Earnings Call: H2 2021

Jun 22, 2021

Good day and thank you for standing by. Welcome to the Axis Technologies Plc Full Year Results Presentation. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised today's conference is being recorded. I'd like to hand the conference over to your first speaker today, Rob Harris, Chief Executive. Please go ahead. Thank you. Good morning, Everyone, and welcome to our full year results presentation for the 2021 financial year. And firstly, I hope you're all safe and well. And Before we start, as always, I'd like to pause for a photo moment of our Acoya product. In this photo, we have Acoya decking showing its Strength against the elements up on Banff Mountain in the Canadian Rocky Mountains. It's also a very symbolic choice of photo As you see in the North American region, where we are making good strategic progress, I'll give you more about that later. Moving on, we have the usual disclaimers, which I know will be familiar to you, and thank you for adhering So that, in terms of this morning's agenda, firstly, I'm going to give you a quick initial overview of the results. Then Will Rudge is going to take you through the financials in more detail. I will then give an update on the Hull Tricoia plant since the early June update. I know this is a key focus for analysts, shareholders and many stakeholders on the call today. I'll then walk through the business review to update you on our strategic development and the Acoya segment's positive, tactical and strategic momentum. So looking across today's results, we have delivered a strong set of numbers for FY 2021. We have delivered a 4.5% increase in sales and a 10% growth in revenue. This is a really good performance given the backdrop of COVID-nineteen this year and given the fact that we are capacity constrained with greater demand than we can actually supply. Our sales and revenue results shows the business' resilience and that strong market demand for our product continues. Our sales, manufacturing and supply teams Continue to do an outstanding job for AXIS. These results are another step up in our profitability. We have grown gross margin by 2 90 basis points to 33% and are reporting a 44% growth in underlying EBITDA today to €10,100,000 We are also benefiting from good cash generation in the Acoya segment and margin gains through diligent pricing of this high value sustainable product for the construction sector. Beyond the financials, 2021 has been a year of strategic progress as well. We are moving ahead in our plans to expand in North America, the largest single market for Aynum for Aynum production by 33%. While we have faced ongoing challenges in completing our new Tricoia plant at Hull, we have progressed the construction during the year to the final stages, But more about this later. Finally, and very importantly, we are investing in our organizational capability, people, Talent and our business processes to manage it and deliver the growth ahead and importantly, providing a platform to grow sustainably. This is important, really important in our path to increase production capacity to 200,000 meters cubed by 2025 in our 5x growth target. I'll now hand over to Will for the financial results, please. Thank you, Rob. Good morning, everyone. The first image you can see here is a great image of a cog being used as a floating boat platform in Canada, A great example of Acoya's durability and stability in action. But I'll move quickly on to the next slide, the financial highlights. Rob has already touched on some of these. This first slide summarizes what we believe to strong financial performance, and this is for the year, the 31st March 2021. Revenue increased by 10% with the coil sales volumes up 4.5%. The sales volumes recovered strongly with demand exceeding our production capacity following the impact of sales in the Q1 due to COVID-nineteen. Revenue growth was supported by an increase in average sales prices. Price increases were implemented for all coil customers from January 2020 and the end of the previous year. In addition, from April 1, 2020, the European markets were successfully transitioned into our direct sales and marketing channels from their previous exclusive license to Sertia, ending the previous discounted sales arrangements. A further price increase took effect from November 2020, including to address an expected increase in raw material costs. These increases have helped the acquired manufacturing margin increase by 3 40 basis points to 33.4 percent. We have seen a marginal increase in other operating costs in the second half of the year As we increase our investments in our organizational capability, however, with the gross margin improvements, this has overall resulted in a 44% increase And underlying group EBITDA to £10,100,000 This represents our 3rd consecutive year of positive group underlying EBITDA on our 2nd consecutive year of positive group underlying EBIT. The strong performance of the acquired business has helped drive a 61% increase in group operating cash And that has helped ensure we can maintain a robust balance sheet with a €13,000,000 reduction in net debt. Moving on to the next slide, which looks at our sales mix in a bit more detail. The underlying demand from resulting sales Here, I've helped demonstrate the resilience of the business. The chart on the right hand side helps explain the year on year movements in acquired revenue Split by region. In Q1, sales were disrupted, in particular in the UK and North America Due to COVID-nineteen impacting our customers' supply chains, we were able to focus efforts in other regions to stimulate additional sales, in particular in mainland Europe, the Nordic region, while also increasing sales to our TRICOIA partners. From Q2, sales volumes recovered quickly in all regions, We saw a pickup in sales to North America in particular being a key region for us to target in the longer term given the substantial market opportunity, which we have confirmed exists. The chart on the left hand side shows the split of volumes by market. The Tricoir segment with 26% of the total sales volumes represent sales of lower priced of coir to our Tricoir partners, With these volumes expected to be transferred to the whole plant once it is operational, and that will free up volume in Arnhem for full price to acquire sales. The rest of Europe region, just for confirmation, represents sales, which in the previous year had been sold at discounted prices under the previous arrangement of Sertia. But during the year we're reporting upon those were at normal prices. We'll move on to the next Slide please, which sets out our EBITDA progression in a bit more detail. This sets out how change in the acquired business Help drive the increase in the group underlying EBITDA from £7,000,000 last year to £10,100,000 this year. €4,800,000 was an improvement due to higher average sales prices. This is split amongst across a few areas. First of all, the effect of the termination of the Surgia contract at the end of the pricing discount that was previously In place, that was effective for the whole of the financial year compared to the previous year. In addition, there was an increase in material Sold for the Tricoia production. But lastly, the largest component was the price increase to all the prior customers, Firstly, from 1st January 2020 and then again a price increase from November 2020, helping improve our overall margins. €1,300,000 of the improvement was attributable to increased sales volumes for the year as a whole, the 4.5% volume increase I mentioned earlier. This was offset by raw material prices, including wood and our net acetals costs, which increased marginally compared to the previous year. There was a more significant increase in acetic anhydride costs seen in the final quarter of the financial year and that has continued into the beginning of the new financial year. However, we do also continue to benefit from the partial natural hedge we get due to Sales of the acetic acid byproduct such that the impact on overall raw material costs has been more marginal. The increase in the Coia operating costs reflects an increase in headcount for the year and an increase in spend on sales and marketing costs as in preparation for the support of our capacity expansion plans. Increase in other Group operating costs largely also reflects higher headcount. We completed the recruitment of the majority of the remaining Hull operating team for the dry fire plant in the second half of the year. In addition, we are investing in our overall organizational capability and have added a number of experienced new roles to reflect our growth in scale and our ambitions for growth. This has included new group heads of Health and Safety for our Technology Center as well as for Engineering, IT, CTAHR's Management and Investor Relations. Moving on to the next page and looking a little bit more detail at profitability progression. Both charts here show our longer term trend over 5 years, group EBITDA on the left hand side And the acquired segmental EBITDA and margin on the right hand side. While the progression of the acquired business has clearly driven the improvements in the group Overall, I would like to highlight a couple of points. We had previously said that we believe the 30% gross manufacturing margin for the acquired business was achievable. We have now achieved this for 18 months. And in particular, this was seen following the step up of volume in FY 2020, which resulted from the benefit of the Acoya The 3rd of Kaya reacted coming on stream and the associated economies of scale, which flowed from 50% increase in capacity. However, over that same period, margins have also benefited from the higher sales prices. Looking ahead, we will continue to keep sales prices under review So that we are at least able to maintain these margin levels. However, we will also target further margin improvement, Seeking to take advantage of further economies of scale as we benefit from additional capacity, in particular with the completion of the 4th Macquarie reactor due to the operations by the end of this new financial year. In addition, when the halt plant turns on for Tricoia, This will free up additional capacity in Arden for higher priced acquire sales. Group profitability is then expected to benefit from the increase in overall sales As well as the higher 40% anticipated gross margin, which we continue to believe is achievable from the oil plant once it's operational. Moving on to the next chart, which looks at our cash flow. The net debt bridge in this slide shows that strong cash flow generation has helped to decrease net debt from 25 €1,000,000 to €12,200,000 at the end of the year. As explained earlier, the acquired business drove most of this with a 27% increase in EBITDA, resulting in €21,400,000 of cash inflow. The Tricoir EBITDA reflects its pre operating position, and that's expected to become positive Following the start up of the whole plant, the R and D and corporate costs did increase compared to the prior year, reflecting the investments in organizational capability. However, we don't expect that to increase in line with revenue as we continue to grow. The decrease in operational working Capital by €5,100,000 is largely due to a decrease in inventory during the year, including the impact of some supply chain disruption As a result of COVID-nineteen and subsequent to that, year end inventory levels were lower than planned and as a result are being rebuilt in the new financial year with a further increase expected ahead of new production capacity coming on stream. The CapEx investments of €21,000,000 Includes GBP 14,400,000 for progress in the Tricoia plant at Hull and GBP 5,000,000 for the 4th reactor in Arden. This investment was partially offset by CapEx accruals of €9,000,000 reflecting the milestone nature of our construction contracts. The CHF 3,200,000 Serdia termination fee was reported in the first half of the year offset against our Serdia loan at the start of the year. And then finally, the Tricoia equity issuance reflects shares issued to our Tricoia consortium partners. If I move on to the balance sheet and just to note a couple of more points in respect of our overall position. Overall, we believe our balance sheet remains robust. In addition to the reduction in net debt I've just explained and the resulting net debt To EBITDA ratio, the group had cash balances of €47,600,000 at the end of March. This cash balance, together with positive operating cash flow from the Ocollo business And further undrawn banking facilities ensure the group is well positioned looking ahead, including taking into account that much of this cash is expected to be invested in our key Additional production capacity projects in Arnhem Hull. In addition, subsequent to the year end, we raised a further €35,000,000 through a successful placing an open offer. The proceeds of this are principally intended to fund our 60% equity share of the planned coir plant in North America. Rob has got some further details On this a little bit later and at this point, I'll pass back to Rob. Many thanks, Will. I'll now give an update on Hull before we go through the wider business. The image here is actually Tricoia Panels. They are on a Swiss exterior cladding project. The interesting design you can see reflects Tricoia in its element. It's a high value, high performance Wood Element. Tricoia gives a lot of design freedom and as you know, it's extremely stable and durable. Three things that you do not get with regular MDF or regular wood panel products. I would now like to move on to our building our tricoir capacity in Hull. As most of you know, we are building a world first of its kind tricoia production plant at Hull in the UK. Across the full 2021 financial year, we have made fundamental progress in the construction of the plant despite Some continuing challenges with the pace of work and construction, which has been impacted through COVID-nineteen and the lead contractors' challenges. Last summer, construction progressed. And after the initial COVID shutdowns, activity on the site slowed down. Despite this, in October, we reached the milestone of installing the acetylation towers, which you can see here in the bottom right hand photo at 56 meters tall. This year, however, we have encountered further challenges in progress to completion and have reported additional updates to the market. Firstly, in April, we reported our expectation of a likely 3 to 6 month delay to the construction. This was based on our assessment of the remaining works we could see needed to be completed and concerns that the lead EPC contractors schedule did not reflect this. This was due to a combination of late engineering changes and resource planning, principally people on the ground. Early this month, On the 7th June, we reported that we had received a notice of purported termination of the EPC contract by the lead contractor, Angie Fabricon. Since that date, we have been working through the legal and contractual implications and working with Angie Fabrikon to establish the status of the outstanding works and our best route to completion through building the necessary resource and capability to get this job done. Today, I can now update you that the contract has now been terminated. This means that we have also now taken over the responsibility For the safety and the security of the site, we are taking over and gaining control. Ongy Fabricon has been demobilizing from the site over the last couple of weeks and are due to provide us with handover documentation. This will allow us to establish the status of works done and the works remaining, allowing us to take safe control of the project. At this stage, our analysis is indicating that we may not need to appoint another lead contractor to complete the works. This is simply because the works are at an advanced stage. No decision on this yet has been taken. We are only 11 working days into the purported Actual termination by Angie Fabricon, and we are still completing a full evaluation. However, this is our current expectation and direction of travel. Additionally, in the last 11 days, we have been boosting our project management and project recovery capabilities on the whole site. Finally, we are committed to doing the right thing for the affected people and to maintain safety as our top priority during this challenging time. While as I say, Hull has been a challenging project for some time, I want to just recap for a minute on what we are trying to achieve with this plant. Let's just step back for a moment. I feel compelled to describe where we have come from on this journey with Tricoia, which could be described as on a bumpy road. However, the destination at the end of this journey remains an extremely attractive commercial opportunity. The whole project began in 2017 when the Tricoia Consortium was formed, which is a venture between Access And our commercial and investment partners, including Medite and Finser on the panel side and INEOS, formerly BP, on the acetile side. Through the consortium ownership structure of Axis, Mediter Ninius, Axis look through interest of the whole plant is around 47%. The plant cost for the whole plant to date is circa €80,000,000 and the expectation is that once the plant starts, We will ramp the manufactured volumes up to the capacity over a 3 year period. In my experience, this is prudent, Even with new technology. Given the high value nature of the Tricoia product, we maintain our plans to hit breakeven at only 40% capacity. While the plant is being built, we have been building market demand by chipping up acoia wood and turning it into tricoia I'm working with our offtake partners to seed the market with Tricoia panels. This is building momentum ready for when the plant turns on. This activity continues to confirm the compelling market opportunity for Tricoia based wood panel products. The plant will run with a continuous production process rather than the batch process in Ocoya in Arnhem. We will start with 40,000 metric tons capacity. The plan remains to be able to extend an ag capacity to the existing site over time, which allows higher returns as with our extensions to existing sites with good economies of scale envisaged. Because we use wood chips as a feedstock in this process, we can use a wider range of feedstocks than those used for a coir. Our Tricoia feedstocks are expected to be more local and domestically sourced. Once we have established Hull, Like any new technology plant, we expect some coughing and splattering and starting our Tricoia plant will not be like turning the key on a new Mercedes, we know that. But once we work through this phase and we are ready with the technology learnings from this world's first project, we have an agreement already in place with Petronas in Malaysia who want to partner with us there to build a Trecoya plant. We anticipate being in a position to start the design of this Malaysian plant after about 6 months of operations at Hull. The other aspect to Hull is the product itself. In our marketing, we call Tricoia a new breed of MDF. And I think that is even a bit of an understatement. It's a game changing, market disrupting, new building material component. We and most of our offtake partners think it is a transformational product. The panels that Tricoia creates, unlike MDF, and they don't shrink and they don't warp, they effectively don't absorb water. They offer a huge amount of design freedom, strong durability, low maintenance and easily coated applications if required. You can see some examples here from the shop fronts used in London to Holiday Homes in Mustique. It's a great high value and high margin product. So in summary, There is a really significant potential for the Tricoia product and our technology globally. I'll now take you through an overview of our business and our segments. This is another good shot. Just Quickly, it's a stunning residential project in the Napa Valley using a coir in the cladding. Many of you know us really well, so I'm going to walk through the next few slides pretty quickly as a summary to recap on what we do, our products, our market and our strategy. The overview of our strategy is this. We have a great world leading products and technology with a large market growth opportunity And a global growth strategy with a capacity build out plan to increase our production capacity by 5x to 200,000 meters cube by 2025. We sell 2 key products, Okoia, our solid wood product Tricoia, our chipped wood element. We make our products through unique and protective processes and technologies. We use acetylation, which is a bit like pickling. Essentially, our technology boosts nature. Our process transforms our wood into a high performance product that is highly stable. It doesn't shrink, it doesn't move and it lasts a very long time. 2 key things that are valuable in wood performance and why our customers actually love our products. It is also highly sustainable compared to There is a significant global growth opportunity for our products. We operate within global wood production industry, which produces over 800,000,000 Yes, over 800,000,000 cubic meters of lumber and wood panel products annually. We also compete with adjacent non wood construction materials. So actually, our total addressable market is even bigger. We segment our market further, geographically, where our main focus From this segmentation, we envisage an estimated achievable market for our products of over 2,600,000 cubic meters per annum For Tricoia and Acoia together, we currently have just around 2% of this estimate on our current annual capacity. So Axis has a really significant market growth opportunity in front of them. As a company, AXIS has a clear purpose, changing wood to change the world. We pursue this clear purpose by acting in accordance with our values, Being ambitious, respecting and valuing all our stakeholders and being committed in all we do. We have a 4 pillar strategy to grow demand for our products, expanding our capacity and practicing excellence in our manufacturing. And importantly, yes, importantly, developing our processes and technology and investing in our talent to manage and deliver this growth. On the bottom right, we have our 5x production capacity growth target chart, and I know you're all familiar with this. We started in 2019 with 40,000 meters cubed, And we aim to get to 200,000 meters cubed in 2025. So turning now to our Ocoya business segment Performance in 2021. The Coia business performed strongly in FY 'twenty one with strong EBITDA and strong margin performance. Revenue growth was strongest in the last three quarters of the year after the impact in the Q1 from a COVID-nineteen disruption. We saw this most strongly in April when customer supply chains were initially disrupted. Sales volumes recovered strongly with demand exceeding our production capacity across the remainder the entire remainder of the year. Acoia's revenue performance has also been supported by an increase in average sales prices. We have benefited in the 2021 financial year from price rises In the prior year, and these were maintained through the COVID-nineteen period, this plus the removal of the previous earlier discount arrangements in Europe that benefited our average selling prices this year. A further price increase also took effect in November 2020, which also helped to address expected increases in raw material costs. Looking at our regional trends, we have seen a particularly strong performance in the U. S. In the second half. We are continuing to ramp up our sales and marketing activity and increase allocation in the North American region to support our expansion plans there, which I'll come to just in a moment. This year, we have seen some higher than usual drawdown of the inventory stop we keep at Arnhem. This has been due to some supply chain disruption during the year, both COVID-nineteen and other effects impacting some shipping flows of raw materials. We have ended the year with lower than usual inventory levels, but we are rebuilding them into the new financial year. We also launched a new product during the year, Acoia Color. This is a true color wood product that is intended Throughout the entire material, the response from our customers has been really strong and demand has decreased across the year. If I look at the strategic development to the next slide of Akoya, We are adding a 4th reactor to Arnhem plant, which will add another 33% to current capacity. They are bringing the plant to a total annual production capacity of 80,000 meters cubed. We have forecast a 3 year payback on this project. We expect this to complete at the end of 2022 financial year, and we are making good progress. The physical Groundworks began in February and since the new reactor itself has arrived on-site. You can see this here in the bottom right picture. As I just mentioned, we see good scope to increase our acoia color product offering and this is one of our development goals in looking at ways we can expand our ability to treat and convert regular Acoya to Acoya Color, a higher margin product. Our joint venture with Eastman Chemical in the U. S. Has moved further ahead Since the half year, we have completed the independent market research we needed to do, validate the market opportunity and then identified an achievable market of up to 1,000,000 meters cube for Acoya in North America. We are already building on our foundations and have established a beachhead on which we can ramp up and grow sales ahead Building this new dedicated plant, we have appointed 5 national distributors already that give us coast to coast reach and up to and including Canada. On top of this, our sales team are building and growing relationships through the Acoya approved manufacturers program. Turning to the JV itself, we have moved our planning ahead. We have also updated the market as I make capital raise with further details on these plans, And I need to summarize the key points of where we are today with this joint venture. Under the joint venture agreement, Axis owns a 60% share With Eastman a 40% share, and we are planning to build a plant on the Eastman Chemical site in Kingsport, Tennessee. This is adjacent to their acetiles operations, which will give us the benefits and efficiencies, the operational support and acetile supply. This location facilitates additional closed loop recycling processes to further enhance the sustainability of our product. The site is in a good strategic location for Transport Links and the plant will effectively duplicate the existing Acoya technology we have in Acoya Arnhem, essentially a copy paste project. Initial plant will have 2 reactors, which is normally 40,000 meters cubed in capacity with the potential for up to 160,000 meters cubed of capacity by adding further reactors in future for cost effective expansion. From the timeline, you can see we are now working on the final FEED, The engineering study. We expect to make the final investment decision this summer. And from that point, we expect construction to take approximately 2 years. From the point of becoming operational, we should reach EBITDA breakeven after 1 year of operations. Since May, we have received the regulatory air permits and reached an advanced stage in appointing an EPC contractor for this project. The debt financing work is progressing well and the key services contracts are in a fairly advanced stage. We expect the cost of The joint venture to be $130,000,000 in total, and it will be funded by a combination of project finance debt by the joint venture and the equity contributions I described earlier. We saw Strong support from our existing shareholders for the capital raise in May, both the institutional placing and open offer were well oversubscribed. And I'd like to thank our shareholders again for their support as we get ready to accelerate the U. S. Opportunity. We expect to achieve a leveraged pretax IRR of 20% and joint venture revenues of over US90 $1,000,000 at initial build capacity utilization. So building for sustainable growth is a recurring theme for us. We see the potential for products and businesses, But we also need to get ready to manage growth through our organization, people and processes in a sustainable way, Not just sustainability in the green sense. ESG is a key part of this, a way of mapping our responsibilities, impacts, opportunities and priorities and is integral to developing our organizational capabilities. We are growing our teams and developing new ones, such as our strategic global functions For health and safety, engineering, technology, assetiles management, this resulted in increasing our headcount by about 11% year on year and adding talent where it can have the most impact to this growth agenda. A great example is shifting our R and D to a center of excellence model to better support our products and teams as we grow across multiple sites. We've also published our 1st standalone sustainability report and new ESG framework in November And are taking the next step in our reporting by reporting to GRI and SASB ESG disclosure standards alongside our upcoming annual report and can share some key highlights here today. Our 2nd annual employee engagement survey showed improvement across all areas, And it was very, very encouraging to see specific improvements on topics identified as opportunities for improvement last year. A great overall measure is how many of our employees are proud to work for Axis. And actually don't mind saying it, We improved on an already high score there to bring up to 80% of our 82% of our employees. Safety is one of our highest operational priorities, And it was disappointing to see an increase in our lost time instant accident rate year on year. Albeit in real terms, this was due to a single additional incident, 2 last year, 3 in FY 'twenty one. Our goal is simply stated for 0 LTIs. We have a new safety strategy underway and expect to see improvements from this over time with our new Think Safe AgSafe program. In FY 'twenty one, we updated our methodology for calculating the way that CO2 is locked into our products, In line with current best practice, giving a total of nearly 50,000 tonnes of CO2 stored in the products we made and sold last year. This is equivalent to 122,000,000 miles of car emissions. We also achieved a 24% reduction in emissions intensity, I. E. That CO2 equivalent emissions producing 1 cubic meter of product, with 7.5% achieved solely through efficiency improvements. So to finish up today and in summary, We have delivered a strong financial performance and a further step forward in our profitability. We have a robust balance sheet supported by cash generative nature of the Aquoia segment, and we are well positioned to advance our growth plans. Our strong focus is on hull and completing the work we need to bring this online and unlock the market potential for our Tricoia products. When we look ahead at the 2022 financial year, we expect revenue growth as we enlarge group production capacity as the 4th reactor at Arnhem comes online. We will continue to invest in our organizational capability and talent. This will allow us to manage and deliver our growth plans. Group overheads will necessarily increase next year. So longer term, we expect to continue to achieve improving profitability as we increase the level of sales from our capacity expansions under our 5x plan. We will benefit from the economies of scale associated with higher operating levels. And once the 4th reactor and hull come online, Our 2 current construction projects, we will effectively double our current capacity from 60,000 meters cubed to 120,000 meters cubed per annum, which is a significant step up for AXIS. So to wrap up, we are very excited about the next phase in our growth journey and achieving the vision we have set for our Acoia, Tricoia and Access Business as a whole. With that, Will and I will now take your questions. And thank you very much for And to cancel, it's the hash key. So that's star and 1 for telephone questions. You can also submit questions via the web. First question today is from the line of Christian Scholes from Numis. Please go ahead. Thank you. Good morning, everyone. I've got 3 questions, if that's okay. The first one, just on the U. S. Potential planned U. S. Aqua plant. Thanks for going through that. Just in terms of exactly what needs to happen from here to get it completed, that the EPC contract needs to be signed and the debt What's in place? Are those sort of the final things that need to be tidied up? And then related to that, I suppose, what lessons have you learned from the whole project in terms of pension modeling in the Coia plants in the U. S. The second one is on You pointed to net debt to EBITDA being, I think, sort of 1.2 times. And with EBITDA increasing at Arnhem, I just wonder What scope that gives you to perhaps refinance and maybe move to a more traditional debt structure leveraging that And then finally, as you pointed out, I think BP sold its chemicals business to INEOS, which is now Now a consortium member for Tricoia, just wondering how conversations have gone with them and just assume they remain supportive of that project going forward? Thank you. So I'd like to take The first one, if I may, Christian. In terms of our plans for the U. S, things have been progressing well since August When we signed up the joint venture, we'll be doing the initial engineering, what we call the FEED, the front end engineering design process. In terms of the next two significant milestones, we're due to complete that engineering project and to Get to final investment decision to allow us to appoint And EPC contractors. So those two key milestones, appointment of the EPC contractor and the FID, the final investment decision, are anticipated to be in the summer This year, so not too far away. In terms of your second part of the question around the U. S, Clearly, there are many lessons to be learned from Hull. We're very reflective on that. And we've Translated those lessons into a different type of governance structure, the way we're managing the project in North America with Eastman. Eastman is a very proactive partner, very collaborative partner in this project. And building plants is what they do as part of their living. And they are taking a lead role in the EPC, And the planned EPC project, the project manager is likely to be an Eastman employee to assist us in successfully building out the project on time and on cost or on budget. So yes, there are lots of lessons to be learned there, as you mentioned. If I just go to your third question around INEOS and then And back to Will on the net debt EBITDA ratio. In terms of the relationship with INEOS, they're a very supportive partner, and They are geared around organic and inorganic growth on their acetals business. They see the opportunity to supply Increasing volumes of their industrial pickling agent to access across Europe and potentially in other parts of the world. So at this stage, they're very focused on the growth opportunity that they can see to grow with us through supplying this critical raw material to the Axis portfolio of products. So overall, very supportive as we Maybe I hand over to Will now on the net debt question. Thanks, Rob. Christian, I think you're absolutely right to highlight the net debt to EBITDA ratio. I think over the next period of time, it is something we're going to be examining very closely and carefully as to whether there is an opportunity to Put perhaps a more traditional financing structure in place. Our ambition, if we do that, would be to, in the first instance, reduce our cost of debt. I think as I said earlier, on our balance sheet is robust and I think there is an opportunity for us to look at that very carefully. It's not been something we've been able to do Over the last year, in particular with COVID causing disruptions more generally in the financial markets. I hope that gives you an indication of how we're looking at it. So I think in line with perhaps how you might expect us to progress things. Yes, excellent. Thank you very much, both. Thank you, Christian. Thank you. The next question is from the line of Toby Tharington from Edison. Please go ahead. Thanks. Good morning all. Hopefully coming through clearly. I've got A few cash questions, please, and one sort of TRICORE business question. Actually, I just have a quick follow-up on Christian's Last question actually. Can you just confirm in the first instance what the current cost of debt is Will, please? It averages about 7%. We have a number of facilities ranging between 3% up to 9%. Yes. Okay. That's great. Thank you. I'll answer my own questions. First of all, could you just update us on what the, If you like, the COVID cash benefit was in FY 2021. And Ergo, what's flowing out in That has already flowed out in FY 2022, whether it's government support, salary top up or tax. That's the first question. So I think you're right. We have elected to repay the government support we received During the year, it was about €600,000 and that's been repaid post year end. There was a further repayment of some salaries, which had been reduced for 4 months earlier in the year. That's about another €200,000 in total. Was there any cash tax Benefit, Will? Any sorry, any what benefit? Any cash tax, tax deferral? No. No other benefits taken from a tax perspective or otherwise. Okay. That's great. Thank you. If I can move on to CapEx, slightly difficult question, I suspect. I'm sure you can provide the sort of Expected Arnhem for reactor CapEx for this year, I guess the tricoir CapEx is slightly more Open ended. Could you give us some sort of guidance on that, please? I think I'll provide the guidance for the 4th reactor. I think during the last year, we Incurred about €5,000,000 on the 4th reactor project. If you recall, our expectation was a total of about €26,000,000 Excluding the additional and upgraded wood handling equipment and the tank the chemical storage, So the majority of that is still to be invested over the course of this year from a cash perspective. For the Tricoia plant, We're not in a position yet to provide that guidance. There is clearly still some more CapEx to be incurred. That is clear. But until we can complete the sort of the analysis, the GAAP analysis that Rob explained earlier, we're not we can't be certain as to what that quantum will be Or how long it will take and the duration of the remaining work may have an impact on the quantum as well? Of course. Yes, that's understood. And I presume there's no provisioning one way or another against The whole situation in the year end balance sheet, would that be right? So I think it's exactly what you mean by the situation. So you may As I went through the net debt bridge, we do have some CapEx accruals in place where we work is being carried out in advance of payments being made. As far as provisioning, there's no provision. I think the The termination is a post year end event. And as we said earlier, there's ongoing work to be completed and determined before we can Set out exactly what the remaining costs and cash payments will be. Yes, understood. Sorry for asking the question 2 or 3 different ways. Understood. Understood. Bear with me. Sorry, almost at the end now. Could you give us some feel for So the natural inventory levels, let's assume we're on the other side of Arnhem IV being commissioned and running and Hull being Commissioned and running. So let's say, middle of next year, what's the sort of natural inventory level For the group on that basis, would you say? Can I try and answer in a slightly rounder way? I think we say In our results, there's about only about 2.5 weeks of finished goods inventory at the year end. That is low. I think ideally we would normally like to have at least a month, normally a little bit more than a month of finished goods inventory at any one time. Raw materials tends to fluctuate a little bit more given the natural flow and the long lead times. Those inventory levels are also low at year end, But we would typically have another month or so, maybe more than that of inventory at any one time. So you can see even compared to last year, which was perhaps a more normalized level for our current operating level, our industry levels are quite a lot less. Yes. Okay. All right. I'll drive it off revenue numbers then. That's fine. Thank you. And final question you'll be pleased to hear. Regarding TRICOIA, just wondering whether the sort of partnerships that you have, existing customers and prospectively Other ones as well, whether you're aware through conversations whether either Medite or Finza have been laying down sort of Additional capacity or production lines in anticipation of hull coming on stream? Yes, it's Rob. I'll answer that. I mean, the beauty of the product is it's a drop in product to their existing Production process. So it's a substitution into that process. We are aware of investments One of those companies has made in terms of the storage and handling of the product to facilitate that, so they have committed CapEx into Business to do that, but as I said, the beauty of the product is a drop in to the existing wood chips into their traditional process. Got it. Understood. That's great. Thank you very much. Thank you. We'll now take analyst questions via the web app. We've got one question that's coming from Tom Ramsey at Investec, which is a 3 part question. Firstly, how are you planning to react to current timber price volatility with the coir pricing? Secondly, in the medium term, do you see For Acoya Manufacturing Margin Achieving 35%. And lastly, could future capacity expansion be more on a royalty model? Thank you, Tom, in terms of pricing of a coir, we've seen a lot of Movement in timber prices around the world, lumber prices currently is a very frothy market. We've seen 40%, 50%, 60%, 80% increases there. For what we've been doing on acoia and to some extent tricoia is a very disciplined segmented approach to our Specialty Product. We do not see the need to commoditize our products by Becoming opportunistic in pricing. And what we've got on our supply chains in principal raw materials are long term relationships, Long term contracts on the supply of radiar pine for our acoia, which allows us to have relatively stable pricing because of the investment, The forestry managers and the production mills, the wood mills, the sawmills Have to invest in producing a clear Acoya product. So They recognize they have additional margin built in there, and they're looking for price stability. So we have currently reasonably stable prices. We are having to price I'll pass some costs through. But on the principal raw material, the radiat of pine, we have generally a stable price. And as Will explained, when it comes to the impact of the acetyls, we have this natural partial hedge on the anhydride and the acid, which again contributes to keeping our margins fairly stable and allows us not to Become an opportunistic price player on the Acoya product. In terms of Could we exceed 35% in terms of gross margin? It's Possible to do so. But at the end of the day, we have to be very focused on getting the right value proposition to the customer And how we segment for different applications, windows, doors, decking and cladding and how we bring on more value add products into the range as well. So it's Possible. I personally don't believe we've hit the glass ceiling, as I said on a previous call, on pricing. But this is a very frothy market at the moment, and we want to tread carefully through it to maintain the specialty nature of our product. In terms of your 3rd question around the type of business model that we could deploy. As people know, we currently have a business model which involves 100% investment by access in some facilities. In some facilities, we have joint ventures or consortia. And our path to get to the 5x Growth planned 200,000 meters cubed from 40,000 meters cubed involves a combination of 100% owned Axis Entities and Joint Venture Arrangements. The key to that strategy is to demonstrate that we can replicate Both the Acoya and Tricoia technology and scale up internationally around the world. At that point, what that gives us is a choice, a choice to be continuing with either 100% ownership New facilities by Axis in new territories around the world, continue with the joint ventures. We'll potentially look at A license model for our technology, once we've proven that we can copy paste Pacoia internationally And we can copy paste TRICOIA internationally. That would give us the opportunity, if we choose to do it, for a licensing model as well. Thank you, Tom, for the question. Hopefully, that answers your questions. It's back to Sarah for just a further question. I think that's all we've got time for on the web app. I'll just Thank you. In that case, that does conclude the conference for today. Thank you all for participating and you may now disconnect. Thank you very much. Thank you.