Alexium reports growing demand for flame retardant materials, expects strong revenue growth

Chemicals company Alexium International Group (ASX: AJX) is on course to be EBITDA positive by the end of this year with interest in its Alexicool technology and its application to the bedding market “growing rapidly”, according to Alexium chief executive officer Dr Bob Brookins.

Alexium develops flame retardancy solutions for a wide range of materials as well as developing proprietary products for advanced thermoregulation utilising “phase change materials” – substances that absorb or release large amounts of so-called latent heat when undergoing changes in their physical state i.e. from solid to liquid and vice versa.

Various applications under development include textiles, packaging, electronics, and building materials while its chemical treatments are currently marketed as Alexicool and Alexiflam.

Market performance

In an update to the market, Alexium said that most of its sales this year were based on “textile applications to mattresses”, with new revenue opportunities being based on a number of new drivers.

The company reported that the number of foam products utilising Alexicool is growing with a broader range of top-of-bed consumer goods now partial to the technology.

Furthermore, a greater number of custom-designed consumer goods with multiple components using Alexicool products is being sold industry-wide. However, one of the most powerful drivers has been a macroeconomic one with fast-growing demand for thermal regulation solutions being witnessed amongst consumers.

Given the rising tide in demand for thermal products, Dr Brookins said Alexium’s current pipeline of potential opportunities for Alexicool products now stands at US$45 million (A$67 million) per year.

In the 2019 financial year, Alexium generated revenues of US$5.1 million (A$7.6 million) while declaring a loss after income tax of US$6.9 million (A$10 million).

“As well as entirely new initiatives, a significant share of our current pipeline includes opportunities from new product launches incorporating Alexicool technology due at the upcoming Las Vegas bedding show. We are actively working to further support new and existing customers in growing this market segment,” said Dr Brookins.

In August this year, Dr Brookins declared that Alexium went through a “transformational” year in 2019 on the back of a new leadership team forming strategic partnerships with industry leaders in key markets and broadening its distribution channels to enabling an upscale of customer orders.

An exclusive development agreement was signed with Pine Belt Processing for the company’s Alexiflam FR technology, providing the chemicals company with access to the US military uniform market. Pine Belt is a current supplier of finished garments to the US military for applications such as permanent-press finish and insecticides.

Alexium confirmed that its staff are currently working with Pine Belt on finalising process parameters for optimal process performance and cost. Final production goods are expected to be submitted for testing at government facilities including lab-scale testing and a limited user evaluation wear trial.

Alexium also successfully secured a memorandum of understanding (MoU) with US-based company ICL, thereby establishing a framework for the potential commercialisation of Alexiflam NF.

Having received approval from the US Environmental Protection Agency (EPA) to manufacture and sell the product in the US, Alexium is “well-positioned to drive commercialisation in the global market for flame-retardant cotton,” the company said.

The deal is expected to provide Alexium with greater market access across the world including improving distribution, manufacturing and development of its Alexiflam NF range.

Given the relative novelty of the deal, Alexium has refused to share specific details including the structure of the agreement and has said that details regarding the structure of the agreement and commercialisation strategy “cannot be discussed at this time but will be shared when appropriate”.

Going from strength to strength

The improving market conditions have induced the chemicals company to focus on long-term growth with two key initiatives being earmarked for next year.

First and foremost, Alexium is seeking to make a foray into China. Alexicool customers are increasingly manufacturing consumer goods in China and providing improved support for them has become a top priority, according to Alexium.

The other key focus is expanding the company’s product portfolio for bedding and adjacent markets, including intensifying development of proprietary products.

With multiple commercial avenues currently being explored by the company, Alexium has set up an investor conference call to be held on 15 October 2019 and plans to hold its annual general meeting (AGM) on 29 October 2019.

This morning’s market update helped boost Alexium shares 8%, to $0.135.