Symphony Environmental Technologies Plc share price, company news, analysis and interviews

Symphony Environmental Technologies plc (LON:SYM) Director Michael Stephen caught up with DirectorsTalk to discuss the UN’s International Plastics Treaty, why people are against plastic and using d2w as a solution.

Q1: Michael, as you know, the United Nations is promoting an International Plastics Treaty and the steering committee is likely to be meeting in November. What are your thoughts on this?

A1: Well, this could be very good if the committee understands how useful and important plastic is in the everyday lives of people everywhere in the world, not least in packaging to protect their food and water from contamination and to prevent food waste and disease.

It could however be very bad if the committee pays too much attention to the anti-plastic campaigners who seem to have an emotional hatred of plastic and want to deprive every one of the benefits of plastic products for no sufficient reason.

Q2: Why do you think they’re against plastic so much?

A2: They’re against plastic, not because it’s defined as litter because paper and other materials are also defined as litter but the special thing about plastic is that it will not biodegrade rapidly and will create microplastics and will lie or float around for decades. We’ve all seen the pictures of ocean garbage patches and the turtle with the plastic bag around his neck.

But if the plastic could be made to biodegrade much more quickly, if it gets into the open environment, there will be no necessity to ban short life plastic ponds. There’s no need to spend millions of dollars on research into new plastics because there’s already a technology available, it’s called d2w. It’s sold to factories all over the world as granules which they then put into their ordinary plastic production at little or no extra cost.

Q3: If that’s the case then, why are the campaigners not campaigning to make this technology mandatory for short life plastic products? As you said, it’s already in some countries in the Middle East?

A3: It’s because some of them are mistakenly thinking that the technology does not work quickly or completely or that it contains heavy metals or that it creates microplastics or toxic residues. None of which is true.

Some of the others know that it’s not true, but they attract a lot of money for their anti-plastic campaigns and don’t want one of the wheels to come off their bandwagon.

Q4: Are there any other groups who be lobbying the UN?

A4: Yes, I think so. The big German and Italian companies who make plastic partly from agricultural crops and describe it as compostable, they’ve been running an anti-competitive campaign against d2w for many years because they see it as a threat to their market share. It’s not actually in competition with their product because theirs is intended to biodegrade rapidly in an industrial composting facility and d2w is intended to biodegrade rapidly if it gets into the open environment.

I think the UN should not agree to promote their product because there is actually no such thing as compostable plastic. The EU standard 13432 and the American standard D6400 for this type of plastic both require it to convert into CO2 gas, not into compost, and there are better things to do, I think, with plastic than to waste it by converting it into CO2 gas. There’s nothing wrong with composting, but plastic of any kind has no place in this process, in fact, many of the industrial composters and local authorities don’t want it, even for transporting food waste to their facilities.

Now, even more important, it’s obvious that this type of plastic does not address the real problem, which is plastic in the open environment from which it cannot realistically be collected and taken to a composting facility. It’s therefore a distraction, but still far too many opinion formers think it’s the answer to the problem.

Q5: Is there a case for banning plastic because it’s made from fossil resources?

A5: Not really, and this is because it’s made from ethylene and ethane, which are by-products of the extraction of oil and natural gas to make fuels, which will be extracted even if plastic did not exist. So, it therefore makes sense until the day, if ever, when these fuels are no longer required to use these by-products instead of using scarce land and water resources, and fossil fuels as well, to grow crops to make plastic.

Q6: Is there anyone else who might be trying to influence the UN process?

A6: Yes, of course, the big oil companies who make the polyethylene and the polypropylene. Make no mistake, they have provided enormous benefits for mankind and I don’t agree with people who denigrate them by calling them big oil. But they and the plastics industry who use their materials to make plastic products, they know that plastic can lie or float around for decades if it gets into the open environment, and they know that this is the reason why so many people are against their products.

The problem is that they made a mistake in policy decision about 20 years ago and seemed reluctant to change it, the decision was to try to persuade the public that plastic was not a problem because it will all be recycled. Now, of course, recycling shifts responsibility for the proper disposal of plastic products onto consumers and society but it’s plain that this approach alone is not working. Recovering and recycling of all plastic waste in the near or even the foreseeable future is simply not going to happen.

So, unless the technology behind the manufacture of short life plastic products changes, these sticking plasters in the form of recycling or awareness-raising campaigns or refillable campaigns or beach clean-up campaigns won’t resolve the issue. Plastic will continue to accumulate in the oceans by accident or by irresponsible behaviour, either in its original form or as microplastics.

Q7: So, with that said, what’s your conclusion on all of this?

A7: Well, my conclusion is that short life plastic products must themselves be made sustainable by design, and in my view, the UN must promote the manufacturer of plastic products with a technology which acts as a safeguard. So, that if the plastic ends up in the environment, it quickly biodegrades and causes as little harm as possible.

Symphony Environmental’s d₂w biodegradable plastic technology offers an environmentally responsible solution for your plastic product, film or packaging.

Symphony Environmental Technologies plc (LON:SYM) Chief Financial Officer Ian Bristow caught up with DirectorsTalk to discuss its financial results, d2p & d2w operations, post period activity and what investors should be looking out for.

Q1: Ian, results for the six month period for Symphony Environmental. Can you just talk us through the financial highlights?

A1: Well, financially, revenues for the period to the 30th of June was £3 million, softer than previous periods due to a couple of areas, primarily our glove strategy has changed. We were selling lower value commodity gloves before, these are safety gloves and we’re now looking for EU certification on those gloves for various aspects, and that’s going to take a bit longer to get. As such, our gloves were £0 for the period, and we hope to start selling those later on this year and into next year.

There’s also some regulatory and resource issues in a number of our markets which has been overcome, and there’s also been some logistical issues. Freight rates have been very high since COVID and certain logistics, freight container timings have been quite difficult to deal with. That’s also softening up now, and we’re seeing in the second half of the year much more logistics much easier, and also the costing and the pricing coming down. That’s also in terms of more materials as well so if we look at our gross profit margin which fell slightly during the period, again, there was high raw material costs, and we’re seeing those coming down second half of the year.

So, the second half on reflection, those numbers actually is going to be much, much better.

In terms of our expenses, we continue with the same overhead base as in the previous periods, and within that, there’s a lot of investment in personnel, supply chain sales, R&D technical and you can see the benefit of that in terms of the pipeline and the opportunities that we’re developing. Also, with our external consultancy advocacy costs, and again, the benefit of that we can see with the legislative frameworks that’s being developed in Latin America, Middle East etc. which is now moving in our direction.

So, it just resulted in a loss of about just £1.4 million and that’s really the first half summary for you there.

Q2: What’s happened operationally across d2p and d2w?

A2: Quite a lot. The main agreement is with Bimbo, Bimbo is the western world’s largest bakery and we’ve got an agreement to supply them with our d2p antimicrobial bread technology. This technology has got FDA and Health Canada approval. Where we are at the moment, we’re just going through various tests and trials in a number of locations with them, and it’s looking very favourable in terms of the commercial start of that, hopefully starting very, very soon. We’ve indicated that in our pipeline expectations as well, which I’ll come to a bit later. We are also active in all parts of the world with this technology as well so it’s not just with Bimbo in parts of America, it’s in other companies in India, in Africa, and those parts of the world.

In terms of what we call pipeline, this is our d2p anti-insect, flame retardant and antimicrobial, a number of successful trials within the pipeline. This pipeline has got over 60 customer-led projects, again, global, in India, Pakistan, Africa, Latin America, Europe, the whole of the Americas as well, it’s nicely spread. So, again, we’re seeing some great test results, great trial results so again, we’re very hopeful for near term conversion of those results. Again, it’s within our pipeline, this £14 million pipeline, that we’ll come to.

For d2w, there’ve been some contract winds in the US for d2w, there was cosmetic bottles, which is very, very exciting in the US so that’s not regulatory led, but in terms of regulatory, we’ve had the confirmation in Peru that the d2w is approved there, as an approved product within the framework there. We’re seeing positive movement in the rest of Latin America and also the Middle East with d2w in the biodegradable aspect, and again, we’re hoping for some more news if you like, in the second half of this year.

Q3: What can you tell us about activity post period end?

A3: Post period end, India is the prime market post period end, we released an Indian RNS at the same time as the interim statement.

So, India, they’re seeing a substantial growth in sales so the joint venture which is with Indorama Corporation started trading in February and they’re seeing, in recent weeks, peaks in revenue and they’re expecting revenue to reach £ 250,000 a month from January 2023. This is led by new rules and regulations that’s come into place which is banning effectively thin gauge products; films, packaging products, but you can be exempt from this if your product is biodegradable. Now, where Symphony is on this and where the customers in India see Symphony on this, as us being the answer to this because we have Indian accredited standards that fulfil biodegradability and also eco-toxicity as well, we’re biodegrade safe and sustainable for the soil. So, the customers are placing orders with India.

What we’re waiting for is actual certification so we’re expecting to get a specific certification for our d2w products in India, which will then pull the whole thing together. Customers are buying at the moment regardless, because they have to, they have no choice, if they don’t show biodegradability in their products then, they’ve got to make thicker films, if you like, and that will add two to three times to their costings. So, that’s very exciting.

In addition, post period end, our insecticidal business, primarily with Rivulis but we are in negotiations with other companies globally so they places some sizeable orders for delivery, and they’ve been dispatched now. With Rivulis, we’re expecting that to grow into other regions where Rivulis trade, and as I said, there’s other players as well in that market so very, very exciting.

Again, with the d2w, following on from the Latin American advocacy, that Peru win for d2w, Mexico themselves has developed a standard. The standards are very, very important because they give legislators a framework and this standard is advantageous to d2w.

Really, the final part of our outlook, our post period end, is our near term pipeline. So, we expect a running rate to be achieved between now and sometime during the first half of next year of about £14 million of annual sales. This is a near term expectation, and that expectation we’ve broken down into:

Growth in d2w so if you look at last year’s revenues of £7.2 million, we expect that to grow to £9 million. We feel that’s quite modest, easily achievable with the legislative frameworks in place,

With our bread technology, again with the western world’s largest producer, we’re looking that being around £2.5 million per annum.

The insecticidal, we should get to £1 million per annum, and

General pipeline, which is the conversion of these 60 or so projects, we should at least get to £1 million pound as a running annual rate for the business.

I actually missed Middle East in all of this, there’s been so much going on here. In the Middle East, our partners have started manufacturing there and that’s coinciding with what we can see as better enforcement because within the Middle East, it’s Saudi Arabia and UAE, they actually have legislation in place, which is favourable to our d2w products.

So, all of those things together, we’ve got very, very, exciting near term opportunity and then the longer term opportunity is a multiple of that, we feel.

Q4: With all these projects going on and everything that you just told me about post period, it must give you confidence looking forward?

A4: Exactly.

Q5: With that in mind, what should investors be looking out for next from Symphony Environmental?

A5: It’s very difficult predict timing of things, but I think with India, with the bread,  Middle East in particular, there will be over the near term, positive events that we see, and also, with our general pipeline as well. Again, because that’s in a number of areas and I’ll say 60 items in the pipeline but some of those are quite large and some of those are bimbo-esque, if you like, in their potential or Rivulis-esque in their potential as well.

So, I think all across the board really, any of these areas in the pipeline that we’ve indicated near term, is something that investors could see updates to between now and next year.

Symphony Environmental Technologies plc (LON:SYM) Chief Financial Officer Ian Bristow caught up with DirectorsTalk for an exclusive interview to discuss the key highlights from their latest trading update, operational highlights, the investment from Sea Pearl, the manufacturing facility in the Middle East and what we can expect from the group in the remainder of the year.

Q1: A six-month trading update just issued. Ian, what were the key highlights?

A1: We had a soft trading in the first six months of this year, we’re a very, very busy, diverse company, we’ve lots of opportunities globally for us and a number of the opportunities were still being developed effectively during the first six months, primarily gloves and also a change in our Middle East position.

That’s primarily meant that some of the revenues fell out of half one compared to previous periods and those particular revenues will fall into H2 so that’s the main revenue headline and, obviously, we can go into more detail on the H2 position.

Within our revenues though, we had an exciting increase in our d2p business which grew 300% during the period and overall, we’re confidence still of our overall full year market consensus position for the business.

So, we’ve a very, very exciting and busy H2 coming up.

Q2: Operationally, what’s been happening over the last six months?

A2: Operationally, I can split those into our two main product areas, which is d2w which is our biodegradable technology, and we’ve been supplying that for 20 years now, and our much newer d2p design to protect range of technologies.

So, with the d2w in particular, there’s been a lot of regulatory work going on, we work quite heavily with various regulators around the world and, in particular, we’ve invested in advocacy in Latin America so for Mexico all the way down to Argentina. Operationally, we won a court case in Peru which gave our product a particular approval within the current regulation, and we are seeing, hopefully during H2, some further wins in that part of the world for d2w. Not just in that part of the world, actually, so globally as well, we’re seeing a much strengthening position for our technology in terms of biodegradable.

Also, working in the Middle East as well so we’re currently in the process of signing a new agreement in the Middle East which we’ve gone into in great detail in the trading update, but there’s a lot of pre-work gone on with that.

We had some extra contract wins with d2w so although our d2p has been a main news item for us over the last couple of years, the d2w which is our main revenue source for the business, two particular US wins during the period, which we’ll see revenues into H2.

For our d2p, we negotiated and won a supply agreement with Grupo Bimbo which is the Western world’s largest bakery and there’s a lot of work going on behind the scenes in various countries, in Latin America, primarily Mexico down to Argentina again, there’s lots of commercial trials going on. A lot of those trials are finished now and hence why the agreement’s been signed and it’s just a case of seeing how that flows through into revenue during H2 which we’re working on, there’s other bread trials going on around the world so it’s not just in the Bimbo side of things, there’s trials in Africa, trials in the Far East as well.

Rivulis Irrigation was something we announced fairly recently so they’re a large Israeli company and they manufactured a lot of agricultural and other products, and our antimicrobial anti-insecticide goes into the irrigation drippers, which is big business, insects actually quite like biting into plastic, believe it or not, and we have an anti-insecticide that prevents that from happening. So, these irrigation drippers actually have a much longer life, and you can imagine how we can spread that into many, many other agricultural products, which is what we’re working on.

We then have our massive day d2p pipeline, so we’ve got 70 plus projects going on globally, insecticidal, antimicrobial, flame retardant and we’re very excited about those things coming on online.

Q3: This week you announced the investment from Sea Pearl can you just tell us a little bit more about them, the use of the funds and the connection with Indorama?

A3: Well, Sea Pearl has taken over the interests of Vincel and Vincel came in a number of years ago now, and they’ve bought in the market in the past and they’ve up warrants, and they’ve placed fairly recently as well with us, so Sea Pearl have taken over those interests.

Sea Pearl is owned by the daughter of SP Lohia and he’s the main owner of Indorama Corporation. Indorama Corporation are a very large conglomerate into many, many materials in industrial sectors in India, Indonesia, parts of Africa also in Mexico as well. What’s really exciting about this relationship is they’re a very supportive company, not just financially but also in terms of our business, and you may recall that we have this joint venture in India we announced in the earlier part of this year and that joint venture is with Indorama.

So, with them, operationally, we’ve got a very exciting situation going there, the second most populous country in the world, we’ve already been supplying product into there on a small scale, but our technologies aligned with Indorama and their contacts and their business, we feel very excited about that.

So, in terms of this funding, they’re obviously very confident in us, excited by what we’ve got, not just in India, but globally with our technologies and our prospect, and, really, it’s just some extra money there for really some of the opportunities to make sure we can capitalise on those. So, we’ve already gone through a lot of those opportunities, so we really want to make sure that if we need to capitalise on those, for any reason, be it capital requirement or R&D requirement or any sort of facilities or resource that we need to make those things really sort of push them home then it’s this funding really to enable us to do this during this year.

Q4: Now, you mentioned earlier that you’re going ahead with the manufacturing facility in the Middle East. What does this mean for the company?

A4: What it means is we’re still capital-light so this facility is not a Symphony-owned facility, it’s a facility that is run by our partners in the region and what it will mean is it will, operationally, allow product to be made much more efficiently than shipping from the far east so we’re saving on freight costs, logistic costs, and we’re saving on all those risks that go with freights and logistics, which the last two years of COVID the risks have been very, very high and very expensive. It enables us to control better the manufacturing, it also enables us to have locally produced products, which is, in any market, being locally produced is a big plus factor. So, in terms of working capital, resources, locally produced manufacturing, we can see it really heightening the opportunity there and heightening the growth in products.

What’s actually happened in that region is we’ve allowed it to destock effectively so it’s taken away our revenue of H1 as a short-term loss, if you like, but in terms of H2, that will completely be reversed. Not just reversed, it will allow greater revenue growth during H2 and into next year, having the facility local.

In addition, you may recall that Saudi Arabia and UAE are pro oxo-biodegradable, they’re pro d2w, they’ve got regulations legislations in place, and we believe that will strengthen during this period as well so we believe the market will expand for our product in H2 and going into next year.

Q5: You touched on this already but what can you tell us about the pipeline for H2?

A5: The pipeline is very strong for H23 so in terms of d2w, we’ve just gone through the Middle East which should show significant growth, and then we’ve gone through the Latin American situation there with regulatory moves in our favor and then we’ve got the joint venture with Indorama in India as well, which is a d2w and a d2p scenario so we believe that should deliver meaningful results in H2.

With our d2p, that’s really underpinned by the Grupo Bimbo agreement, which we believe will start delivering inH2 and also the pipeline itself and areas of the pipeline include Rivulis which has already grown threefold in the first six months of this year and then we’ve got these large orders that have already been placed for quarter three.

We believe there’ll be further orders during the year, there are companies as well that we’re working with and within our pipeline with the insecticide, with the bread antimicrobial so that’s really what’s underpinning our H2 positivity, you like.

Q6: Is there anything else that we can expect from Symphony Environmental Technologies over the remainder of the year?

A6: No, I think we’ve pretty much covered it really.

So, from India, Middle East, Latin America, with bread, with anti-insecticide, flame retardant, d2w regulatory environments, there’s a lot there with the business and there’s a lot more underneath that as well.

A lot of these developments we’re working on, their customer-led developments, we’re working in partnership with customers, we work with them with our distributors as well so although we’re a small company, we’re able to do large things by having these large resources around the world that are working with us with a common goal.

Symphony Environmental Technologies plc (LON:SYM) is the topic of conversation when Hybridan’s Director of Corporate Broking Niall Pearson caught up with DirectorsTalk for an exclusive interview.

Q1: For those that have not yet come across Symphony Environmental, could you just tell us a little bit about them?

A1: The company are quoted on the AIM market, they’ve been around for a number of years. Their bread and butter is essentially an additive technology that goes into materials such as plastic that can really change the speed of that product decay. Ultimately, the end result is making it 100% biodegradable in the open environment so oceans, rivers and land.

The technology as you can imagine is incredibly high tech, it’s really underpinned by over four decades of scientific data behind it so it’s certainly well proven. The way it works, it’s very small quantity so just 1% of their additive is introduced into the manufacturing process of products before they hit the supermarket sells for example. These products with the additive in it can have numerous applications, anything covering from antiviral or antimicrobial and of course 100 biodegradable.

As I’m sure you can probably ascertain, it’s an incredibly regulated market and the company certainly ticks a lot of boxes in that respect, they’ve got their US FDA approval and also similar approval in Canada as well.

Q2: Now, they had some important news out this week about their operations in India. Can you tell us about that?

A2: It was a very important update and I think it certainly reinforces to investors that the company has a global footprint, the market certainly saw and understood that. Their shares had a good rally up 20% so it’s always good to see messages resonating in this current environment.

They have a great relationship with their JV partner Indorama which, of course, is a global chemical company and that JV forged really that major expansion into India, it’s moving along very nicely, it only really completed in February.

I think India is a great example of how a country which has a very real plastic problem but I think more importantly is doing something very logical and realistic about how to manage their solutions. So, India has nearly have about 10 mega tonnes of plastic waste annually which is huge, a mega tonne is a million tonne, and I think more importantly, 40% of that waste is not collected and to manage that the government have really put out some pretty aggressive targets as part of their plastic pact to ban single use plastic.

It’s good to see the adoption of big companies such as Amazon and Coca Cola have signed up so mandating that all plastics have to be biodegradable, coupling that with SYM having a foot in the door of that country, really opens up a wealth of commercial opportunity. So it’s a very exciting time for them.

Q3: How has the company faired through the COVID situation?

A3: I think they’ve been incredibly resilient through the pandemic and just the general market backdrop, I think COVID has certainly changed the narrative on hygiene. Consumers are starting to realise that the paper bags we were told to all buy actually produce more waste than plastic bags, they’ve got a worst carbon footprint in the production process and those cotton shopping bags sold at £10 pounds are actually a real hotbed for bacteria and COVID.

So, the rhetoric is becoming less around banning plastic altogether, but more around how do we manage the plastic problem better which is their sweet spot. The company were incredibly nimble in their product offering, obviously they’ve been experts in biodegradable plastics for a number of years, we had lots of PPE coming through into hospitals, and they were thinking why can’t we expand our technology to make that equipment, antimicrobial, antiviral such as gloves which they manage to add their technology in those products to kill COVID in less than 10 minutes. That level of innovation in such a short space of time is quite staggering really. Again, the market reacted quite well to them, shares were up 50% last year, and the year before that in 2020, in the midst of COVID, there were up nearly 150%.

The challenges that they’ve had haven’t really been COVID-specific, they’ve been more widespread and not really unique to the company so what we’re seeing across all small companies right now is high shipping costs, logistical delay, we’re seeing a lot of knock on effects in small caps.

Saying that, the company have done a great job in trying to manage that, they’ve done a lot of investment in their logistics team to try and get ahead of the curve and anticipate those issues before they happen. Those challenges aren’t going to last forever, we’d expect them to subside soon, I hope.

Q4: Finally, what can investors look forward to in the future for Symphony Environmental?

A4: Well, all the news flow that’s been coming out from the company over the past few months, I think the market is really starting to understand that they’re at a real inflection point and certainly have been doing a great job in laying the foundations for mass commercial adoption of their technology.

Having all the necessary regulatory approvals in place, such as the FDA, takes time, there’s a lot of hoops to jump through and then you have big customers going to trials, working along in unison with those regulatory approvals.

So, the company have said to the market that they have several of these deals nearing closure with major products in the mix so it’s a very exciting time for them as they’re moving to create a commercial scale.