Zotefoams (LSE:ZTF) — Sustainability at Zotefoams

0:01 Good morning, ladies and gentlemen, welcome to the ZOTEFOAMS Sustainability Presentation. Throughout this recorded presentation, investors online will be in listen only mode. Questions are encouraged. They can be submitted at any time using the Q and A situated on the right hand corner of your screen. Simply type in your question at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, company can review all questions submitted today and publish responses where it's appropriate to do so. As usual, before we begin, we'd like to submit the following poll and I'm sure the company will be most grateful for your participation. I'd now like to hand over to CEO,

0:32 David Studding. Good morning. Thank you, Mark, and good morning everyone. I'm joined here today by Doctor Carl Houston, who's our Director of Technology and Development at ZOTEFOAMS Group, and Neil Court Johnson, who's the President of our MuCell Extrusion subsidiary. They'll be presenting later on, on topics specific to their scope. But where I'd like to start is just remind everyone a little bit about ZOTEFOAMS business. So we're here today to talk about the sustainability angles. I think sustainability has come up many, many times and investor questioning etc. And often when we present it is, you know, a subset or a part of financial or interim results presentation.

1:24 And given its prominence and importance, we felt that it'd be appropriate just to give a bit more information on what we're doing, what we've achieved so far and how we see the context in the future. We will cover that in, or I will cover that in these six

1:46 different categories. So starting with products and markets. Just to remind everyone, ZOTEFOAMS has two main technologies. We use high pressure autoclaves to create foams with unique and highly differentiated properties from a range of polymers. Those autoclave technology facilities are located in The UK, in Northern Kentucky and in Poland, and used to make the vast majority of ZOTEFOAMS sales today coming from these products. And we think about the products in different business categories. First, polyolefin foam. This is where ZOTEFOAMS business originated, really taking materials like predominantly low density polyethylene, and creating premium and durable foams for a range of markets globally, but predominantly in Europe and North America, where our facilities are located, and to a lesser extent in Asia, as we have to ship materials out there.

2:51 We use the same technology, the same asset base to create high performance foams. And here we're using higher value, higher performance polymers to create more technical applications, foams for more technical applications. And the biggest part of this market is high performance footwear, but also in aviation and space and in our TIFF insulation products. In addition to that technology, we have extrusion based foaming. That's been something which in the past we have licensed people making products to help them reduce the polymer content, common packaged goods. And we still do that, but increasingly we're focusing on that technology being applied to a new product range resource.

3:45 Neil will cover that later on. So the main markets and typical applications are important for us. When we look at the different places that we sell foam, really they come under these categories. Product protection is a very large one. Some people call it packaging, but actually I think when we think about packaging quite often, we think about single use disposable packaging. Our business isn't really involved in that other than trying to completely redefine it through our resource and mu cell technologies. So packaging is all about functionality. Can you protect or transport the product in the packaging?

4:33 And can you do it at a low cost of damage, a low cost of storage and transportation, and importantly, a low cost of the packaging. And typically, traditionally, when people have talked about cost, they've talked about financial costs, increasingly, that's carbon cost as well. And so when we look at the packaging, or protection areas that we're involved in, in the autoclave forms business, predominantly we are looking at long life or permanent packaging solutions. So I think where the form is part of a solution, or protecting very high value goods for a long time, or is reusable. So for example, in the electronics industry, manufacturing computer chips, silicon chips, our foams make anti static dissipative and conductive foams that are used in multiple back and forward journeys, you know, almost every day to protect these foams during the protective chips during the manufacturing transit.

5:46 If we if we look more widely, our business in 2016 identified three main trends that would drive growth. Demographics and regulation were two, but the third one was environment. So saving scarce resources is something which we have looked at and focused our business on for many, many years. And the long term strategy for growth has been built around these megatrends that ultimately drive demand for the products. Our purpose is to provide optimal materials, solutions for the benefit of society. And when we think about the reason we add the solutions word in there is we think about a whole system effect. It's not just about is plastic good or bad? Is the foam good or bad? Is it the right or wrong solution? It's always about the context that's used in.

6:46 And so there are many applications which we've decided over the years that we don't really want to develop our products to go into. And there are other ones where we see, you know, really very high benefit. So you'll see in later in the presentation, the TFET installation products, aviation products, the benefit that society gets from having our foams used in those solutions is very, very high. In common with many other people, we have got an approach that looks at the hierarchy of waste, you know, first reducing the amount of material used, then reusing it and then recycling it. A lot of our focus really is on that.

7:31 How do you use less material? How do you make things lighter? How do you make them use less material? But obviously, the reduction is only part of the system. And the recycling and recovery at the end is something we've been working quite significantly on, recycling of our own materials. So examples of reduction include, you know, we've mentioned aviation before, we replace materials which save significant amount of weight. Here, you can see these examples of 65% of raw material weight saving in aviation for silicon rubbers and fibre reinforced composites in aviation.

8:22 And fibre reinforced composites, I would say, you know, ten years ago was being touted as the big weight saving system in aviation, ducting and air conditioning systems, and we are significantly lighter than that. If we look at the materials we use, you can see here that, you know, this size square of foam is the same weight as a US quarter. So that, you know, not only are we making very light materials, but we're making light materials that outperform competitors, sometimes by a factor 2x for competitive foam,

9:04 and, you know, three to 10 times on other composite or foam material or other material systems. So very, very big reduction in the amount of material we use here. Reuse, I mentioned within the packaging market, the reuse is very important. We are creating forms which actually are designed to be part of a permanent solution. So if you can use it once twice, that's great. But things like, you know, you see the red and black form, they're used in tool control for like an aircraft mechanic set or something like that. The foam is used multiple, multiple times. And that's something that gives us very high sustainability credentials.

9:56 And finally, on recycling, you know, our products are definitely recyclable. A lot of our customer scrap is used in other products. And then finally, you know, we use materials from our own processes, we use recycled materials to make 30% recycled content forms as a standard now. And many people are switching to those as a substitute for our standard forms, which is great news that overall saves everyone the carbon footprint. Our ECOZOTE foams use 30% recycled content, and we are designing other materials using, or looking at other materials using a variety of different recycled materials, including recovered ocean waste.

10:55 You'll hear later from Neil about the recycled content in the resource product. So that makes it a really circular product, where we take raw materials that have previously been used, combine them with virgin materials and use them to create a new packaging of the same format.

11:18 The key aspects of our business that we think about that will help us to survive in the future. Number one is our nitrogen based expansion process. Basically we use nitrogen gas and energy to compress that gas or to sorry, energy to heat our materials, and use the gas to form them, expand them. So, and as we invest, we become a lot more efficient at that. Those internal targets are something that we are, we have been for years, but we are much more focused on now, particularly the high energy costs, it really helps that focus become something that the facilities live and breathe.

12:05 The efficient use of raw material. It's not just about the lightweighting ultimately of the products, it's about the amount of material we need to make those products. And we're becoming a lot more efficient on that. Our products do avoid emissions, whether that's in the manufacturing use, etc. And when we think about green revenue, we look at products which net the cost of our manufacture and the net benefit further down the production or further down supply chain is very significant. And that includes materials where our solutions such as running shoes uses much less material than competitive processes.

12:50 So the raw material content use is lower. And then finally, with new product development, Karl will cover that in a little bit of detail. But we are looking really at when we develop all of our raw materials, new materials, scoring systems, which incorporate not just the economic prospects, but the carbon saving prospects. Today, we are finding that those significantly overlap. The reason for that is the economy is just looking for better carbon solutions right across the board. And so something which has been talked about, thought about for years, is now becoming a reality. I would say it's still something that we find some resistance to in getting new products accepted for being lower carbon footprint.

13:55 You know, I think the high inflation and the economic difficulties are slowing down adoption a bit. But it's something that we've got the products people are talking about and looking at. And we expect that to accelerate over time, the proportion of materials that bought because of the carbon footprint or the sustainability as our priority, almost over the financial cost. And, you know, when I talked about the green economy,

14:34 materials which use less material, further or save carbon further down the supply chain, materials which use less raw material than competitive offerings, you know, 85% of our revenues today fall into these categories and would expect, particularly if the resource products start to become, you know, bigger and bigger part of our business, that would substantially increase because a 100% of those products would fall under these definitions. So at this point, I will hand over to Carl to cover our product development process and the external scoring targets, and he'll hand over to Neil to cover the resource and you sell business. And I'll come back at the end to moderate q and a. And so thank you for for now.

15:34 Thank you. As David's already said, we we recognize the importance of sustainability for our contribution towards society. And we have a good product range at the moment that contributes and helps our customers and end users reduce the carbon footprint of what they do from light weighting through to insulation. But we also recognise that things are changing and we need to ensure that our portfolio of products continually evolves to meet the requirements of this sustainable world, producing products that help customers reduce further weight and insulate better, not just insulate but at lighter weight for example. And I'll talk a little bit more about some of the projects that we've got and how they fit in the portfolio.

16:32 What this strategy does mean is that we preferentially select projects that contribute to a low sustainable world, to low carbon footprint. It doesn't mean that we don't, develop projects where other attributes are worth paying the carbon premium for. So for example, we have a very pure product we supply into the medical sector. They are more interested in purity of the product than they are in the carbon footprint of the product, and we continue to develop products for that area. But we've put metrics in internally that look at the carbon footprint as a whole of each of the developments that we have in our portfolio, and we preferentially develop projects and develop products which either fall into one of these following four buckets.

17:31 The first one is to reduce the weight of the use phase and reduce the impact of use phase, which is predominantly through weight saving. The second is to reduce the overall carbon footprint from the raw material that we use right away to the in use phase.

17:51 The third is products from recycled polymers. We recognise that long term that it's most likely going to come a closed loop. So we're on that footpath at the moment and that road map at the moment to be able to use polymers which have been recycled and perhaps aren't as efficient and as optimal as we would like. And also technology development. So how much energy do we use to make the products that we have? And is there a better way of doing it? A lower energy way of manufacture? So just delving into each of those. In terms of products to reduce weight, this tends to come from semi structural parts in aviation, mass transportation.

18:39 So there are many solids used. You're flown on aeroplanes where the inside panels of the aeroplanes which are non structural, they're semi structural, they're just there for aesthetics holding the wall in place with insulation behind it. If we can replace some of those solids with foamed materials that drastically reduce the weight and insulate as well, which means they can reduce the amount of insulation behind them, that's very attractive using the weight. And the knock on effect isn't just about the saving of weight that we produce, over the material that we're displacing, but the overall weight in the aircraft which obviously saves, kerosene or gives them longevity if they do move to electric, engines.

19:30 We've developing we already have lots of materials which are thermal insulation and very low weight, but we're going lower. We've got developments that are looking to make thermal insulated materials even lower density, even lower weight, which again not only saves weight in use, but also reduces the amount of material that goes to the product. And we have projects which look at improving thermal insulation. That means that you can use less material to achieve the same insulation factors. In terms of products that reduce the overall carbon footprint, are a number of projects in the portfolio which include things like biopolymers. There are a range of homes that we currently make, which we can reduce the carbon footprint by using raw materials that are made partially from biopolymers.

20:22 We have products manufactured that we currently supply, where customers, particularly from the consumer sector, are asking us to reduce the carbon footprint, we can do that by reducing, optimizing the size for them of the part that we make or actually changing the manufacturing location. We have one example where the customer was manufacturing in Central Europe and we made our product in Poland which reduced the shipment and transportation carbon footprint. So there are a number of things that we can do within the portfolio where we evolve the product and develop products at different manufacturing sites to reduce the overall carbon footprint. For recycled polymers, we have several developments ongoing, one of which is looking at reusing our own internal scrap.

21:13 We have a range of polymers on the EcoSouth brand, where we actually take material that doesn't end up in the product, reprocess it, make foam out of it and supply it and make a product which is almost identical to the one that we currently sell, which is what customers are wanting. They're actually wanting a lower carbon footprint but the same product please in a lot of cases. Similarly, we investigate use of commercially available recycled materials, so mechanically recycled materials. Those present more of a challenge. Often they are not as optimal in terms of polymers as the ones that we use that are virgin polymers, but we are developing grades around that and trying to learn how to do this because we recognise this is on the roadmap for long term that we have to do it.

22:04 Where it's a challenge is most of our products are optimised per unit weight and using a mechanically recycled polymer means it's probably not optimal. So we add weight to it. We're always looking to find that balance between the compromise on properties and performance that you get when you use recycled materials. That's very much a journey that we're on. We also have applications looking at ocean waste. There's foams that are used in sports and leisure in particular and consumer goods, where material which is recovered from fishing nets can be used to make foams that are sold into the consumer goods sector.

22:51 So we have a number of avenues that we're developing products for the future. And finally, in terms of technology development, we use nitrogen gas which is borrowed from the atmosphere, so it's regarded as one of the cleanest foams that you can buy and one of the more environmentally friendly foams. But we still consume energy in that manufacture. Part of our development is how can we do this by consuming less energy. We have a number of technology shifts that we're investigating at the moment. While we've agreed with some of our banks that we have loans with, sustainability backed loans, some metrics around product development, which are ultimately how much of our portfolio and are generated, revenues generated from products that are developed for use phase sustainability.

23:49 We also have an internal metric where we, look at the holistic, carbon footprint of our product development. And what we can say is over 75% of those development projects that we're currently scaling up are regarded by us having high sustainability credentials. And more than 50% of those in the r and d phase have got high sustainability credentials. Obviously, they'll filter out and and some of those will result in products that are scaled up. But that tells you that we are building a portfolio for the future which is really geared towards meeting sustainability goals of our customers and end users. The external target is very challenging.

24:40 You know, it's very reliant on not just ZOTEFOAMS developing products, but also our customers wanting those products and developing in their timescales. Purposefully challenging. And, it's gonna be tough to achieve. We achieved it last year, as I'll reflect on in a minute, but it's gonna be tough to achieve going forward. In terms of our sustainability journey, where have we come from? There's recognition that two real principles will deliver long term sustainability. The first is the use of fewer natural resources,

25:21 minimizing how much material that we use in the manufacture of our products. And the second one, as I've already touched on in product development, is preferentially operating in markets and developing products that have a sustainable advantage. So they're the guiding principles, through embedding within our control framework, we have guided internally the decision making. So I go back to 2020, we adopted the SASB framework, we embedded this within our control framework, highlighting all of the metrics that are used within SASB for a chemical company, and embedded them within each of the functional areas of the group. At the same time, we embedded TCFD.

26:13 We then set about, through our control framework, targets for the individual areas, what do we need to do to reduce the risk of not achieving good sustainability metrics? That target setting process has evolved, we've published those targets, and then we start being graded by the agencies who look at sustainability. Over that period of time, prior to setting targets, where we didn't publish metrics, got marked as having a bad score. So what you will see over a period of time, and I'll cover it on the next slide, is our scores are gradually increasing.

27:00 So for example, if we didn't publish that we didn't emit chemicals, things that are just from us who are using nitrogen as a chemical foaming, physical foaming agent, chemical emissions are just not important, so we just didn't publish those. And that was taken by the agencies as being negative because they assumed that you then emit lots of VOCs and various chemicals. So we now having picked up SASB, we do publish the fact that we don't emit it. So we're seeing our scores now with these agencies improve. And the absence of data has been replaced by data which obviously should put us in a good light.

27:50 So looking at, some of the metrics that, the external agencies have ranked us by, we have the LSE green economy mark.

28:07 MSCI have rated us as one of the leaders. We've got a AA rating on the AAA to CCC rating, so we're regarded as a leader in them. Sustain analytics have given us a very low risk rating of 23.9, which is very favorable against the average score for manufacturing companies in our sector of 31.6. CDP, we don't get such a good rating. That's, from twenty twenty two November, which used 2021 data. And as I covered in the last slide, we only really started adopting SASB and publishing the data in 2022. So as a consequence, we scored lowly. We're confident that in November, when CDP published the score for the following year that the ranking will be a lot better than that.

29:04 Integer, ESG, they give us a ranking of B which is a good mark And we're confident that these will improve over time. As I mentioned earlier, we publish a number of external metrics. We've agreed three with our loan provider on a sustainability backed loan. The first one is energy reduction, second is about having a sustainable development portfolio of products, and the third is around our raw material consumption. In 2022, we published for the first time this five year plan that our energy reductions we intend to achieve a 10% reduction over a five year period.

29:54 This is measured in terms of the energy per unit revenue. We selected that because it allows us to continue the development of high performance products, which typically consume more energy per unit mass, but sell at a higher price per unit mass. So as a consequence, those two things canceled each other out, and that was the principle behind why we selected that metric. And we achieved that last year, and we actually overachieved. And one of the reasons being that inflation took off and the price prices went up. We actually did the calculation and presented to the board just to highlight that we actually, if we strip out price increases from inflation, the metric came out at about point seven one five. So we even achieved beyond what we should have achieved in 2023 with our own introduction initiatives.

30:54 And of course, all of that flows down into internal metrics which are measured and reported at our internal controls framework. The sustainable product portfolio, we achieved 1.2% of revenue from new products that were introduced since 2022 by the end of twenty twenty two. That target for the following year, this year, 22% is going to be very difficult to achieve. Primarily not because we're not developing the right products, but because the timing of adoption of those developments, one of the key ones being in the aviation industry, has been put back due to the build rates in aviation industry. But that's a tough target and was always intended to be a tough target.

31:42 And in terms of raw material consumption, again a five year target to half the raw material that didn't end up in the final product that we sell to our customers. We set off, and this is a staged approach, very low amount of saving in the early years, with a very large amount of saving in the latter years. The reason being, we know that we need to make some capital investments, and not significant ones, but reasonable capital investments, changes to our process to modify equipment to save raw material. But last year, our target was two and a half percent and we achieved 4.7% in the first year. And we're we're on target to achieve our seven and a half percent this year. My final slide is on the Sustainable Development Goals and how many other metrics that we are adopting or considering.

32:38 We've looked at a wide range frameworks. The UN SDGs were one of them. We have chosen not to adopt this, even though we broadly align and meet all of the requirements of the SDGs. We have to, as a business, strike a balance between investing and spending money, paying to measure ourselves against all of these metrics versus the benefits we get from doing that measurement. And we believe that the metrics, the framework of SASP and the targets that we've currently got are very beneficial to us now and pointing us in the right direction and are an efficient way of doing that for the business. So we've chosen not to adopt further frameworks.

33:33 Okay. I'll hand over to Neil now. Carl, thank you. So our MuCell division comprises two key technology platforms, MuCell 1.0 and Resource. And I'll speak briefly first about our core polymer reduction technology, which we term MuCell 1.0. This core technology is based on high pressure inert atmospheric gases that we inject into polymer. We displace the resin to both strengthen and lightweight, whether they be extrusion of thermoformed or blown films or sheet.

34:25 We subject atmospheric gases, we only use atmospheric gases, to in excess of 10,000 psi pressure, and we create a supercritical fluid which enables us to mix the gas with the polymer to create a homogenous solution. It works with PET, with polypropylene, with polyethylene. And through controlling optimum pressure, temperature and extrusion speed, through our proprietary equipment and process, we achieve optimum results, typically reducing polymer usage by 15 to 20%. And in so doing, MuCell 1.0 as a technology produces lighter, greener, and lower cost products.

35:34 Moving to Resource. Resource is a fully recyclable monomaterial food contact barrier packaging.

35:48 I'm showing a chart here from the Ellen MacArthur Foundation, and as you look at this chart, you see six of the world's biggest brand owners listed down the left hand side. And you can see in the first column that they are consuming approximately 7,700,000 metric tons of virgin polymer every year. About 90% of this will never be used in their packaging again, And the European Union regulation requires that from 2025 that plastic packaging contains 30 recycled content. In fact, just this morning, the European Union have issued guidance in draft, the packaging treaty, if Google, and you'll see that the European Union are actually stiffening the legislation and the requirements in terms of recycled content and also in terms of extended producer responsibility, which I'll talk about a little bit later.

37:09 Crucially, the issues that, you know, for example Nestle, the world's largest food company, are struggling with here is one, material science and two, the general availability of high quality food grade recycler. Those are really the key challenges. So, resource addresses this need. The unique microcellular technology here enables us to extrude nine layers within the film that is, for example, the thickness of a crisp bag.

37:58 And our technology enables up to 100% recycled content within the substrate. If we think about mechanical recycling as a work stream, then we would work with, for example, up to 70% recycled content in today's work stream. The only virgin layer being in direct contact with the food, which is a regulatory requirement. And crucially, the resource technology is fully scalable globally at minimal cost and complexity.

38:53 This material can be processed using existing filling machines with very few changes. And I know that there's a couple of questions that have been already raised on the platform that I'll come on to talk about at the end of this presentation. If we compare the resource technology to liquid paperboard containers, resource is lighter, it's stronger, and it also provides access to new markets. Because unlike LPB, it does not wick, and it is microwavable.

39:41 Nothing goes to waste with resource. The resource technology is fully circular. It lends itself to many different packaging applications such as pouches, trays, films, bag in box, sachets, etc. But at ZOTEFOAMS, we've made our initial focus beverage cartons due to the size of the market and the absence of recyclability and circularity for, you know, what are currently composite mixed material products, most of which are today are incinerated around the world.

40:29 We have successfully validated all print technologies with resource, whether flexo print surface, offset lido gravure, reverse laminate BOPE, and even actually digital print solutions, which enable us to provide bespoke print solutions. In terms of the life cycle assessments, well, due to a prevalence of greenwashing, ZOTEFOAMS has subjected resource to extensive life cycle assessments to the ISO 14,044 standards on a cradle to grave basis.

41:28 We have benchmarked resource monomaterial HDPE beverage cartons against liquid paperboard cartons, which contain a mixture of fiber, polymer and aluminium. We have partnered some of the best science institutions to analyse resource environmental impact, and we've looked at 19 different impact categories. Our work has been reviewed by Doctor Jasmine Cooper of Imperial College London, as well as being validated by Professor Michael Shaver of Manchester University, the LCA Centre in The Netherlands, and IKTR and Recyclis in Germany.

42:21 The three of the 19 impact categories which are probably most representative of the product's environmental impact are water consumption, energy use, and global warming potential. In all cases, resource beverage cartons significantly outperforms LPB cartons, demonstrating at least a 50% reduction in the negative impact versus the mixed material cartons. We've partnered with Europe's key recycling experts, and we've achieved full accreditation for what is a fully circular packaging technology.

43:17 We understand in Europe and North America, for example, that the mechanical recycling work stream will represent about two thirds of all recycling by 2030. And in any case, mechanical separation of material types is required for chemical recycling and enzymatic work streams. Resource beverage cartons are sorted into the HDPE work stream after being successfully separated using either size, magnetic, eddy current, near infrared, and float sync separation methods.

44:08 For example, here in The UK, we've validated resource monomaterial HDPE containers can be processed by Bifa and Veolia as part of the closed loop milk bottle recycling infrastructure, which is recognized as a high bar for qualification. In so doing, challenges that we've overcome have included discoloration, odour, contamination of feedstock, loss of mechanical properties, bleeding of inks, gel content, and others. In each case, resource has either met or exceeded the industry standard.

44:59 To provide transparency and trust with industry and consumers, ZOTEFOAMS plans to have the resource package contain a digital passport. Using a QR code, it will be possible for consumers to learn about the materials contained within the package, as well as how to dispose of that package. In The UK, as an example, the resource container can be disposed of by consumers in the same way that they would dispose of a milk bottle today. In terms of the market sizes, I'm not going to read all of the numbers on the chart.

45:55 Suffice to say, these are enormous markets. We know, for example, that with beverage containers that, you know, there are two fifty billion mixed material beverage cartons consumed every year around the world. Whether it be the resource technology or our MuCell 1.0 technology, we're well placed to attack these markets. And in terms of the approach that we'll take, we are very focused to ensure success. We will focus primarily initially on, for example, the juice market.

46:49 We will be focused around Europe and North America, and with retailers who have, we've described it on the slide as attitude. Many retailers understand that, you know, a mono material product technology such as resource can be easily recycled and have categorised these materials PET, PP, and PE as green materials for the future, and that's where we're focused.

47:35 Finally, we have signed a joint development agreement with one of the world's leaders in beverage packaging. We have also signed up one of Europe's leading retail groups, and we will be running market trials in the first quarter of twenty twenty four. And, you know, our activities crucially are about packaging at industrial scale on the existing equipment.

48:22 I have a couple of questions. Sam asks two questions. Firstly, how much of a USP does resource really have, and how difficult will it be for brands to say no to adopting it? So the first part of the question in terms of the USP, I think there are four elements I would draw out. The first to say is that, you know, this is an industry first, fully circular packaging technology. We see a lot of progress in the non food area, but as I shared with the Ellen MacArthur slide, food contact barrier packaging has been a real problem for industry, and this addresses that need.

49:25 The regulatory requirements demand 30% recycled content be included in plastic packaging by 2025, and our ability to include to 70% using the mechanical recycling work stream, I think, is a key point. The last thing I would say in terms of our USP is really the life cycle assessment. Because if you look at the products in the round, the technology in the round, you see that from a cradle to grave point of view, we more than half the global warming impact, the water consumption, toxicity, etcetera.

50:11 The second part of Sam's question, how difficult will it be for brands to say no to adopting it? I think, you know, I'd look at three sectors here. If you are an extruder, well, this technology uses current extrusion processes. If you are a packer, this material can be processed using your existing filling lines with some minimal changes. If you are brand owner, then going back to the Ellen MacArthur challenge in terms of the regulatory requirements and the government's taxation, then this will be a critical enabler for you.

51:14 So, I think hopefully that answers your question, Sam. There is another question from Tom, and that is: Are there any new regulatory developments that will impact ZOTEFOAMS? So maybe what I can do is just answer for resource and pass to David to talk about ZOTEFOAMS. From a resource perspective, Tom, you know, what we're seeing, and you'll see it live on the newswires today with the European Union, is that the regulatory requirements are stiffening in terms of, you know, the greenwashing that has gone on.

52:06 And we see, for example, in The UK, a packaging tax that is now in place, and we see extended producer responsibility. And this EPR across all of the European countries financially will be extremely punitive for those brand owners that don't have, you know, 30% or more recycled content in their substrate. The onus is being placed very much on the brand owner to, if you like, clean up here in terms of post consumer. David, maybe I'll pass to you for ZOTEFOAMS. Yeah, thanks, Neil, and I guess just more generally, you know, we go back to the slide I presented about in 2016, we identified regulatory drivers as one of the main growth or environmental context, presenting us with growth opportunities and changing the environment for our business.

53:15 And while it's impossible to say exactly how regulation is going to be implemented, I think we can see in general that regulation points towards, you know, making consumers safer, making products safer, fire standards. It's now, you know, hand in hand with environmental legislation around, you know, the minimization of resources, which generally is is good for a foam industry. You know, we are here to take polymer and use less of it, make it lighter and make the functionality better. Having said that, there are a few examples like, you know, UK packaging tax, the way that was implemented wasn't particularly helpful. It wasn't unhelpful, but you know, the Mucil business reduces the amount of plastic that it takes to make a plastic tray, for example, for food packaging.

54:14 And the way the legislation was implemented, the tax legislation, despite us, you know, lobbying and consulting on that, said they do it by weight. And so if you use less plastic, less recycled plastic by foaming, you're actually penalized. You want the weight to put more plastic in so that you can get your weight up of recycled content. And that therefore doesn't attract the tax. So it's a bit, you know, that's something that, you know, whereas, you know, recent consultations on chemical recycling actually look quite positive for us. So I think the general flow is good. You get some eddy currents pushing you the wrong way sometimes.

55:02 But I think very positive. Some other questions we have just in the last few minutes. Chris is asking about ESG funds. You know, we've got our brokers knocking on the doors of a lot of ESG investors, not a big part of our register today. The sector we are operating in, small cap, in particular has not been something that's seen a lot of funds inflow and ESG funds tend to have a slightly higher market cap threshold at the moment. But that's something we just keep working on, keep pushing ourselves in front of them. And, you know, we are a good investment, but it does take someone to open their eyes and do the research. Because on the face of it, we're a chemicals company, we're a polymer company.

55:50 And you can easily jump over that and say, well, that's not what I want in my portfolio. So to do the research, they typically are doing those on billion pound market cap companies at the moment, or slightly below that unfortunately, and it may take time for the focus to come around to smaller companies. Next question on SAM, why don't airlines adopt your materials more broadly given the benefits? And how can we increase that product use more broadly? I mean, largely it's not the airlines, it's the aircraft manufacturers, so Boeing, Airbus, etc. And, you know, they are aware of our materials, it just takes a long time.

56:36 In the airline industry, if you do something in seven years, it's considered pretty quick. Now a lot more pressure on lightweighting the planes, a lot more pressure on fuel efficiency. So, you know, the drivers are there, we've got a lot of conversations going on. We would see that as an area for significant growth over the next few years as the plane models get refreshed and that the number of planes being produced rises. So something we do see a pretty strong growth pattern in there going forward. Next question from Richard.

57:22 Have you a sense when a carton is mass produced what the cost differential will be? We do, there are quite significant economies of scale to be had in going from where we are now, which is one pilot line production facility with, you know, maybe forty, fifty million cartons per annum on a single line, up to, you know, a facility doing a billion cartons. So we have modelled that, we have got pretty good idea of what that would look like, and we've got a reasonable idea of the economics of the conventional cartons. We also are modelling different tax scenarios, and as Neil said, you know, the extended producer responsibility, the packaging tax type things are, and will I think continue to help us.

58:20 Because as we use high recycled content and we are circular, that's basically where the legislation is trying to push people. So I think from 2025, we get a bit of a boost on that as well. Tom, are we seeing resources the only fully recyclable material for cartons? And how big is the market opportunity? Well, the market today is in excess of 300,000,000,000 cartons. So if you translate that into money, it's an awful lot of money. You know, I think 0.3% of a market share would be a business which is larger than ZOTEFOAMS today. When we talk about recyclable, if you look at the incumbent carton, it will say something on it along the lines of widely recycled.

59:17 Now, what that means differs in different places, but essentially cartons which are mostly not recycled, I care that right now, mostly that are sent to landfill or incinerated, and where they are recycled. And what they do is they strip the card out and use that card for other purposes, not for making another carton, and the plastic and aluminium content is mixed. And again, it's often used as a building material or something like that concrete filler, etc. Now, so those are, you know, they can be recycled by that very, you know, I'd say unappealing definition of recycling.

1:00:06 Our cartons and all the waste in the manufacturing process, etc, when you cut bits out, or you've got scrap, all can be put back into our carton again. So that circularity, haven't found anything out there that gives that. We've talked a lot to brands, we've talked a lot to beverage packaging companies. We've commissioned independent research. None of that has come up with anything which is circular in the way our product is. When you see announcements about this is more sustainable, more sustainable carton is competing with the previous version.

1:00:53 And the big innovation that is being pushed by the current producers is to remove aluminium. So they put a carton with polymer and plastic together, and a plastic cap. And a new legislation with the cap needs to be tethered to the packaging means that that plastic cap is now attached to the composite carton. So these are improvements over something which, if you compare that improved version with ours, we would very confidently, I think, have a lower sustainability scores or better sustainability scores.

1:01:44 But as Neil said, the life cycle analysis we have done and completed has been based against the carton, which today includes aluminium. So our differential advantage may not be as big, but certainly we are the only people that are producing anything that we have seen which can be deemed as circular. Next question from Simon. Could you please add a bit more detail to the recycling process for resource? For instance, how is it recycled? Who recycles? How does it get back to manufacturing process? I'll just keep going on these because of time Neil, if that's all right. But there are many different recycling processes globally, not everyone uses the same system.

1:02:34 But we have tried our cartons on all the main systems. In The UK, basically what happens mostly is you put it in your recycling box that gets taken to what's called a Murph mixed recycling facility, where they separate, for example, the glass from plastic or paper out. They will then use various systems such as infrared or a flute sink to separate different kinds of plastic which need to be recycled separately. And eventually, hopefully you end up with a recycling stream that includes just in our case, high density polyethylene.

1:03:21 So it would follow the same track in The UK as a milk carton. It then gets chopped up into little bits, washed and repellatised. And, you know, sold on, depending on the cleaning process, either as standard polymer or, you know, sometimes if it's been printed, it will be sort of greyish, used in different applications or food grade, if it's very high recycled content. So, you know, these facilities do exist. Actually, The UK industry are very, very keen on our product because it would divert significant amount of new business into the recycling, the value added recycling streams.

1:04:15 Okay, Simon L, can you recycle the foam in running shoes? If it's not, may consider investigating. Running shoes along with many other products are designed to last. They're not designed to kind of fall apart after a couple of weeks running. When it comes to the foams in there, the best way we can describe that is if the shoe is put in somewhere that they take apart, the foam kit in itself can be recycled. And we know that because when they're manufacturing the shoes, any scrap, offcuts, etc, are recycled into, you know, different shoe formats. So Nike have at least one shoe format using the recycled materials from their own internal processes.

1:05:17 Tom M, surely if a brand says no to resource, it's reputational suicide. Well, I think we'll worry about that Dave, when we've got enough production capacity to satisfy all the people that really do want it. And as Neil alluded to earlier, we're not going to be instantly able to satisfy all the demand we see. So we are concentrating on geographies where recycling is high it will be treated properly with concentrating on areas or certain products where value added is higher. So for example, you know, you get water packed in aseptic cartons.

1:06:07 Why? I don't understand that. Just, why would someone want to do that? It's far less recyclable than a plastic bottle. Is that reputational suicide? Actually, they've done very, very well from that. And they've done very well because the public are by and large uninformed. And it looks like, hey, this is less plastic. Right? And so I could name, you know, some UK retailers that will tell you, I'm moving everything I can to cartons because it's less plastic. And other UK retailers are going, I want to get rid of cartons because they're not recyclable. So which one do you work with? You work with the one that wants to get rid of cartons or existing composite cartons, because actually the packaging format, the squareness of it, the packing density, the functionality is very, very good.

1:07:03 It's a successful product, the carton format because it's very, very good. And, you know, it's just not recyclable in the way that the retailers and the brands want it. And we're coming along with something that is. So in a sense, we want to work with the people that are really are at the leading edge here and that see the world in the way that we see it. I think there are plenty of those, there really are. That's great, David. I think you've taken all the questions you have from investors during today's call. Thank you to everybody for your engagement. And of course, if any other questions do come through, David, we'll make those available to you and the team for your review. David, I know that investor feedback will be important to you and to the company as a whole, and I'll shortly redirect those on the call to give you their thoughts and expectations.

1:07:55 But I wonder before doing so, if I may just ask you for a few closing comments. Yeah, so just thank you very much for listening. I apologize, a small dog into my office, which has never happened before. The early part slightly distracted me, but I hope, you were able to get bulk of the messaging clearly enough. So thanks to the co presenters, Carl Houston and New Court Johnson, key parts of our team delivering the sustainability agenda at ZOTEFOAMS and keep following our progress. Thank you very much. That's great. David, Neil, Carl, thank you very much indeed for updating investors today. Could I please ask investors on the call not to close this session as they now automatically redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations. This may 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.

1:08:48 Good morning to you all.