Nexam – Today´s interim financial statements for Q3, CESI highlights in bold.

Posted: 10 November, 2014 in Nexam, Published Investment Calls

I have previously published a very extensive Nexam analysis (https://cuttingedgescienceinvest.com/2014/09/28/nexam-chemical-nexam-genius-applications-of-the-148-year-old-berthelot-reaction/). However, in this post I just would like to highlight a set of very satisfying statements in today´s Nexam Q3 interim financial statements. Ok, let´s start:

One might argue if today´s announced numbers and increased turnaround should be celebrated or criticized.

CESI: Today, Nexam is not about the numbers.

Current Nexam value is simply about to secure the continued development of the genius science, the intellectual property, the collaborations and the applications. It’s about the near future global impact. Therefore, CESI is extremly satisfied with today´s report and selected highlights are extracted in bold font:

http://www.nexamchemical.com/en/Investors/Press-releases/Pressmeddelande/?releaseid=1677283

Operations:

 

  • A Japanese customer has commenced commercialization of a material for manufacturing film based on Nexam Chemical’s crosslinkers.
  • Nexam Chemical has received a positive response from Eurostar concerning the rPET project and will receive over SEK 3.4 million in funding grants.
  • IRPC and Nexam Chemical have entered into a framework cooperation agreement regarding polyolefins.
  • Nexam Chemical’s patent application for nylon resin with MEPA has been granted in Japan.
  • Nexam products have been delivered to several customers whose projects have been launched during the quarter.
  • New confidentiality agreements have been entered into with European companies.
  • Information on postponed implementation of incentive programme for 2014–2017.

Financial & legal:

  • Net sales for the period totalled SEK 455 thousand (SEK 337 thousand). Profit/loss before tax for the period came in at SEK -7,877 thousand (SEK -6,323 thousand).
  • Total assets at the end of the period amounted to SEK 92,771 thousand (SEK 59,600 thousand), with cash and cash equivalents accounting for SEK 71,388 thousand (SEK 39,640 thousand).
  • The net cash flow for the period was SEK -9,891 thousand (SEK -6,829 thousand).
  • Nexam is strengthening its organization for intensified commercialization and the Board of Directors has appointed a new CEO effective

1 January 2015.

  • Nexam Chemical launches NEXIMID® MHT-R – an easy to process polyimide resin for high-temperature applications. This resin is mainly intended for manufacturing composite parts for the aerospace industry. Other areas could also be relevant where metal parts exposed to high temperatures can be replaced. For example, this could be applied in the machining industry and the transport sector.
  • Nexam enters into a non-disclosure agreement with a European pipe manufacturer for evaluation of NEXAMITE products in extruded products made out of polyethylene and polypropylene.
  • The patent office in Taiwan informed Nexam Chemical that it will grant the Company’s patent application for PETA.

Nexam Chemical appoints new CEO for intensified commercialization. Nexam Chemical has, for natural reasons, until recently been focused on developing new products and applications based on our unique technology for crosslinkers. We have successfully built up a broad portfolio of patented technologies and products and established several collaborative projects with global leading chemical companies and other highly specialised parties.Even though the development opportunities for the future are nearly infinite, it is now time to focus on the next key step in our development, intensified commercialization of Nexam Chemical’s products. It is time to broaden our business from mainly being a technology development company to becoming a full-fledged professional business in terms of marketing and sales. We are therefore planning to bring the Company into a new phase where Nexam Chemical will become much more market-oriented.

In close consultation with the Company’s current management team, the Board of Directors of Nexam Chemical has therefore decided to change and strengthen the management by adding several strong profiles. They will provide the company with solid knowledge and experience in marketing and sales, and has previously led and developed companies in stages of expansion. In a first step, the Board of Directors has signed a contract with a new CEO for Nexam Chemical. The new CEO has a MSc in chemical engineering and has long-standing and wide-ranging experience from the international plastics and chemicals industry in leading positions, including CEO. His most recent position was at a listed company where he was a part of the top management team. His background and experience, combined with his proven strong focus on results and ability to build teams, will be a great asset for Nexam Chemical. He will begin serving as the new CEO on 1 January. Per Palmqvist Morin will remain the CEO until then. Due to ongoing commitments of the new CEO, we have chosen to meet his current employer’s request to not announce the persons name in question yet. This will be communicated as soon as possible. In parallel with the process of recruiting a new CEO, we have initiated a process to recruit a person responsible for commercial activities in a newly created position as CMO. One of the most important tasks for the Company’s new CEO will be to finalize this recruitment together with me.

In connection with the organizational changes, the four founders, Per Palmqvist Morin, Daniel Röme, Jan-Erik Rosenberg och Richard Tooby, will continue to be active in the company. They will however enter into new roles, where their focus will be directed towards each persons special skills. This will ensure continuity and transfer of acquired know-how, while the business will benefit from new expertise in marketing, sales and management. The founders will remain the largest owners of the Company and they are subject to a lock-up agreement.

(Lennart Holm)

Interim Financial Statements for Quarter 3, July–September 2014

Entering into a new phase with high speed

Several new projects have been initiated during the quarter, mainly with European customers, and Nexam Chemical has delivered products to several of them. Our partnership with Armacell is progressing, albeit with some delays. We are also poised to begin a project funded by Eurostar that we will be working on together with Armacell and The European Van Company. The aim of the project is to upgrade recycled PET for use in PET foam and other applications. We were informed in the summer that this project will receive funding from Eurostar. In addition, many other entities in Europe are testing Nexam Chemical’s formulations mainly for upgrading recycled PET resin for various applications. Nexam Chemical entered into a cooperation agreement with its polyethylene partner IRPC over the summer for development and commercialization of modified polyolefins. IRPC has informed us that they now have passed the development phase, with respect to a polyethylene quality for pipes, and will begin testing the quality for approval together with their end client in the autumn/winter. This will be an interesting and potentially large application area for our company. Nexam Chemical held a technical launch of its new high-temperature resin, NEXIMID® MHT-R, in the beginning of October and we have already received several inquiries from around the world. In addition to the project with Rolls Royce and Swerea SiComp, we are expecting several companies to initiate projects with the new resin in the coming years. The in-depth section of this report features a fairly new area for Nexam Chemical: liquid crystalline polymers, or LCP plastics as they are often referred to. This material is rapidly gaining ground, especially in the electronics industry, where Nexam Chemical has already established itself as a supplier of products for property improvement.

In September, the Japanese company JVP announced that they are initiating commercialization of material for photovoltaics containing our products. This is our second polyimide material customer in Japan that is commercialising products that include our chemicals. I think it is likely that there will be some more in the near future. Our first patent was granted in Japan during the quarter, and  several new external Asian patent applications, that include crosslinkers, have gone public. We hired an interim CFO starting in August, whose tasks include preparing the Company for its previously announced listing change. This work is progressing and we expect to be ready to complete the listing change to NASDAQ Stockholm Small Cap in 2015. At the end of the year I will hand over the management of Nexam Chemical to the new CEO and look forward to collaborating with him. Our new CEO has the background and qualities that can lead Nexam Chemical to commercial success. It has been an honour to have served as CEO during these six intensive, fun and extremely educational years. Now that Nexam Chemical is heading into a new phase, it is time for the entrepreneurs among the group of founders to let in the expertise that will take the Company to new heights. Nexam Chemical’s technology has its future on the market. I am convinced that the new management team not only will enable us to manage our underlying potential, but also maximise the transition to benefit both our customers and all of our shareholders. I am looking forward to the addition of new colleagues who can bring new expertise and new skills to the table. It will be exciting to work together, in a new role.

LCP – In depth section:

Liquid crystalline polymers (liquid crystal polymers or LCP as it is commonly referred to) is a group of polymers with extreme properties. LCP polymers are exceeded only by PEAK polymers in terms of properties, but it is significantly cheaper and easier to process. The first discoveries of liquid crystalline phases were made as early as in the 1890s by chemist Otto Lehmann who discovered “the liquid crystalline phase of matter”. However, further discoveries of different polymers and a lot of research would be required before Georg Heilmeier at the RCA Corporation succeeded in developing the first polymer containing a liquid crystalline phase in 1968. Shortly after the initial discovery, the Carborundum Corporation, Eastman and Du Pont succeeded in doing that as well. The LCP polymers of the present time consist of fully aromatic (high-temperature resistant) polyester polymers and were launched in the late 1980s. The LCP technology is used in both high-performance materials and in solutions for more well-known LCP electronic displays. The LCP material is currently produced mainly by Ticona (a part of Celanese and formerly a part of Hoechst AG), Solvay, Sumitomo, Toray and Polyplastics (a joint venture between Daicel in Japan and Ticona). Properties and use of polyaryletherketone plastics LCP plastics have excellent dimension stability and creep resistance, especially at very high temperatures. The continuous use temperature of LCP plastics is approximately 240 °C.

 In-depth: Liquid crystalline polymers grew annually by 3.7% from 2007 to 2012. Annual growth of 8.2% is forecast from 2012 to 2017. This would result in global production of over 63,000 tonnes, at an estimated value of over USD 1 billion. The main driving force is the replacement of moulded parts that were previously made out of metal, as well as the replacement of thermosets and other advanced thermoplastics in the electronics and telecom industries. This is the result of higher demand for miniaturisation and greater precision, along with the demand for more heat-resistant material.

LCP

Nexam´s products within the field

Nexam’s technology has made an impression on several businesses that produce LCP plastics and joint trials are currently under evaluation. These projects are still in their infancy, but solutions that don´t seem to be available with other additives have been identified. Nexam already has developed products for each of the various purposes and the longterm work is progressing subject to non-disclosure agreements. The goal is for all parties to be able to further boost sales and use of LCP plastics in various applications. There is a high level of interest in replacing more expensive materials or materials that make the component manufacturing process expensive. Some of the products used in the projects are already patent-protected and others are expected to be soon. LCP plastic is also highly resistant to many chemicals, including concentrated acids, bases and hydrocarbons. LCP plastics also exhibit excellent fatigue properties and solid dielectric properties over a wide range of temperatures. LCP plastic also has substantial process advantages when manufacturing plastic components in comparison to other types of high-performance thermoplastics. High production efficiency is thus possible thanks to very short cycle times. It has proven possible to achieve cycle times less than 1 second for many small components. For example, if the production volume is 1 million components, this will often result in the lower production costs outweighing the lower material costs of competing materials. The extraordinary properties of LCP plastic make it suitable for use in applications such as:

 

  • Electrical and electronic components requiring high precision, such as components that link parts in fibre optic cables and telecom equipment.
  • Components for chemical processing machinery.
  • Medical equipment.
  • Vehicles and under bonnet components.
  • Airplane components.
  • Machine components for heavy industry.

Filled and reinforced products are available, such as carbon fibre, glass fibre and materials containing minerals and graphite. This enables LCP plastic to be adapted to requirements in many areas.

 Market

Asia is the undisputed largest consumer of LCP and is also expected to have the highest growth in LCP consumption in the period leading up to 2017. Demand is also estimated to increase in Western Europe and North America in spite of the relatively high prices for the material. The very solid growth prospects of LCP plastic are mainly due to the ability to use it in several very demanding applications. This is particularly the case in the electricity and electronics segment, which are markets experiencing strong growth.

Vision and mission

Nexam Chemical’s vision is to be a recognised world leader in the field of property modification of plastic and polymer materials via heat-activated crosslinking.

Ongoing partnerships and customer projects 

Since Nexam Chemical’s technology was introduced in 2009, a number of development projects and partnerships have been entered into with a range of parties, of which several are world leaders in their respective niches. They include BASF, Repsol, IRPC, Sumitomo, ABB, NASA and Rolls-Royce. Nexam Chemical currently works with over 20 of the world’s 100 largest chemical and materials companies. Nexam Chemical Holding AB (publ)

Best Regards, CESI

The author, Cutting Edge Science Invest, is a Nexam Chemical share holder. Cutting Edge Science Invest can not guarantee, or take into  accountability, the content of truth and accuracy of the information in this article/post.Thus, Cutting Edge Science Invest requires that a possible reader gather complimentary information if any type of investment in the company described above is considered. Cutting Edge Science Invest provides personally biased information and at best also “general information and opinions”. The article/post does not contain professional investment advice. 

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