production and strengthening regulatory tailwinds positions Carbonxt for material growth in FY26. The Company’s US-based manufacturing footprint offers strategic advantages as utilities and industries prioritise secure, domestic supply chains for critical environmental technologies.
With new capital secured, commercial production on the horizon and a $2.5 billion PFAS treatment market taking shape, Carbonxt is emerging as a credible participant in North America’s activated carbon sector. The next several months will prove crucial as sample production begins and the Company progresses toward first commercial sales from its flagship Kentucky facility.
