Cleantech Building Materials: Annual Results to 31 December 2021
Cleantech Building Materials
9 min read
Cleantech Building Materials
30 May 2022
CLEANTECH BUILDING MATERIALS PLC, NASDAQ FIRST NORTH GROWTH MARKET, COPENHAGEN
TICKER: CBM
Cleantech Building Materials plc
AnnualResults to 31 December 2021
Cleantech Building Materials plc (“CBM” or the “Company” or the “Group”) presents its results for the twelve months ended 31 December 2021. The audited financial statements are appended to this announcement.
Chairman’s Statement
Despite the logistical challenges arising from the pandemic in 2021, CBM is now in a stronger position for transformative growth in the coming years. In 2021, CBM’s subsidiary company Diamond Wood China Limited (DWC) was able to progress on its strategy to build an Accoya® acetylated wood (Accoya® Wood) factory in China, with its Joint Venture (JV) partner, Nantong Acetic Acid Company (NTAAC). NTAAC is amongst China’s top speciality chemical companies, serving global multinational food and beverage producers in the US and Europe. NTAAC is listed on the Shanghai Stock Exchange with a market capitalisation of €515 million. As reported in the 2020 Report & Accounts on 31 March 2021, DWC and NTAAC signed the investment agreement constituting the JV.
Since then, and through consultation with local government officials in Jiangsu province, DWC and NTAAC have established the timing and key milestones of the Accoya® Wood factory project. There is a schedule for the construction of the Accoya® Wood factory and the corresponding financing. The factory will be built in the Jiangsu Rudong Yangkou Port Economic Development Zone.
Under the investment agreement between the two parties, DWC is the majority shareholder in the JV company, Jiangsu Dragon Wood Limited (JDW). Additionally, DWC will receive a royalty on profits from JDW. DWC’s equity investments into JDW is being financed through CBM, which previously entered into a subscription agreement for €15m euros with a private family office. During 2021, the family office subscribed for CBM shares under the subscription agreement related to the achievement of milestones in the Accoya® Wood factory project.
The following is a brief update of the JDW Accoya® Wood factory developments in China:
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The Accoya® technology licensor, Titan Wood, transferred the Accoya® Basic Engineering Design information to DWC during 2020 and 2021.
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During 2021 Accsys’ subsidiary, Titan Wood, provided technical assistance to DWC for the preparation of the Nantong Accoya® Wood factory engineering and equipment selection.
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An LOI with a leading Chinese bank was signed with JDW on 29 April 2021 regarding a €26m debt financing to JDW.
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Registration of JDW was completed and the business license issued on 18 May 2021.
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JDW completed the signing of the Project Investment Agreement with local Chinese government authority regarding land, utilities and taxes on 18 May 2021.
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Milestone 1 and Milestone 2 capital injections into JDW were completed by both shareholders, NTAAC and DWC, in year 2021.
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All DWC’s wholesaler agreements have been officially transferred to JDW during September 2021. The DWC sales staff have also been transferred to JDW.
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The Feasibility Study Report approval was granted to JDW on 15 November 2021 by the Chinese government, and the Registration Certificate of Investment Project of Jiangsu Province obtained. The JDW Project is now officially posted on the government web site (http://222.190.131.17:8075).
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The approval of Social Stability Assessment Report was granted for the JDW project on 30 November 2021 by the Chinese government.
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JDW finalized the Front-End Engineering Design with an engineering, procurement and construction (EPC) firm, LBT Shanghai in November 2021.
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The Energy Conservation Assessment application was approved on 24 February 2022 by the Chinese government.
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The Environmental Impact Assessment report has been submitted for final approval
These are the material developments towards the construction of the Accoya® Wood Factory. The key JDW activities are being undertaken by the Group’s people in the region, so international travel restrictions have had minimal impact on the progress of the project.
Accoya® Wood is produced using a cutting-edge patented technology, enabling it to resist rot, defy the elements and stay strong for decades. Guaranteed for 50 years above ground and 25 years in ground or freshwater, the performance and sustainability properties associated with the Accoya® brand are sought by joinery manufacturers, architects and builders worldwide.
In 2021 the Group invested in the development of its marketing and sales operations in China and the ASEAN countries, which resulted in a new offtake agreement being added to the growing list of manufacturers and wholesalers in the region committing to purchase significant volumes of Accoya® Wood. These agreements, and the ongoing business with the Company’s existing base of distribution partners, attest to a strong and increasing demand for Accoya® Wood in the region.
The Group increased revenues in 2021 of €1,014,000 (2020: €857,000). The Group increased its loss for the 12 months ended 31 December 2021 to €4,891,000 (€4,116,000 in 2020). The increased loss is largely due to the additional loss from the group’s share of the JV, and higher share-based payment charge.
I would like to take this opportunity to again express my sincere gratitude to my fellow Directors and staff for their hard work and commitment over the past year.
I look forward to providing you with further updates at our next Annual General Meeting in June 2022.
Strategy and Objectives
The Group’s primary strategic objectives for 2022 are:
1.
To engage a leading engineering, procurement and construction firm to lead the building of an Accoya® Wood manufacturing facility in China.
2.
Together with the Group’s chemical industry joint venture partner, NTAAC, to ensure that the Accoya® Wood manufacturing facility is constructed on time and on budget, and operated efficiently.
3.
To build relationships with large-volume wood product manufacturers through testing and trials in anticipation of Accoya® Wood being produced in the Group’s own factory.
4.
To develop the Group’s marketing and sales initiatives to further expand market channels and offtake agreements.
Financial Review of the Business
The Group’s revenues for the year ended 31 December 2021 increased to €1,014,000 (2020: €857,000) and consisted mainly of Accoya® Wood sales to customers in China, Thailand, Vietnam, Singapore, Indonesia, and Malaysia.
The Group realised a net loss of €4,891,000 for the year to 31 December 2021 (2020: €4,116,000). As at 31 December 2021, the Group had cash and cash equivalents of €158,000 (2020: €25,000) as well as an available facility of approximately €3.4m (Loan Facility), and an equity commitment to finance the JV. The Company has net current liabilities of €207,000 (2020: €797,000).
Once the Group is producing its own Accoya® Wood, the Board believes the financial performance of the Group will be radically transformed.
Going Concern
The Directors have considered the future liquidity of the Group in light of the net loss of €4,891,000 (2020: loss of €4,116,000) during the current year and the net current liabilities as of 31 December 2021 of €207,000 (2020: €797,000) and the material uncertainty regarding the Group’s ability to execute the Group’s business plan.
The Directors have reviewed the Group’s cash flow projections prepared by management covering a period of twelve months from the date of the approval of the consolidated financial statements. Management’s projections make key assumptions with regard to (i) the anticipated cash flows from the Group’s operations, (ii) the availability of future funding from the Loan Facility, and (iii) the financing from the Investor, NTAAC and a leading Chinese bank. Covid-19 contributed to the delay in finalising the joint venture agreement with NTAAC, but this was finally signed in March 2021. In April 2021 the Joint Venture received a LOI from a leading Chinese bank of NTAAC regarding €26m debt financing. During the year progress on a range of matters has been made, including local government approval of project registration, social stability assessment and feasibility study. The factory site is also currently being cleared in preparation for construction in 2022. Since year end there has also been approval of the energy conservation assessment. In November 2021, the Group obtained an additional loan facility of €3m to support the Group’s operations (Loan Facility).
Based on these cash flow projections, the Group will have sufficient financial resources in the twelve months period from the date of approval of the consolidated financial statements to meet its financial obligations as and when they fall due.
Accordingly, the Directors consider that it is appropriate to prepare the consolidated financial statements on a going concern basis.
Should the Group be unable to continue as a going concern, adjustments would have to be made to restate the value of assets to their recoverable amounts, to provide for further liabilities that might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities. The effect of these potential adjustments has not been reflected in the consolidated financial statements.
The Crowe U.K. LLP audit opinion with regard to the Group’s 2021 financial statements is qualified on the basis of a limitation of scope in respect of the Group’s interest in JDW. As a consequence of the unprecedented Covid-19 pandemic lockdown restrictions in China during 2022, the auditors were unable to obtain sufficient and appropriate audit evidence to support the carrying value of the Group’s interest in JDW of €244,000 at 31 December 2021 and its share of JDW’s losses of €332,000 for the year then ended.
Future Developments
The Group expects to commence construction of its own Accoya® Wood manufacturing facility during 2022. CBM plans to hold the AGM on 24 June 2022 and publish the Company’s next financial report which will be its unaudited accounts for the six months to 30 June 2022 in September 2022.
THE DIRECTORS OF CLEANTECH BUILDING MATERIALS PLC ACCEPT RESPONSIBILITY FOR THE CONTENTS OF THIS ANNOUNCEMENT
Further information may be found at the Company's website at www.cbm-plc.com
Further Enquiries:
Cleantech Building Materials plc Adrian Wyn-Griffiths
