Swedish textiles recycler Renewcell doesn’t expect to break even in the fourth quarter.
The company said on Thursday that it’s taking long to ramp up Circulose pulp sales to fiber producers than it previously expected. This impact on working capital and cash flow in the third quarter is expected to continue in the fourth quarter.
Renewcell’s patented process recycles cellulosic-rich textile waste such as cotton and viscose.
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This summer Renewcell reported process changes at the Renewcell 1 production line in Ortviken, saying this would help it break-even on a cash-flow basis by the end of the year. But while production capacity is developing as forecasted, sales continue to lag.
The 13-year-old Swedish innovator said it continues to receive strong interest from a “large number of consumer brands” who believe Circulose will help their sustainability goals, noting that the “medium and long-term outlook for Circulose sales remains very strong.”
Renewcell is taking steps to speed up Circulose adoption by securing off-take agreements with fiber producers and forming the Circulose Supplier Network, which works to train and educate suppliers and has grown from 47 members in July to 116 in October. Renewcell also sells Circulose to a sales agent who ships stock to China, where it is held to speed up delivery time to Asian producers.
As of the end of September, Renewcell sold 14,400 tonnes of Circulose, including one-third to fiber producers and two-thirds to the sales agent. It has received payment for 70 percent of the final sales value from the sales agent, with the balance due when there is an onward sale to a fiber producer. Renewcell said it was this part of the textile value chain that was expected to be down in the “short term but is now expected to continue during the fourth quarter and well into 2024.”
With sales taking longer to ramp up, Renewcell has had to fund accounts receivable totaling 55 million Swedish krona ($5.0 million) at the end of September for the 30 percent that the sales agent hasn’t yet sold.
Renewcell expects to report third quarter results on Nov. 7.
New partnerships such as a deal with fellow Nordic innovator Spinnova could help Renewcell expand Circulose adoption.
