Varyk Kutnick

Varyk Kutnick asked if the CapEx per pound for the India facility would translate to the European facility, the reasons behind Loop's significantly lower CapEx compared to competitors, the expected return on invested capital and funding strategy for future growth, and the significance and scale of the Nike partnership.

Answer

Daniel Solomita, CEO of Loop Industries, explained that the European facility would be slightly more expensive due to transportation and reconnection of modules, but existing utilities at the German site would offset much of the increased cost. He attributed Loop's lower CapEx to a post-COVID reinvention, focusing on low-cost manufacturing in India with cheaper labor and locally sourced equipment. Solomita confirmed that future growth would be 100% funded by India's cash flows, with a payback period of less than three years, and highlighted the scalability of the model. He expressed immense satisfaction with Nike as an anchor customer, emphasizing their innovation and the vast growth potential in the textile-to-textile market due to Loop's unique low-temperature methanolysis technology.

Varyk Kutnick asked if the CapEx per pound for the India facility would translate to the European facility, the reasons behind Loop Industries' significantly lower CapEx per pound compared to competitors, the expected return on invested capital and funding strategy for future growth, and provided commentary on the significance of the Nike deal and the scale of the textile market.

Answer

Daniel Solomita, CEO of Loop Industries, explained that the European facility would be slightly more expensive due to transportation and reconnection of modules, but this is largely offset by leveraging existing utilities at the chosen German chemical plant site, keeping costs 'generally in the same numbers.' He attributed Loop's cost efficiency to reinventing its strategy post-COVID by focusing on low-cost manufacturing in India, where labor rates are significantly lower and equipment can be sourced locally. Solomita confirmed a payback period of less than three years for the India plant and stated that future expansions would be funded by India's cash flows, with corporate operations covered by licensing and engineering fees. He expressed honor in securing Nike as an anchor customer, recognizing their innovation and need for textile-to-textile solutions, and emphasized the immense scale of the polyester fiber market (66% of 85 million tons annually) and Loop's unique low-temperature methanolysis technology for processing diverse textile waste.

Varyk Kutnick of Divyde Capital Partners asked for details on Loop's capital intensity, specifically requesting the gross and net CapEx per pound for its planned facility to compare against a competitor's figures.

Answer

CEO Daniel Solomita stated that for Loop's technology alone, excluding land, financing, and polymerization, the CapEx is 61 cents per pound for a 154 million pound-per-year facility. He highlighted that this cost is highly competitive and could decrease further with scale. When including the polymerization unit, the cost rises to 75 cents per pound.

The analyst asked for a comparison of the India plant's CapEx with previous projects, details on the structure of offtake agreements, pricing competitiveness, expected profit margins, and confirmation of the investment payback period.

Answer

The India project's CapEx represents an 80% reduction compared to the previous Korean project estimate. Offtake agreements are structured to be bankable with guaranteed volumes and take-or-pay features. The low CapEx allows for competitive pricing against mechanical recycling while offering superior quality. Margins are expected to be robust from day one, and the company confirmed the analyst's calculated payback period of 1.5 to 2.5 years on their equity investment is correct.