Good morning, everybody. Oh, good morning, everybody, and welcome to our third quarter trading update. This morning, we've got Jan and Russ here. Jan will run through a presentation, and then obviously, there'll be Q&A afterwards. I just want to remind you all that this is being recorded, just for your information, and it will be put up on the website later today. With that, I'll hand over to Jan.
Thank you very much, Louise. Good morning, everyone. Good to have you here as well, Russ.
Good morning.
This is, as Louise said, a trading update, not a full quarterly audited result report, so to speak. So, I will be running through an overview of where we are and how we see the world right now, and Russ, obviously, is here to help out afterwards, but I'll be making the presentation today, given my new role as the Working Chairman. As you know, Tim will be leaving by the end of the year, and we thought that it was most natural that I would be the one presenting and being here today. So really looking forward to, first of all, the session today, but also getting to know many of you more directly as we go forward. Good.
If we just take a look at the so a little bit of an executive overview, so to speak, I think we have actually done quite a lot in the business, step by step, to reposition ourselves for what we call profitable growth. First of all, in our core conversion business, where we have refocused our attention to where the applications, the areas where we really see that we have a strong competitive advantage, and we'll come back and talk a little bit more about that.
I guess the largest piece of news over the last three months and that we've been working on for a good part of this year is the repositioning of Cyclyx, reshaping the business model there, and really taking that, the already existing platform for recycling of plastics and the waste management part. But with the change of business model, really taking the first very large step towards building the first circularity center, the Cyclyx Circularity Center, CCC, as we call it. And also as part of that, securing the investment, most importantly, probably, and we'll come back and talk about that later on. So a really very significant step for us forward.
If we look at more the operation performance, the gross profit contribution has improved year-over-year, despite the fact that we see some weakness in the revenue and some parts. We'll come back and talk a bit more about that as well. What I also think is quite important is the step that management took here, well, in late summer, early fall, and actually resized the size of the operation and really drove down the overhead cost quite significantly. We'll take a look at what the positive impact that that has had on the overhead cost that we're carrying now.
And then, it's some of the progress as well in terms of some of the projects we're pursuing, in particular in the conversion business. And of course, thanks for those of you that are online that have helped and contributed to the capital raise that we concluded at the end of October with a NOK 20 million raise at basically no discount to the share price. That I think in the current market environment is a clear sign of strength of the company as such. And we have used some of these proceeds also to repay some of the debt that we had raised earlier in the year.
So I think all, if you look at this picture overall, it's a pretty strong position and a lot of good stepping stones for a super interesting and exciting future that we have ahead of us. So with that, as sort of just setting the scene, let's take a look at the various pieces. And from a trading and performance perspective, as I mentioned, the revenue is slightly down to close to NOK 11 million versus the NOK 12.7 million same period last year. And obviously, on the Agilyx side, it's driven by the Toyo project in Japan. We'll come back and talk more about that a bit later on, which we are very excited about the progress there.
The Cyclyx revenue is a bit lower than last year. There has been some issues on the customer side in terms of their ability to take the material. We see an improvement, as we indicated, I think already when we had our half-year result, that we expected a better second half of the year, and we see clearly that that is starting to materialize already in the third quarter, and so that's a positive sign as such. As I mentioned, the gross profit contribution is improving, and which is obviously of very essential and important for us.
I think generally speaking, as you think about us going forward, this is something that, tying on to the last point on this slide, that we will not consolidate, and the results from Cyclyx going forward anymore. So I think I think we should look upon Agilyx P&L in a slightly different way going forward, and not only look at the growth line, but also look at the earnings, so to speak. And that's something that just making you aware of. And then the operating cost that has come down quite significantly, and we'll see that on a slide later on as well. So I think we'll go to the next one.
Focusing our attention a little bit on the conversion business. I mean, it's nothing new on the left side of the slide where you see the strengths of the business, something that is extremely well-founded. I mean, we're almost 20 years of experience. We're on the eighth generation of our conversion reactor technology and design. I mean, that, I think that in itself is a proof of the stability and the solidity of our conversion technology and for how long we have been around in this industry.
Also, I think, I mean, look, still looking upon myself as a bit of a newcomer, I think this concept of taking waste to product, which might be a bit of a jargon that we are using, but I'm sure most of you have heard about it before, that we not only go from the waste to an intermediate pyrolysis oil, and then the customer has to refine it and take the final steps themselves.
But we have developed for several of the different type of plastics or polymers a more complete solution where we also take care of the refining stage so that you actually get to a monomer, which is then the building block, really, to start making product again and making plastic polymers. So that's what stands behind the waste to product, and I think that sets us apart from many others in the industry. And what also perhaps doesn't completely set us apart, but I think is an attractive aspect from an investor perspective, that we have an asset-light business model. In other words, we are not a build-own-operate company when it comes to our conversion technology.
We are obviously seeking the proof points and the reference sites for our different technologies and solutions in the market. That's why we are so excited about Toyo. That will be a very important such one for styrene, where we're obviously, as you can see on the right-hand side here, making good progress with several of the key projects that we have talked to you about before in both styrene and then also with INEOS and in Kumho in Korea.
Mitsubishi, where we have a very strong relationship and discussion around the PMMA solution, and then the company BioBTX for the aromatic chemicals, which actually is a very large part of the total petrochemical market as such, with BTX and that's, we have a well-advanced discussions with them around the project as well. So the exciting times ahead and determining times ahead in terms of materializing this part of our pipeline to really then get these proof points in the market, and by that, sort of start going through an inflection point and an acceptance and readiness from our customers to make those steps and allocate their capital to build these type of plants.
Big potential, as you can see to the right, but I don't think we will go too deep into that today, but... And then moving on, I mentioned Toyo. Here is a fresh and crisp and clear fall day in Japan, where you see the plant, the current status of it, where our unit is the silver-gray part in the front, where with the reactor. But it's really exciting to see, and I think it sort of brings it to a different level of concreteness when you see a picture like this, that the plant is actually basically completely erected. We have our commissioning engineers going out here in about a week's time to start the commissioning.
The staff from Toyo have been to Tigard. Tigard is our plant in Portland, Oregon, where we have our development site, and they have been there for training, et cetera. So this project is progressing very well. Very good cooperation with the client. So we're very excited about this and targeting then to have the plant starting up here in the first quarter of next year. And this should be hopefully a first step of many to come. I mean, this is a site where the customer has been quite clear with us that they take this step now, prove the technology, get acquainted with the operation, et cetera, and then there could be more to come.
So again, this is a stepping stone to something more, so to speak. So, exciting times. And if we then shift our attention to Cyclyx and the waste management side of the business, I think you're all, of course, familiar with the fact that this is the step prior to the conversion, which we then run within Styrenyx, and we are one out of many that have different solutions in the conversion side. Cyclyx addresses the step prior to that in the value chain, and which has been addressed many times as well, but I think worthwhile repeating, that Cyclyx do not only address the advanced and chemical recycling part, that can also be supplying material for mechanical recyclers.
So, the market is even greater for Cyclyx as such. What you have on the slide here is then the setup that we have now reached here a month and a half or a month ago with ExxonMobil and LyondellBasell, where LyondellBasell has bought 25% of the shares that we had. So we have gone down to 50% ownership, ExxonMobil staying at 25%, and Lyondell coming in at 25% ownership. The earnings potential now with this reshaping of Cyclyx from which has been also previously an asset-light model with a membership and selling licenses, et cetera, but that was it.
We have now reshaped that and said, okay, Cyclyx should actually be a build, own, operate a company, and we have a vision or a medium, long-term plan together with our partners to look at at least five units. And this is in the combination of the offtake, the requirement for material that ExxonMobil and Lyondell have themselves, but also in order to address an open market opportunity that we know from all the work that we've done in Cyclyx, that opportunity is very big. The earnings flows, as you see here, will be twofold for Agilyx. One will be a direct volume-based royalty.
That's number three on the chart here, and the other one is a management fee that will go from the units, so to speak, to the company Cyclyx, and where we obviously then, as a 50% owner, will see half of that as a ultimate ownership revenue going forward. And if you go to the next one, we've laid out a little bit how this could look, and you've seen this from our presentation at the end of October, so there's nothing new on this slide. But to the left, you see the opportunity as we lay it out now together with our partner, ExxonMobil and LyondellBasell.
But where you see the first line, CCC 1, is then the management, 50% of that NOK 7 million management fee for the first one. These are very low because the way this is now set up is that we, that Exxon and Lyondell are contributing 100% of the capital on, on a non-diluted basis for the first CCC. We have contributed IP and know-how into the company, and, but, but we have not been required to contribute cash or for the investment. Hence, the earnings for us, the management fee is lower. When you then look at CCC number two, that is considerably much higher, and that's on the basis of that we then have anticipated to participate with our pro rata part of the capital required to build the second unit.
If you look at it, NOK 120-130 million investment, we're looking at approximately a NOK 60 million capital participation in there. And you also then see that the earnings and basically based on the pricing that we have agreed with Exxon and Lyondell. So that is already agreed. The numbers for number three, four, and five are then on the assumption that they would be the same as for number two. We've been on the conservative side, I think it's fair to say, when we have made these estimates. So if you were to ask me, I would say that if anything, there's a potential upside on the number three, four, and five.
But we've kept it on a moderate level just to give you a feel for what that earnings will look like. And then at the bottom, you see the already pre-agreed royalties that Agilyx will see per unit. So NOK 2.5 million at the volumes that are so or we have for the first unit, 178,000 tons of material going into the CCC. Just for detail, perhaps, but the output is approximately 150,000 tons.
So when we talk about the 178, that's the waste coming into the unit and the material that we will deliver, the offtake that Exxon and Lyondell have committed themselves to, important to point out, is in the tune of 150,000 tons per annum. On the right side, you see the potential that you have going beyond what we have together with Exxon, Lyondell as defined today, and where we see there are several companies knocking on our door, where we have initial and also advanced discussions with of how we could help them build something similar that we now have agreed to build for Exxon and Lyondell. This could be done in different ways.
This could be done exactly similarly to the way we're doing it with ExxonMobil and LyondellBasell, where we do it within the framework of the Cyclyx. This could be done in a separate vehicle. This could be done that Agilyx buys a license from Cyclyx, and that we do it in the name, sort of in the construct of Agilyx. So there are many opportunities which all have been discussed and pre-agreed with our partners, by the way. So this is all in complete transparency and alignment with them, that those are possible pathways going forward. You see at an approximate NOK 30 million per annum for Agilyx as a potential cash generation in some of these scenarios, and these are early days.
These are approximate numbers based on some assumptions that we made on both cost of the waste, of the input to the units, as well as assumptions on the price points for the offtake. Be aware that these- we're basically making a market here, I would say. So there are no long track records of price points available in the market yet. So there, these are- there are assumptions behind these numbers. But we wanted just to give you a sort of an indication of what the earnings potential can be here. All right, moving along. Excuse me. If we then take a look at the Agilyx perspective of what impact will this have?
I mean, first of all, as I mentioned, the hundred and thirty-five million is already committed and by ExxonMobil and LyondellBasell for the first CCC-one. This covers then the full capital cost as it's been estimated on the basis of the engineering. I'll come back to that in a second. So, and some of the funds that are required for Cyclyx in order to build out some of their basic capabilities, scale up the organization, and also, as you can see here, start an early part of the engineering already now for CCC-two.
So ExxonMobil and LyondellBasell are extremely keen to not only drive through and execute number one, they already now want to start the engineering for number two, targeting an FID or an investment decision in the middle of next year, prior to that, the first one is up and running. So that's just a sign of the confidence and the interest and the appetite to move forward here from our partners. But what this means from an Agilyx perspective is that we there, there's quite a bit of cost level that will be now transferred completely to Cyclyx, and not be a burden on the PNL for Agilyx any further, anymore. And you see on the graph to the right, you see the impact of that between the first and the second column.
And then to the right of that, the third one, current run rate, is there you see the impact of the cost savings and right-sizing of the organization within Agilyx that we had initiated here during the third quarter. So I think I really want to commend the initiatives taken by management here to achieve that. So we have a substantially much lower run rate of our cost burden, so to speak, in the company today compared to a year ago.
So I think this is quite important, and I think it's worthwhile repeating what we said during the time when we raised the capital, that we, with the current run rate and the money that we have raised in the market now, we are fully funded up until the end of 2024. So that's, I think, a very secure position that we're in. All right, just focusing a little bit more details, perhaps, but I think it's quite important, given the step that we've taken with the reshaping of the model for Cyclyx, that it's now very important for them to build out the organization. The FID is expected here in a couple of weeks' time, we're all very focused to bring that into fruition, so to speak.
The site is secured, has been identified since long, but the contracts are now signed, so the site is secured and we can start moving forward on that basis. And we are expecting to start the construction very soon after the FID has been taken. And secondly, the lab is fully operational now, which is up in New Hampshire, where a big part of the organization for Cyclyx is sitting. So we're taking now very quickly the ramp-up steps to make sure that we are not only able to talk and be excited about the business opportunity as such, we also have to deliver on it, and that requires resources and capability build-up, so to speak, which we are very focused on.
Here, I also think the good cooperation with ExxonMobil and LyondellBasell will help us because they have, of course, vast experience and resources available, and I see a very good cooperation spirit now between the three parties to make that happen. All right, so summing this that up, I think we've made some rather significant changes to the business this year. Well, every little step counts, so to speak, repeating some of the points that we covered already. Refocusing our conversion business, the Agilyx conversion business, to more focus where we really have competitive advantage and not trying to go too broad, but rather be laser-focused on the opportunities and the areas where we can really compete and stand out versus competition.
Cyclyx, I mean, it speaks for itself. I think it's an enormous opportunity, and from what I can judge and see, it is not fully appreciated and understood in the market, but I'm sure it will gradually materialize, and that will have a material change in terms of the business opportunity for both Agilyx and Cyclyx. And then the changes and adjustments that we made to the business, continuing to pursue our different projects and taking the necessary steps around with the capital structure, et cetera. I think I must admit that I feel very positive, very excited about the opportunities that we have in front of us.
It's a lot of work, but that's something we're extremely happy and ready to put in order to materialize this opportunity for all of us. So with that, I think I stop my monologue here and open up for questions.
If anybody would like to ask a question, please just raise your hand and then we will come to you individually. I will stop sharing my screen so you can see a bit better.
... Anything I've forgotten, Russ?
No, I think you summarized very well. Thank you.
Adam, let me unmute you, or you can unmute yourself, can't you? There you go.
I think so. Can you hear me okay?
Yeah.
Yes.
Great. Morning. Just, I noticed in the statement you talked about slower project conversion, and, I mean, I guess related to that, Toyo, you talked about, you know, hopefully they may, in time, follow up with, with more business. And specifically on Toyo, I mean, we've seen them working actually with a couple of other companies, mainly in the energy space. They, they're probably quite a formal, conservative organization, I think might describe them. In that regard, could you give a feel for how long of a proving period they would want running this first project before they start to come back and look at new projects? And then just on that, more broadly, comment on slower project conversion, just what do you see out there in the market? What is slowing things up?
Is it fairly temporary stuff, or is it something more fundamental? And then just very finally, a very general one, the Nairobi Plastics Conference seems well, the NGOs are calling it a non-event. I just wonder if you have any views. My feel is maybe the petrochemical industry overplayed its hand a little bit, but very interested to get your take on that. Thanks.
Well, maybe if I start, and please, my colleagues here, help out here. As I said, and still, like, consider myself as a bit of a newcomer. Great to see you, Adam. Thanks, thanks for asking these very, very, very appropriate questions. If we start with Toyo, I mean, I lived four years in Tokyo myself in a previous company I used to work for, so I consider myself having some more of an insight into it, but only somewhat. The more you learn, the more you understand how little you really understand. But I have a huge respect for how methodical and systematic Japanese companies tend to be.
So in that sense, I feel quite confident that, I mean, provided that everything will go well, and we have no indications of anything else, and I want to underline that, I think generally speaking, that could be a very interesting opportunity. Personally, I've not had a chance to interact directly and get proof points or direct input in terms of how soon they would start looking at further follow-ups. But I'm sure they would like to see it operating for several quarters in order to see that they really get the results and, et cetera, that they would like to see. I don't know if, Russ or Louise, if you have any more details on that.
Yeah, Adam, I think the discussions we've had in the past, they've never clearly articulated what that timeframe would be. But as Jan mentioned, it's probably at least a half a year's worth of operating performance so that they can prove out the feedstock to output and all the characteristics of the successful running of the plant. So I think it's somewhere in that timeframe where they'll get comfortable that the technology works and that they're pleased with the offtake coming through the unit. And then, of course, that would open up conversations with potentially new business with them as well.
I should have maybe asked as well, do you have automatic right to the data coming out of the project so you can use it for marketing elsewhere?
We do have rights to the data, correct? Yes.
Mm-hmm. Which is an extremely important point. On your second question, more the general business climate, so to speak, for these type of investments, I mean, I think we were quite clear in our half-year report and when we talked about a sort of rebalancing the expectation going forward, where we said that we will be looking at an average of three projects per year versus the four projects per year that we've seen earlier, which is a function of two elements. One is the overall slowdown and the cautiousness, I think is a fair way to put it, but on the customer side, to devote capital to these type of investments at this point in time.
And the second one is a function of our that we have being more selective and more focused in the type of technologies and market spaces that we pursue. I mean, we're in that sense, we're a small organization, and you gotta make sure that you get that your conversion or your hit rate likelihood is as high as possible. And our conclusion is that we would maximize that by being a bit more focused than what we perhaps have been in the past. So it's a combination of the two. And in terms of the general economic perspective, I don't think we have changed our views on that compared to a couple of months ago.
It remains to be, you gotta do a lot of work with the customers. And we have a lot of conversations, there are a lot of discussions going on. It's not as if we don't have projects and ideas and dialogues, not at all, but it getting them across the finish line takes longer today than what it did two years ago. The Nairobi conference, I must admit that I have no comments on that. I don't know if-
I haven't got anything particular to add, Adam. I think, I think your summary is probably fair. I'm not sure it's going to hugely make a difference at this point, for us.
Yeah. No, agreed. Agreed. That's great. Thanks very much. Very helpful.
Thank you.
Thank you, Adam.
Thank you.
Good, good questions.
Any more questions? If anybody's got any questions, please just raise your hand.
... I take that as a no, and-
As we do, yeah.
Anything else, Russ, from your perspective, that you would like to add or?
No, I think one, maybe one additional thought, that we're really excited about the CCC development with Cyclyx is, as this progresses and we complete the various units, envisioned as we talked about, it really adds to our predictability and performance as an organization. Because, you know, as you saw with each CCC being developed, it does generate another recurring revenue stream-
Mm.
-which is something that helps us to be a little bit more predictable. It helps us to offset some of the spikes and that you get with the conversion business as we bring in new projects, and licenses, and engineering development, and construction. That license is a nice thing for us from a performance perspective, but as we develop conversion units-
Mm.
and CCC units, that royalty generated from those two business units.
Mm
... really adds to our, predictability and recurring revenue streams going forward. So I think it's really important that you understand that this will really help, us to predict our results in a, in a lot clearer way as we develop these assets. And, it's really gonna help in, in kind of offsetting some of the lumpiness we get with the pure conversion business-
Mm
... as we go forward.
Mm.
Great.
All right. Good. I think with that, so we draw the line, I think. Thanks for your attention, and we look forward to being in dialogue with you going forward. I know that some of the aspects of our business might not be super easy to grasp and understand. Please do not hesitate to reach out to us. We will reach out to you as well to make sure that we don't leave any questions open, and any stones unturned. So thank you very much for your attention.
Thank you. Thank you, everyone.
Thank you.
Bye-bye.
Bye.