Zotefoams (LSE:ZTF) — Post AGM Investor Presentation

0:02 Good afternoon, ladies and gentlemen. Welcome to the ZOTEFOAMS Post AGM Investor Presentation. Throughout this recorded presentation, attendees online will be in listen only mode. Questions are encouraged. They can be submitted at any time. Just simply type in your questions in the Q and A box on the right hand side and press send. The company may not be in a position to answer every question received during today's meeting. However, the company can review your questions, and then any other responses will be added to the Investor Meet company platform. Before we begin, we'd like to submit the following poll. If you could give that your kind attention, I'm sure the company will be most grateful. And I'd like to hand over to CEO, David Sterling. Good afternoon.

0:35 Good afternoon, everyone. Thanks, Mark. Welcome to our AGM update in May 2023. We did release a trading update this morning. Most of the information from that trading update is contained in summary form in the presentation. So what I'd like to do is I'll present a bit of an overview, let Gary McGrath, our CFO, talk quickly about financials, and then we'll cover some of the business unit specific performance. We are talking about four months to end of April here with a little bit of comment on the macroeconomic environment and the outlook, of course. And as Mark said, any questions, please type them in to the q and a section in the chat box, and we will come back to you at the end of the presentation.

1:31 So if we can move through to second page. The business ZOTEFOAMS, if you look across the top here, we have two basic technologies, autoclave technology and extrusion technology. The autoclave technology makes blocks of foam, and we think about that in two main ways. One, with the genesis of the company in polyolefin foam using polymers like polyethylene, primarily to make premium durable foams for a huge variety of applications, mainly business to business. Our high performance products uses the same technology, the same asset base to make foams from different polymers.

2:25 And the reason we want different polymers is those polymers have different performance conditions and change the properties of the foam. So for example, all under the ZOTECH brand, We make very lightweight foams for aviation, space, etcetera. From fluoropolymers, we make foams for Nike footwear, from elastomers with good energy return, and other forms such as nylons or or other materials that we're looking at. All of those technologies are made using the same process equipment, so they they are interchangeable in terms of capacity. Not a 100%, but for the purposes of these presentations, it's best to think of that.

3:12 And so as our high performance products portfolio grows, we can mix and rich our business over time and those give us a higher selling price per unit capacity, higher margins and the ability to grow our business more quickly. Our polyolefin business, really we are operating substantially in established markets with a very, very fragmented diversified customer base. In high performance products, we are creating markets or disrupting markets and the opportunities are are large. We're not looking at market share. We're looking at disruptive technologies and we have proven we can do that. For example, Nike in in footwear,

4:03 where we provide the forms for very high end running shoes. Also within our high performance products business, we have technical insulation, branded t fit, and mainly that's aimed at the food, drink, biopharma, semi con markets, and clean and semi clean room type processing. Those products are made from our own high performance forms. And the reason that we have gone into that market, again, it's a very disruptive technology. But but realistically, that is a huge market. We're operating right at the top of the pinnacle of performance and that's a very good use of our capacity.

4:54 The other part of our business we think about is extrusion technology or MuCell. What we're doing there is taking polymers, which are extruded typically to very thin sections, injecting gas and changing the amount of polymer used or or the physical properties. So an obvious use of that technology is to use less plastic because you're injecting gas and displacing the plastic in common packaging like yogurt pots or or or bottles, etcetera. And we sell the technology or we license the technology for other plastic producers to do that. We have also used that technology to change the properties of some of the plastics.

5:44 In the specific case I'm talking about is resource, which is a development of a barrier properties in plastic created using a layer structure of solid and formed plastic films. And by doing this, we've we've created a technology that can be used to displace existing barrier packaging. The most common the easiest one to understand and where we're focusing is on cartons for packaging, for example, of apple juice and orange juice. The biggest player in the market is Tetra Pak. Hundreds of billions of cartons are made every year with a relatively small number of suppliers.

6:36 And those cartons are made from a combination of liquid, what's called liquid paperboard, made a combination of card, plastic and usually aluminium to provide the barrier and water repelling properties. Those three elements together give us a package which is known as a a a composite package, which is very difficult to recycle and doesn't use recycled content. It's all virgin content. Our technology can be completely recycled, but like a milk carton, just throw it in the common recycling stream. And we use at this point at least 30% recycled content in the manufacture of a new carton.

7:26 So

7:28 the the auto cloud technology business is is growing, is profitable. You know, we'll talk about that in the next slide. The resource part of the new cell is a development project. It's it's very high potential, but also high risk, and we will talk about how we are investing and how we see the development time scales and development approach in that business. So that's our business overview. At this point, what I will do is I'll pass over to Gary to cover some specific elements of the first four months and and look forward, and I'll talk a bit more about the business units themselves. Thanks, David.

8:14 So you can see on this slide, headlines for the four months to April, see our group sales up 15%, and our two primary business units, polyolefin sales or the AZO brand, up 14%, and HPP sales, which combines our footwear and our aviation and our T FIT subcomponents up 19%. Don't show Mucil here. Mucil for last year, for the full year, was about 2% to 3% of revenue. It's historically a bigger seller in the second half of the year, and so it's actually very immaterial with little movement in the first four months, so relevant for this performance update. So what you can see is continued year on year growth in revenue, and very importantly, an improved cost environment. I have my second slide will go a little bit deeper into the key components of that, which primarily are our LDPE resin for the polyolefin business and our energy.

9:16 So I won't touch upon that yet now. I'll do that in a second. But in addition to that, what we've also got is operational efficiencies as we continue to eke out improvements, be that improving our energy efficiency, which obviously both are important from an ESG as well as a cost perspective, optimizing certainly, we've talked in the past about our U. S. Plant and about optimizing that and improving certain yields and so on, we're certainly making great progress there and just optimizing our entire supply chain. We have, as you know, if you follow us, taken some significant price actions in the past two years. Particularly last year, we put through three, one of which was a surcharge, and we're seeing the benefits of that in this fourth these first four months of the year, coupled with, on a year to year basis, the stronger dollar.

10:17 I think probably around last year this time last year, we were probably looking at an average of around 1.35 to the pound, and this period is more around the 1.20, 1.23. You saw we saw that benefit in the second half of last year, and so the period to period to April benefits. But as we move through the rest of the year, that will balance back out because the year when you're comparative in the second half will be limited, if not actually a headwind with the forecast. So on top of that phasing benefits, in terms of performance, we're not presenting the profit, but we're certainly seeing a better a strong underlying profit, and that is supported by SG and A actually going up year on year, but in terms of our own internal planning, lagging, but much of which we expect to pick up as we invest continue to invest in growth going forward.

11:14 And then finally, we were very pleased with the end of last year's leverage position and borrowings position. If you recall, we were at 1.2. We've come down from two from just over two at the end of twenty twenty one, and we continue to see that stabilized strokes somewhat improve, and we're looking at a 1.1 x on a trailing twelve month basis. Comfortable with very effective cash generation, continued cash generation, and that we expect that to remain around that level. As I said, a couple of just wanted to make a couple of points on the key cost elements, and those that those of you who have attended this, you know, the last two or three times have seen this chart before.

12:00 But it still remains important to show the where we've come from in LDPE, which is a significant cost component of our business and particularly of the polyolefins business and the margins that we achieve. And if you recall, what you see there is is, you know, the the the top line in orange, that is the price that we've been paying for for LDPE in my first five four or five years here. I joined at the end of fifteen. I experienced a pretty stable LDPE environment. That changed drastically around September 2020, and indeed, it went from around an €800 per tonne price to a 2,300 price by middle of June last year.

12:45 That has come down as you can see, and we're now around the 1,500, and you can see we've been there for most of the quarter. So certainly stabilizing. It's higher than the historical average based on this chart, but it's stabilized. The important thing as well is to start to understand just, you know, what some of the drivers of that were. You can see that how that orange widens. That's the that's the the profit that's taken by the by the manufacturers. That's what the blue line represents, the actual spread, the margin of the supplier. You can see that really did spike during COVID. We're very you know, we know that that really is related to the availability of export, the ability of imported product rather, the inability to bring product in and stabilize the market led to the opportunity to gain for the manufacturers to take higher profits. That's come down, and it seems to have stabilized, as you can see, at a much lower level.

13:39 So summary, where it's down, it's stable,

13:45 that's certainly helping us as we go forward. That does have an impact on the surcharge element of our pricing, and Dave will make a comment on that as we summarize what we said in the training today. The other main area is energy. We have the three main sites in The UK, US and Poland, some three quarters of that cost is in The UK, where we have seen obviously volatility and increasing costs. But we've certainly seen that pressure reside over the last few months. We're much lower levels than we were, although it still remains somewhat volatile. We are buying ahead. We didn't do much of that last year because of the delta between spot and forward. We are buying ahead, but there's still, you know, there's still risk there, and there's still a difference between buying now and buying forwards to the negative. So we're observing that as we go. And it really is The UK that's

14:44 the primary plant impacted there. And then just finally, exchange is big issue for us. It decent was component some of the growth last year in the '22 results. We are seeing you know, we are long on the dollar. We do we're pretty we're pretty much hedged in euro. All of the almost all of the raw material we bring into Europe, into the Croydon plant is euro denominated, and all of the sales that we all of our sales into Mainland Europe are priced in euros. That generally seems to seems to be a natural hedge. We're long in the dollar. We sell all of our almost all of our HPP in dollar, and we have The U. S. Business. And we buy more in euro, as I mentioned. So that's the more critical.

15:33 That's very stable through this year. And we've as we've said in trading statement, if the prices remain the same they are sorry, the rate stays as it is today, we kind of anticipate full year there being very an immaterial movement from currency. That's it. With that, I'll pass over to David for the rest. All right. Thank you, Gary. So progress today, I think just in summary before we take the detail. Polyolefin Foams, you know, we have seen a sort of good recovery in margins because prices have held up and costs have come down. We have got structural growth prospects.

16:20 I think we are looking at a European market, Germany in particular is not so strong industrially where but but right now in this particular period, but we have got a structural growth prospect right across the polyolefin business. We see that and we have got capacity to deliver that. In high performance products, we see further growth opportunities in in footwear. We are exclusive with Nike, substantially running, track running, moving into trail running recently and and moving into basketball in the upcoming seasons. So our TFA insulation products are are well positioned for growth. There's a huge amount of building of new facilities of, you know, the biotech pharma and food and dairy, particularly in areas like India, China, where we're located, as well as Europe and North America, particularly as people try to insulate supply chains from, you know, disruption on silicon chips, etcetera.

17:34 And in new cell, there's definitely a big opportunity to disrupt the the the packaging market and cartons in particular. And I will remind you that so everything we do, we have one eye on sustainability. Mucil is specifically designed to offer more carbon footprint solutions. We are 50% of the carbon footprint approximately and significantly lower water consumption and energy consumption than manufacturing a liquid paperboard carton, which may surprise some people, but there you go. It's been externally verified. And most of our polyolefin business is either designed to lightweight or insulate or use less material or protect goods that have high value and high carbon footprint itself improve their longevity.

18:30 So I think we are a business that really focuses on as our our purpose really is to find the optimal material for the benefit society. And when we develop new products, when we think about the areas of business that we're going into, that's certainly something we judge ourselves by and make the decision based on that as a factor. If we go into the next slide, talk in detail about polyolefin foams in the four month period, We have got a 14% increase in revenue. Volumes are down a little bit. We've seen good growth in North America, but Continental Europe, as I said, Germany in particular, bit more volatile, bit more uncertain and, you know, lack of commitment.

19:24 And that's that kind of that sentiment driven as well as underlying economics. But we we continue to push forward in areas where the business is is doing well or the markets are doing well. We have got, as Gary said, higher average prices, but at this point last year as the price increases that we have put through over the past twelve months have stabilized. We have got slightly favorable exchange rates. It doesn't make that much of a difference in the in the AZOTE business, but but somewhat. And a good favorable product mix. So and as Gary said, the price of polymer has come down, energy has come down. So that Those are really business unit specific to AZOTE.

20:17 And as those costs have come down and our prices have stayed stable, we have seen that widening of margins. We haven't put prices up in this period. In fact, we are currently discussing with most of our customers what the right prices are going forward because the last price increase in many of our markets was a surcharge. And that surcharge was based on high energy and high polymer prices. And so we are looking at getting the right price for for certain products in certain markets or in some cases the right product because we believe that some rebalancing of our product portfolio will benefit everyone, ourselves and our customers.

21:04 So that's that's something that's really the heavy activity from that segment today. If we look at our high performance products, 19% sales increase. Footwear sales are up 12% with an increase in volume. And also on top of that higher average selling prices, dollar related, but with a little bit on on product mix. So very, very strong performance from footwear in the period. I will say before I go on to the next two things that we are only talking about four month period here. So those those very good results in footwear, very pleased with that, good start to the year,

21:54 but they are somewhat being measured over a short time period compared to last year. And the same is true for the PVS, ZOTEFOAMS and TFEFOAMS, where with ZOTEFOAMS, the underlying demand is definitely improved. We sell most of that portfolio into aviation, a lot of into Boeing and increasingly of interest to Airbus and and some other platforms. And so the underlying demand environment definitely improving. But in the period, just really due to timing of of deliveries, etcetera,

22:32 The sales to that particular product group down 13%, not something we are expecting to continue at all. In fact, we're pegging good growth of that business over the coming years. TIF insulation, again, similar kind of story, relatively flat to last year, but expecting the growth to come later in the year. So again, it's repeating what Gary said, most of the high performance products sold in US dollars. So a bit of a bit of a tailwind in the first four months on the dollar. So basically, I would say overall good start, but in in line with our expectations.

23:21 And then if we move on to Mucil, know, really this is a story about resource, because we have substantially redeployed the team over to the development of resource. This slide really gives you just the positioning. It's, as I said, a much lower carbon footprint, which is global warming potential here. We take a fifth of the energy and about a tenth of the water. So it's a very favorable product and it's circular, 100% recyclable in existing streams. And the key to this success, think, is that we have designed something that can be used by existing beverage carton users, packers, retailers, etcetera, on existing equipment.

24:19 So we're not asking for a big shift in the infrastructure costs or the approach of of the industry here to adopt this packing solution. How much progress are we making? I think it's pretty good. We have we've developed if you look on the bottom left hand side of this, our Massachusetts pilot line, you you can see it looks like a sort of untidy lab, which these things often do. And that's where we've developed the products and and refined the formulations. And on the right hand side, you'll see something looking a lot more like a a full scale production line because it is in Denmark.

25:08 It's not quite full scale, but it's up two thirds scale able to make up to about 70,000,000 cartons a year or something of that order if it was running. And we successfully transitioned the formulations from Massachusetts over to Denmark in preparation for commercial trials. We have got partners lined up for commercial trials and we have

25:35 a very clear strategy of going to market on that. I just have pre answered one of the pre submitted questions which is that as this is a development program, we are engaged with lots of people commercially who are interested, retailers, brands, etcetera. But everyone is really asking the same questions and looking for proof of the pudding. And so what we are not trying to do is work with many many partners to do many many trials. We're working with a very limited number of partner to do trials which would be representative for everyone. And that allows us really to to go deep with a few people.

26:22 And then, you know, with the lessons learned from that, with the successes, then we can go to market.

26:30 But so I think when people are saying, how many partners are you working with? We've got the potential to be working with twenty, thirty different brands and retailers quite easily, but it doesn't actually help us. So we are very nicely said to them, look, we'll keep you informed. We're very interested in working with you and, you know, we're gonna do the heavy lifting with with with other people and come back to you. And I think that's that's very clearly what we are doing our approach. So stepping just finally into the outlook, know, what do we see? We see further growth, high performance products should become an increasing part of the sales portfolio, but there is good opportunities across all product groups in there.

27:26 The polyolefin market, as I said, more diversified, more widely spread, bit more reliant on market conditions. And North America, those are pretty good. In UK, they're not too bad at all. In Continental Europe, in general, not too bad with the current exception of Germany. But

27:49 I think we see some challenging conditions, but very confident in our portfolio overall. We are spending money. We are investing in the business, not just in resource, but in development of of other materials. We previously talked about polyolefin forms with 30% recycled content, new products, new you know, investing in in our facilities to reduce our operating costs, reduce energy reliance, etcetera, become more efficient, reduce waste, all of these things that you'd expect kind of going on.

28:30 And, you know, for full year, as Gary said, foreign exchange rates should level out, so no major impact from currency on the full year profit. And it's early in the year. We are saying that we are happy with the the market forecasts which are in the trading statement. And so those, you know, we we I'll just give you the numbers there. We're looking at revenue as a market consensus of 135,000,000 and adjusted profit before tax of 12.6. And that would be after all of the investment in resource.

29:15 Okay? So we are it's early in the year. There's still a bit of volatility around, but sitting here towards the end of May in a fairly confident position about the year as a whole. And then finally, you're probably wondering who's this person sitting next to me and and she just popped up. So Lynn Drummond is our new as of about four hours ago chair, succeeding Steve Goode who stepped down at the conclusion of the AGM. And Lynn has been on the board since January, and you can see her bio in front of you. I don't if you want to just say hello to people out there in IMC land. Hi, everyone.

30:01 Really nice to be with you today, and look forward to hearing more from you in course of the next few years. Alright. So the the same formal presentation. What I would do is I'll go to the the chat box and see what questions we have. That's great. David, let me just give you a couple of seconds just to review some of those. If you've had a considerable number of questions, you might wanna pick through those. But ladies and gentlemen, thank you very much indeed for your engagement this afternoon. If I could ask you to continue submitting your questions using the Q and A tab on the right hand corner of your screen. I'd just remind you that recording of this presentation, along with a copy of the slides and the published Q and A, will be available via your Investor Me company dashboard. David, I've given you no time at all, hopefully, a time to look at one question. But perhaps if I may ask you to read out those questions, and then I'll pick up from you at the end. Alright.

30:53 The the first question is regarding how many partners assessing resource. I think I've covered that. Second question is considering the investment made in resource, what timelines are the board working to secure a partner? We're we're working on two fronts actually. One is the the partners for commercial development, retailers, brands, packaging companies in the middle, and other manufacturing partners. And and that's something that, you know, we will need to make our Denmark facility food safe. We need to, you know, do internal trials and then and then move to external trials. I I would think realistically external in market trials are first quarter next year.

31:46 And in parallel with that, we are talking to potential strategic investors who may want to be on that journey with us. And that would allow us to potentially accelerate, widen our development, and and change the risk profile for ZOTEFOAMS. So none of those we've made any announcements about in detail. Obviously, if it if we get to the point where those are signed deals or concluded agreements, then it would be price sensitive and we would let people know immediately, but nothing to announce at this point. Third question, can you please describe how you see your competitor landscape and your moat against them?

32:36 Competitor landscape, what I would say is that our polyolefin business tends to be regional. So those products don't travel too well. Most of our business is in North America or Europe, and the competition, competitive landscape is is much as it was over the last, you know, five or ten years. People people come and go a little bit, but I don't see anything anything different there. With our high performance products, you know, we're looking, you know, a bit more widely about what people are doing globally with forming technologies, etcetera. And, you know, as with any industry, you see things interest you, what are they doing?

33:22 But no one has has come out with anything that we don't understand or or don't don't don't see. And certainly not in any meaningful capacity investment way. However, that could change tomorrow, so I'm not we're not sanguine about that, and we are ourselves looking both to figure out how to best use our technology, you know, make different products, new advances, etcetera, and how to augment or upgrade our our own forming capability to improve either the performance or the economics. So it's it's a I think a response that you might expect from any sensible manufacturing company that's looking at a global basis. So next question from Thomas H. Please can you give any sense of scale of the commitment that you're looking for for your potential partner and resource?

34:32 I'm afraid I can't. No. Think at this point, we we are we're looking for someone with ideally packaging experience, you know, high volume packing supply with the financial wherewithal to invest, to scale. If something comes along with the money and not the wherewithal, I think we've got a very competent team because, you know, we've picked people from the industry to to get where we are, including x, you know, Tetra Pak commercial directors and ex engineers from from the industry as well as compliance and and food safe experts, etcetera. So we've we've built a team with competence, but I I think it also depends what scope of that investment is because, you know, the resource technology can be used for a number of different things like cartons and pouches, sachets, toothpaste tubes.

35:40 We can't do everything at once, so we decide to focus. And then there's a geographical component. Is someone interested in just, you know, West Of Europe or just South America or just Asia or, you know, just Japan? So it's we are open to, you know, slice and dice and discuss this in different ways, but I think, you know, what I said earlier about it's it's helpful for us to have done the end market trials and know where we are As we pass those milestones, you potentially hit quite high value inflection points. So a business that says it can do these things is worth less than a business that has done these things. And we certainly have an intent plan to get to the we have done these things under the road steam.

36:33 We don't, at this point, have any commitment or or decision on scaling up by ourselves. So that's something that will emerge over over the course of a successful development. And if the development is unsuccessful, you know, we we may we we wouldn't do that, you know. So it's it's something that we are constantly evaluating, but at this stage, we have a clear go to market test plan and are making, you know, successful progress all fronts at this point. So I hope that's not too invasive at all.

37:22 Next question from Sam e. How far away are you from commercializing resource? What potential revenue contribution could it generate? Well, I think we've quoted in the past something like a point 3% market share is a business that is as big as ZOTEFOAMS today. So a lot depends on how the market likes it. If it was product or if it is a product that the market likes, I personally would find it very very difficult to believe that it would be not many times the size of of ZOTEFOAMS.

38:11 We, you know, usually you don't get niche products having a point z zero or point 3% market share. That's not how it works. It'll either be quite a bit bigger than that or it won't work at all. So but but there are differences by by market, by geography. Different retailers have got different perspectives on how they see ESG. So it may be that the market is more niche or more fragmented than than we think because it's we know it's certainly not homogenous and there there may be it may end up being being a niche, but as I said, point 3% is is a very significant business. So hopefully that's helpful.

39:08 Okay. Next question from Ed. With volumes of 5%, when do you cut prices to stem this off? The competition's volumes offer similar amount? Well, I don't know specifically about the competition's volumes. Most of those are private companies and, you know, we don't talk to them about commercial matters. It's that simple. If I was to look at what I believe the market is doing in various areas and our share, I don't think we're losing share generally, but it's something we need to be very aware of to get the prices right. And as I said earlier, you know, it's the the focus of the the polyolefin commercial team today is all about, you know, getting the right product at the right price to the customer.

40:04 And we are, in some cases, looking to reduce our prices to customers or sell them different phones at a cheaper price to get that right because, you know, we we put prices up when our costs went up. And, you know, as costs come down, we recognize that competitors' behavior would would chain you know, they they'll bring the prices down. I have no doubt. And we hear talk of that at the moment. We we hear we we see precious little evidence of it, but, you know, it's difficult to get competitive prices oftentimes. And, you know, your customers, you know, bless them quite often tell you the competitors are offering better prices than you.

40:58 So it is something that's that's in front and center of mind at the moment. But I think primarily that 5% is due to a market dynamic rather than a ZOTEFOAMS specific commercial dynamic at the moment. Okay. Next question from Sam. Given the strong performance, diversity of revenue, and unique IP, you've been you've been very nice to some, does the current market cap give the company cost to the board concern, private equity, corporate interest, etcetera? You know, I I I think every member of the board would like the market cap to be higher.

41:45 We continue to engage with our brokers and and financial PR people to understand, you know, what is driving the shareholder interest, the market cap, what we do about it, what can we communicate better, etcetera. I think there's a significant down rating of UK small caps generally and that manufacturing cost we've a little bit more. So we are within a pack. There's lots of commentary about, you know, private equity and radars and all all sorts of things, but not something that, you know, we we we have we have thoughts about what we do in in these cases if someone came knocking on the door. But as until someone comes knocking on the door, it's quite simply we get on with running the business.

42:38 We're certainly not putting ourselves, you know, out there. So I think that thanks for saying all the nice things, and we will just get on with running the business. Next question from Ed. Given the positive noises on aviation and forward orders, how much of a lag will have this up to your order book? We we certainly certainly see, you know, Boeing and Airbus having a huge order book. One of the challenges they both face is increasing the build rates per month because although we are ready to go, they can have as much foam as they want, the planes aren't built entirely out of foam. So those other parts need to come together.

43:25 Some of the other suppliers are not ready to to ramp up in the same way. And, you know, Boeing Boeing is moving and I think we see very positive momentum through the second half this year and and into two thousand twenty four and twenty five. We're getting all the right signals and it's not just, you know, more planes. We're looking at more content per plane and we're looking at, you know, different potentially getting on different platforms. So it's feeling it's feeling positive. I think if we look back a few years, you know, we did well over 10,000,000 aviation. Last year, it was about six, wasn't it, Gary?

44:18 So Yep. Six and a half. Yeah. Six and a half. So, you know, what would, you know, we're we're we're still well below the peak and, you know, that's a very good good profitable product range for us. So that's something that that, you know, we expect good momentum from going forward. Next question is from Andrew r, which is you talk about significant further spend and resource and what level of spend you envisage. Well, I think the broker's view on that is, Gary, if you got a Well, certainly in terms of the in terms of the operating cost impact, they're looking at a pretty much a continuation of last year. If you recall, we were around about a 2,000,000 loss on the UCEL last year.

45:10 And and very much, you know, that that's pretty much what's been driven by resource and the expectations for this year, we're in the same range. We also mentioned in the annual report that on top of that, there was about 2,000,000 in CapEx, and the view is probably similar as well. So for this year, it's pretty much a repeat of last. Yeah. Okay. The next question is from Quentin. You mentioned Tetra Pak as the main manufacturer of cartons that your resource product could would aim to replace. Is there any danger that they may look to act and neutralize the threat? And what form of action do think that might take?

45:59 I think what you're asking is what happens if you poke the bear? Generally, you get a reaction. I think it it it's probably a bit early, I think, for Tetra Pak to or any of the other competitors to specifically react. But, you know, they've got a huge amount of marketing, publicity, lobbying around, you know, the the benefits of cartons or the benefits of liquid paperboard, etcetera. I I don't see that being any different or any differently skewed because we're around. It's it's quite simple. Their products are good and everyone else's products are bad.

46:45 That's what they're trying to persuade the world. I I think if we look at the way EU regulation is shaping up, it's gonna be more difficult for them to to continue that. I don't see you know, we we have we have patents on our products. You know, we have a plan to go to market. You know, the competitors always gonna make it difficult for you. They're all they're to price you out. They will offer customers incentives not to work with you. They will, you know, do do other things depending on the the the level of control or or whatever of the market. But, you know, realistically, customers the customers we have talked to want an alternative.

47:44 And if Tetra Pak don't offer them the alternative, they will go where they need to go to get a lower carbon or completely recyclable or preferentially a product that uses recycled content. We offer those. You know, and and ultimately, we are a small company. Catcher pack could buy the technology and and not blink, you know, if we were to to to sell it. But that's that's up to them. So I think all we are doing is is getting on and, you know, delivering to the market what we have been told very, very clearly the market wants. So Again, Quentin talked about slowdown in consumer spending in The US.

48:37 To what extent are you exposed to that? I am not really concerned about that at all. I think we have such a strong demand profile in The US that, you know, even if that comes off a little bit, we'll still be doing very well there. So and and most of our our business ultimately is is b two b. I know that ends up in consumer spending, but, you know, unless it was an outright, you know, 2008 type situation, I think a little bit coming off the top in consumer spending is not gonna impact us significantly at all.

49:30 Michael d, Nike has significant sales in basketball footwear. Do you have any sales in this range currently? And any visibility of the potential of your involvement if you're able to disclose? Well, we have said that, you know, we are working with Nike in ranges outside footwear outside running, sorry, running footwear. And basketball is is the primary one. We are potentially we we we do expect sales towards the back end of this year in in basketball. It's, know, not immaterial. It's a decent decent amount of potential. It wouldn't wouldn't be something which really shows significantly this year, but think, you know, basketball is a very big category and this is our first foray into that.

50:25 So let let's see how it goes. And ultimately, you know, the performance of of those shoes and the sell through of those shoes will determine how far we we go and how quickly we go in that category or whether we remain in that at all. So it's good to get trial. It's good to get on it. You know, you'll be able to buy your your basketball shoes in the shops. And when Nike released the the models, we will let you know what they are so you can contribute to our success by buying your 16 year old kid up here. Scott, have you any idea of the size of basketball market opportunity versus trail running?

51:12 Well, I guess running generally, we we think the basketball market well, we we know Nike sales. We know how many shoes they sell in in each category. We're very close to them. It is a potentially significant opportunity, but not as big as running in general. I think you mean running category in general rather than trail. But it's too early to tell. It it it really depends on the sell through as I say. So I, you know, I can speculate on that given my personal kind of opinions and then, you know, those are those are formed with some knowledge. But I would rather just let let it, you know, give us another six months or nine months before we can answer that question properly.

52:06 Okay. Scott m, what's current pooling utilization? By just over 50%, something like that. Gary, here's one for you. Can you give your best guess best guess on on energy costs this year? If I knew exactly what the price would be, I'd be speculating, and I wouldn't be working here. Right? But we we we announced back in March that the energy costs for '22 have gone up to 7,300,000. And we talk and and I'm talking about gas electricity and nitrogen, which is an important component of our of our cost base. And that was up from about 5,800,000 the year before. So 7.3 last year with a run rate probably going, you know, trending upwards.

52:54 We said it stabilized and started to come down. But if you took that 7.3, we haven't, you know, we haven't posted any numbers, but probably took another 10% or 15% on top of it. Probably probably is where my my head is where where we're going for this year. So, again, you know, not a not a significantly material movement for the group. It's still not the most significant part of cost base. The raw material base, both in these and our HPP, is a far greater component. It's probably more in line with our people costs. People costs clearly are also on the way up as everyone would know. But, yeah, I'd probably be about 10%, 15% subject to whatever happens in the macroeconomic environment. Right? Geopolitical world.

53:43 Yeah. Okay. Next question. How many from Ed T, how many ESG SDR eight funds are on the share register? And if not many, surely this needs some folks from your broker giving you strong credentials here. I think quite quite simply, ESG funds are are, you know, the fastest growing part of the the market and there are more and more of them all the time and quite a lot of small cap funds are re rewrapping themselves as ESG funds. So we are I I couldn't answer the number specifically, but we are, you know, we had a conversation with a broker very recently exactly on this topic. So to make sure we've got the appropriate level of of focus in here because we do think it is an area where we've got a clear message for for this investor group.

54:40 So next question from Scott. How much management time, attention, resource taking up? A decent amount actually for me. You know, a bit a bit less recently because we have a a very clear direction and it's about execution rather than what direction to take, if that makes sense. But I'd say over the last six months, it's it's probably been if I was to think of the different business units, ZOTE, footwear, TFEIF, other HPP, I'd say resource has been has been the number one focus for me.

55:26 I think for the rest of the exec team, not so much. You know, we've got a a business unit director for each of those individually. And and in fact, for AZO, we've got one in The US and and one in in Europe, business unit director. So I I think it's appropriate given the amount of money we're putting in there. But, you know, I I I don't think anyone feels less of my gaze on the back of the head because I've been doing more spend spending more time on resource. So they're they're still getting still getting plenty of my time and attention. And I think I think for Gary, it's probably it's as a board member, that there's there's relevance.

56:18 And, yeah, we have it's very separate. I have a separate finance member who supports the the unit, I'm and I play an oversight role together more than more than the nonexecs, but less than David. So it's certainly getting the attention it requires, but it's certainly not diverting attention away from other parts of the organization. Okay. Couple more we've got from one from Ed. Have you considered longer term PPA agreements on electricity to give you better visibility? Well, we always look at energy hedging. We've got people we work with to do that both on the gas and the electric side. The problem with with hedging is when when there's a lot of uncertainty in the in the picture, the forward hedging rates go up hugely. No one wants to sell your electricity in twelve months time, you know, today's price plus a little bit.

57:18 We we always double it or triple it. And the the rates have been so far out whack that it's just not been worth hedging. We've we've actually started to hedge a bit more over the last couple of months on on gas and electric. So we have a bit more coverage now than than we had that spread between the spot rate, daily, and the forward rate is is definitely tighter. So it makes sense to buy in some coverage, but we're still, you know, we're still not at the levels of of normal normalized kind of ruling hedging that you might do in currency or something like that. It's you know, the the market has not had the the capacity, the liquidity, the risk appetite to offer forward markets on energy at at sensible spreads.

58:12 So I I think that's that. And then I think this might be our last question. So one for Lynn. What will you uniquely contribute to the board? Hi, Scott. I I would love to think I was unique and it's very kind of you to suggest I might be, but I'm absolutely not unique. I have a range of experiences both from a scientific career, so I'm comfortable, I guess, in the space that ZOTEFOAMS works. And I've spent the last couple of months with the business, with Gary and and David and the team learning as much as I can before I stepped into Steve's shoes.

59:02 The range of experiences I think that I'll bring is my experiences in bigger companies, the the challenges that that brings as you grow rapidly. But a really big part of what I want to do is to support David, Gary, and the team as they move forward with the many opportunities that I see as I've gone around the business, and how we focus down and grow the business for the benefit of the shareholders and for for for for for the ESG points that that David and Gary have articulated. There's lots to do in the business, and I'm really delighted to be joining at a time where there's real opportunity, real challenge, and some really exciting projects to deliver and get across the line.

1:00:00 That's great. Lynn, Gary, David, thank you very much indeed. You've taken every question from investors this afternoon. So thank you once again to everybody for their engagement. David, Gary Lynn, I know investor feedback would be important to you. We'll shortly direct those on the call to give you their thoughts and expectations. But perhaps, David, back to you for some final words just to wrap up with, and then I'll send investors to give you their feedback. All right. Thank you, Mark. So appreciate everyone's time on this call. You will have noted probably that we put a rather more detailed trading update this morning than than normally AGM. That was to facilitate, you know, ability to talk about things on on this platform. We really value the direct feedback or direct contact with with individual investors or or or smaller brokers.

1:00:53 So thanks for the questions and absolutely feedback. Very welcome. We we do listen and read all of it. So thanks again for your time and see you soon, I hope. That's great. David, Lynn, Gary, thank you once again for your time this afternoon. Can I please ask investors on the call not to close this session as we're now automatically redirect investors for the opportunity to provide your feedback in order that the board can better understand your views and expectations? This will take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of ZOTEFOAMS PLC, we'd like to thank you for attending today's presentation. Good afternoon to you all.