Accsys, the fast-growing and eco-friendly company that combines chemistry and technology to create high performance, sustainable wood building products, announces the following trading update in advance of its Annual General Meeting, to be held at 10.30 a.m. (UK time) today.
Trading for 5 months to 31 August 2020
Sales levels have continued to recover strongly following the previously reported impact to sales volumes in April resulting from COVID-19 disrupting our distribution channels. In May we successfully carried out our annual maintenance stop for our Accoya® plant. This was accomplished slightly earlier than initially planned, to position the business to maximise uptime once pandemic lockdown measures eased.
Following this, all three Accoya® reactors have been on stream and sales orders have increased notably following the return to and reopening of business by our customers and end-users. As a result, Accoya® sales volumes of 20,952 cubic metres for the five months to 31 August 2020 represent only a 9% reduction compared to the same period last year despite a 35% year on year reduction in total volume sold experienced in April.
Unaudited group revenue for the period was €33.7m, a 6% reduction compared to the same period last year. In addition to the strong recovery in sales in recent months as lock-down measures have eased, the Group has benefited from full priced sales to the former Cerdia region following the termination of the Accoya® licence with Cerdia effective from 1 April 2020. Production levels in Arnhem have also now returned to their pre-COVID-19 levels.
We expect the recovery in sales levels to continue assuming no further significant disruption from COVID-19.
Tricoya® Hull plant construction progress
Following the initial disruption caused by COVID-19 through April and May, construction work for the Tricoya® plant in Hull has progressed with activity levels continuing to increase. New on-site working protocols take into account revised Health and Safety and social distancing requirements resulting in an associated reduction in productivity levels. However, overall activity levels are now at a higher level than at any previous time on the project, with monthly working hours now over three times those from a year ago.
The new Covid-19 working protocols are resulting in some inefficiencies in the build programme and we are working with our construction contractors to ensure that all possible measures are taken to meet the project schedule. We are working towards the completion of the construction of the plant in the first quarter of the new calendar year with commissioning to follow thereafter. However, the situation is being closely monitored and the impact on the project schedule remains dynamic and under review.
COVID-19 mitigating actions update
Following the resumption of full construction activities in Hull and improved Accoya® sales volumes, all UK employees who had previously been furloughed had returned to work by August and all salaries, including those of the senior management team and the Board, have returned to their pre-COVID-19 levels. Our application for compensation for payroll costs in the Netherlands under the NOW scheme applies only to the first quarter of the new financial year, given the subsequent increase in Accoya® revenue.
Our focus on cost control and working capital has been successful in the period and, as we have incurred less capital expenditure on the Hull plant than expected due to the delays with construction, this has enabled a reduction in net debt compared to 31 March 2020. Operating costs are therefore expected to show a relative increase in the second half of the financial year as we focus on our growth strategy.
Progress with Accoya® capacity increase
Work is progressing with the expansion of the Accoya® plant in Arnhem by the addition of a fourth Accoya® reactor, which will increase the capacity to 80,000 cubic metres. The reactor vessel has been ordered and an engineering, procurement and construction management contract has been entered into with detailed engineering now being undertaken. The project is expected to be complete by March 2022 as previously reported.
Joint Venture with Eastman Chemical Company
In August we were very pleased to announce the formation of Accoya USA LLC, a new joint venture with Eastman Chemical Company which intends to construct and operate an Accoya® wood production plant to serve the North American market, a key target region with, which we estimate to be, the largest market potential for Accoya®.
The new company has been formed and a technology licence entered into to enable front-end engineering and design for the proposed initial 40,000 cubic metres plant to be completed. A decision whether to proceed to the next stage of plant construction, and as to funding, is expected to be made following the initial engineering and design work, which is expected to be completed in the first quarter of the 2021 calendar year.
Governance and sustainability
We have continued to progress our full review of how we assess ESG issues and opportunities. Working with an expert consultancy, we have completed a materiality study with input from many stakeholders, including interviews, focus groups, and a survey of over 1,600 relevant individuals. We have identified the most important and relevant ESG topics to Accsys and are currently developing a more detailed strategy that will be presented in an ESG and Sustainability Report in due course.
As previously announced, Stephen Odell will assume the position as Chairman immediately following today’s AGM and Patrick Shanley will step down as Chairman and as a non-executive director following nearly 10 years’ service to the Company. Alexander Wessels appointment as a non-executive director will also become effective immediately following today’s AGM.
Stephen and Alexander will add to the Board’s international experience as we continue our ambitious growth strategy. Accsys will remain forever grateful for Patrick’s dedication and significant contribution to our success so far and the Board would like to put on record their heartfelt thanks.