Altor, a private equity firm based in Stockholm, has snapped up the embattled Swedish textile recycler’s remaining assets, which include a commercial-scale plant in Sundsvall and the technology behind the dissolving pulp called Circulose. Renewcell’s pilot plant in Kristinehamn was acquired last month by Biosorbe, another fellow Swede that makes a bio-based oil-spill-absorbing product. Renewcell will also be rechristened Circulose.
The development marks a resolution to a months-long saga that began even before Renewcell filed for bankruptcy in late February. But the formalization of its cashflow woes, exacerbated by a dearth of offtake agreements by brands leery of making the leap from short-term capsule collections to more substantive arrangements, touched off an outpouring of industry soul-searching about what went wrong, who was to blame and, more critically, what this meant for the future of so-called “next-gen” alternatives to virgin cotton and man-made cellulosic fibers like viscose—particularly those that lagged in maturity and initial hype.
Circulose will be a “new company” under Altor, whose diverse investment portfolio includes low-impact steelmaker H2 Green Steel, circular IT solutions provider Flex IT and fashion brand Toteme, the latter firm said. Magnus Lundmark, previously Renewcell’s chief operating officer, will serve as its new CEO, taking over from Magnus Håkansson, who held the reins following former chief Patrik Lundström’s exit last October, when a profit warning sent the company’s stock price careening. By the time H&M Group, Renewcell’s largest investor, declined to ease its capital crunch any further a few months later—Renewcell was holding a net debt of 905 million Swedish kronor, or almost $87 million—the writing was on the wall.
That Renewcell got a second lease on life isn’t surprising to Nicole Rycroft, founder and executive director at forestry nonprofit Canopy and one of Renewcell’s biggest cheerleaders. Altor’s investment in Circulose, she said, offers the industry a “second chance” to transform business-as-usual (read: carbon-heavy) supply chains.
“We always believed the phoenix would rise from the ashes,” she said. “The fashion industry has learned vital lessons from the Renewcell experience. The fashion value chain is now better equipped to ensure these innovations reach market adoption more smoothly. Many brands and producers stepped up, providing the confidence investors needed to move forward.”
Lundmark, who joined Renewcell last October from Birla-owned pulp producer Domsjö Fabriker, told Sourcing Journal that there has been a “lot of work behind the scenes.” For now, the Sundsvall plant will remain idle until Circulose can muster up the requisite demand to run it again, which could take a year. There’s urgency, he said, but a prudent one.
“We will focus on the commercial side, so that will give us time to develop the market,” he said, declining the reveal the terms of the sale. “And then we will restart the mill when we know that we have underlying demand that is healthy.”
What healthy looks like isn’t clear as yet, but robust offtake agreements that project future demand are certainly a part of it, Lundmark said. Market developments have also been ongoing since the bankruptcy was announced, though there have been no new offtake agreements “per se,” just letters of intent that Canopy helped secure. With the company back in private mode and H&M Group and other previous shareholders no longer carrying stakes, the strategy going forward is to put marketing and sales first.
“This is the learning from our business, but it’s [also] been true for [the] pulp business for many years: You cannot produce to inventory. Inventory will kill you eventually; you need to have solid demand,” he said. “I think that what is different now, which will be easier for the commercial team, is that there’s much more product and samples out in the market.”
Certainly, with roughly 4,000 metric tons of finished fiber at producer partners in China, India, Pakistan and Turkey and another 14,000 metric tons of dissolving pulp in storage, Altor’s Cellulose won’t be starting from scratch. But whether it can address the challenges that plagued Renewcell—a lack of infrastructural support, the glacial pace of legislation incentivizing sustainable textiles, and a 30-40 percent premium that attenuated cost-sensitive companies’ commitments, among them—remains to be seen.
Clara Zverina, principal at Altor, for one, isn’t cowed. As the “first puzzle piece” for incumbent fiber replacement, Circulose deserves to be safeguarded, she noted. Altor’s long-term buy-in, which includes active spots on Circulose’s board, will also provide the resources and network necessary to scale its “impact and reach.”
“We don’t shy away from a challenge and this one is worth taking, both for the uniqueness of the patented technology and the urgency of scaling circular solutions for the entire textile and fashion industry, particularly to replace virgin cotton and MMCF,” she said in a statement. “We are determined to partner with key stakeholders across the value chain to together unlock the potential of Circulose.”
Lundmark said that Renewcell received a lot of positive feedback in the interim, but this must translate into explicit orders to make a difference. The industry tends to get stuck into pilot or capsule mode when what needs to happen for Circulose to succeed is to become a “normal product.” There may be room for improvement when it comes to the technology, he admitted, but “at least we know that it works and we can produce big industrial volumes of this.”
“We, of course, both expect and hope for the support from the brands now,” Lundmark added. “Because at the end of the day, you have to ask, ‘O.K, are you going to buy or not?’”
