Accsys Technologies PLC

Good morning, everyone. Welcome to the Access Interim Results presentation, which covers the first six months of our 2022 financial year, from the 1st of April to end of September 2021. As always, we have some great pictures of ACOIA and Tricoya in action throughout today's presentation. The image you see here is of ACOIA in Baja, Mexico. The building is the Baja Club Hotel, and ACOIA has been used in the bulkhead panelling and cladding, or siding, as is known in North America. We have our usual disclaimers, which I know will be familiar to you. This morning, I'm going to give you a quick overview of our results, and then I'll pass to Will Rudge, our finance director, to run through the financials. I will then cover how our Akoya and TriKoya businesses have performed in our first half, and then review with you our wider strategic development. To summarise our results this morning, there are three key things that I will show you today. Firstly, our results are good. Secondly, we have made solid progress with our strategic growth options. And thirdly, we have continued with our planned investment in our organisational growth capability, building our talent pool and strengthening our business processes to deliver our ambitious growth plans. In terms of our first half results, we have had good financial performance. We are reporting 12% growth in sales volumes, 31% growth in revenue and we have seen continuing blistering demand for our products. We have delivered this growth even though we have continued to operate at capacity at our plant in Arnhem. During the period we have increased our average sales prices and gross profit is up 20% and you can see the benefit from that pricing power that we have continued our momentum on profitability in the period. It is worth noting upfront that in this period, we are comparing our performance to the first half of the 2021 financial year, which was from the 1st of April 2020 to the end of September 2020. As I'm sure you will recall, within this period, quarter one of our previous financial year was negatively impacted by COVID. My second point today is that we're making good progress on our key expansion projects. And finally, this has been a period of investment in the business, as we planned. We have added people ready to manage the growth ahead of us and to be ready to operate our new expansion projects as they come online. Even after this new investment, we're reporting EBITDA growth of 5%.

With that, I will now pass over to Will. Thank you, Rob. Good morning, everyone. I'm going to move quite quickly past the fantastic image of acquired cladding used at Oregon State University and move on to the next slide, which is our financial highlights. Looking at our financial highlights for the six month period to 30 September 2021. As Rob said, we've reported strong revenue growth of 31% driven by 12% increase in volumes, which together with acquire sales price increases and change in our sales mix in the period. As Rob mentioned, we've been at capacity and the volume increase therefore reflects that last year was impacted by COVID in the first few months and that had also altered our sales mix. And I will explain this in more detail on another slide. The increased production, sales volumes and pricing all helped drive the 20% increase in gross profit. The underlying gross manufacturing margin was 2% lower. However, this was due to the sales mix and we continue to see an increase in profit per cubic metre of ACOIA sold. During the period, again, as Rob mentioned, we have invested in our organisation, in particular our people, to support our future growth. This resulted in higher operating costs, leading to the 5% increase in underlying EBITDA compared to last year. The balance sheet reflects we are very well positioned to deliver our future growth. Within the net cash balance of £2.4 million at the end of September, we held cash balances of £61 million enabling us to invest in the whole tri-coil plant Arnhem expansion US projects, which we'll come back to. So moving on to the next slide, looking at our sales mix in more detail. The left hand chart sets out the proportion of our coir sales by end market, the percentages in brackets reflecting the change in this proportion compared to the previous year. Here it's important to understand what we did last year when COVID first impacted us. The first couple of months of last year, the UK and US markets in particular were impacted as a result of disruption to supply chains caused by COVID. We were able to redirect some of our volumes to other markets at that time, in particular to mainland Europe and also for Tricoya. Some of these sales included what we call tolling, and this is where we process the wood but are not responsible for the raw wood purchase, and as a result, these are priced at a lower level, as are the sales for Tricoya. In the current period, where our sales were not impacted by COVID, the sales mix has been effectively been rebalanced, resulting in a higher overall proportion of our sales at a higher price point. In addition, we've continued to target the North American market ahead of the new plant plan there to be built, and reflecting that this is our largest geographical market opportunity. Here, our sales volumes grew by 75%. Moving on to the next page, this slide sets out how our group EBITDA compared to the same six-month period last year. The 5% increase to €4.5 million of underlying EBITDA reflects the increase in our COIA profitability, partially offset by our investment in organisational capability. So starting on the left-hand side, the sales volume has increased by 12%, reflecting that last year was impacted by COVID. but also that this year we've rescheduled our annual maintenance stop to the second half of the financial year to enable some key tie-ins for the fourth reactor project in Ireland to be carried out. The €2.9 million increase due to sales prices resulted from the coil price increases implemented in November last year, with further increases in June and September this year. Average prices were also high in the period due to the change in the product mix, as I explained on the last slide. The price increase has substantially offset the higher raw material costs in the period, where our chemical raw materials increased more than previously anticipated. I'll come back to this in another slide in more detail. The decrease in fixed overheads of €1 million in the period reflects that we had higher production volumes and the fact that we have efficiency gains when we are operating at higher volumes. As a reminder, we reduced our production volumes in the first two months of last year as an initial COVID mitigation measure. We increased our investments in our organisational capability, as previously indicated, and this has seen our operating costs increase by 2.4 million in total. This largely reflects an additional 51 heads, and this includes recruitment of operation teams ahead of the commercial start-up of the fourth reactor in Arnhem, the Tri-Koya plant in Hull, plus a further 11 staff for the Koya Colour project, who joined us when we acquired assets in Wales, allowing us to significantly increase our colour production capacity, which we look forward to seeing the benefits of more in the next year. Last year also included some temporary salary decreases for some of our more senior staff as a COVID mitigation action. Over the current period, we repaid all staff below the board and executive level. Finally, last year also included 400,000 euros of licence revenue, attributable to milestones reached in respect to the licence agreement in place between Axis and the Accoya USA joint venture. While not replicated in the current period, further licence income is expected to be recognised as the project progresses. Moving on to the next slide, here we set out the longer-term trend for profitability. On the left-hand side showing the previous four periods of group underlying EBITDA, and on the right-hand side the Accoya segment profitability excluding license income. Group EBITDA improvements continue to be driven by growth in the Akoya business. In particular, the increase in FY19 to FY20, where we benefited from the third Akoya reactor coming on stream. Therefore, as we look ahead, we expect a further step up in profitability with the fourth reactor in Arnhem coming on stream, enabling us to target further operating efficiencies associated with the additional capacity being added to an existing site. The graph on the right-hand side sets out that the profit from a coil manufacturing continues to increase, although the gross margin percentage in the period decreased by 250 basis points due to the change in the sales mix explained on the earlier side. We previously set out that we continue to expect a 30% gross manufacturing margin to be achievable, having increased by more than 9% since FY18. This continues to remain the case, even after allowing for some raw material cost price pressure in the period. and the changes in the sales mix. Moving on to the next slide, the chart helps to explain the continuing progression of our profitability by showing that while the percentage gross margin decreased, the monetary profit we make for each cubic metre sold has continued to increase. The profit per cubic metre required has increased by 11% compared to the first half of last year. This increase has been driven by the higher sales volumes and resulting efficiency, compared to last year, along with the successful implementation of the two price increases in the period. These price increases substantially offset increases we've seen with our raw material costs. Our key chemical raw material, acetic anhydride, has seen a much more significant increase compared to what we previously anticipated, reflecting in large part the significant increase in natural gas prices. However, we continue to benefit from selling acetic acid as a valuable by-product, which continues to provide a partial natural hedge. And as a result, our net acetyl price, which represents approximately a quarter of the production cost of a normal cubic metre of coir, has increased by approximately 26% compared to last year. Looking ahead, we have seen some further increase in the net acetyl price in the third quarter of the financial year. However, at this point, we expect a slight softening of prices thereafter, although underlying commodity prices do remain volatile. Raw wood prices have increased at a more moderate level, largely in line with our previous expectations as we continue to benefit from long-term supply arrangements in place. After allowing for the sales price increases, we do continue to believe the 30% gross margin remains achievable in both the short and longer term. The next slide looks at our strong cash flow generation. The chart shows movement in net debt for the six-month period starting from a net debt position of 12.2 million at the 1st of April and ending with a net cash balance of 2.4 million at the 30th of September. The number of moving parts worth highlighting. The coir business and its improved profitability now generate significant cash inflows, 10.3 million in the period. While the tri-coir corporate and R&D segments have partially offset this, we expect the tri-coir segment to generate positive returns following the whole plant startup next year. The £4.4 million increase in working capital in the period largely reflects a planned increase in inventory levels of £5.8 million, where we have increased inventory from a lower than optimal level at the start of the year. We expect inventory levels to continue to increase further in the second half, ahead of the fourth reactor in Arnhem starting up, as well as the Tricoya plant in Hull. We continue to invest. and 12.1 million out of the 17.2 million of CAPEX relates to progress made in respect of the Arnhem coir plant expansion project, with a further 3.7 million for the tri-coir plant construction in Hull. In July, we purchased assets from the former Lignia site in Barry in South Wales. These will help us to grow production availability of a coir plant more rapidly, accelerating the launch of the product into more geographic markets and for more production applications. This purchase also included half a million euros of raw wood infantry, which will be used by the Akoya plant in Arnhem. The Act's equity issuance represents the net proceeds from the placing and open offer successfully completed in May. This was primarily to fund the expansion of the Akoya business into North America through the construction of the new Akoya USA plant through our joint venture with Eastman. In this regard, we've invested 1.2 million euros into the US joint venture in the period, as you move closer to the final investment decision. Moving on to the next slide, and a little bit more on the balance sheet and our net cash position, I would like to highlight that within that €2.4 million of net cash, we held cash balances of €61 million at the end of September. The majority of these are expected to be invested into our strategic growth projects, including the completion of the fourth reactor, as well as new wood-handling equipment in Arnhem, the completion of the construction of the tri-COI plant in Hull and the COI USA plant and the investment into the US joint venture following the final investment decision expected in the coming months. Our financial position has also been improved by the successful refinancing of our group debt shortly after the period end. In October, we completed the refinance of our group debt facilities through a new agreement with Avian Amro. The new €60 million three-year agreement comprises a €45 million term loan and a 15 million euro revolving credit facility. The 45 million term loan has been fully utilised to repay all of the group's existing debt, with the exception of the NatWest facility held by the Trichoi consortium, which remains in place. This significantly simplifies our debt structure, which previously included five different debt providers, including commercial partners. These new arrangements also provide us with greater liquidity and a reduction in the cost of our debts by up to half going forward. So overall, our balance sheet is in good shape to deliver our growth plans. So moving on to the next slide and the financial summary, and just to summarise the key financial aspects, the Koi business has performed well with further sales price increases. Through our cost structure and our long-term supply arrangements, we have helped manage supply chain cost pressures. And as a result, we continue to believe the 30% gross margin of the Koi business will continue to be delivered We also continue to target a 40% growth margin for the tri-core plant once it reaches higher levels of capacity utilisation. And finally, ahead of the expected doubling of production capacity next year, we've continued to invest in the organisation and our people to help deliver our planned growth. I'd now like to hand back to Rob. Thank you, Will.

Before we turn to our segmental update, let me just quickly explain this photo. This is a new build residential project where Akoya has been used to create replica Georgian style sliding sash windows and an entrance door. Akoya was an excellent choice because with the 50 year warranty, it will be timeless and symbiotic with the sustainable built environment. We have a number of people on today's call who know us really well and a few who are newer to Axis. So before we get into our segments, I will quickly recap what we do and the choices we have made. I make no apologies for this. We have a great story and I need to tell it. Access Purpose is to change wood to change the world. We have great world leading technology that creates high performance sustainable wood products. We have a large market growth opportunity and we currently have just a 2% share of our identified achievable market. And we also benefit from positive long-term structural growth megatrends. Demand for our products is so strong that our customers continue to want more than we can actually produce. We have a global growth strategy to build out and increase our production capacity by 5x to 200,000 metres cubed by 2025. Actually, we are also on track to double our manufacturing capacity next year. Axa sells two key products, which you can see on the right of this slide. Akoya, our solid wood product, and Trikoia, our chipped wood element that is used to make wood panel products. We make our products through unique and protected acetylation technology, which is a bit like pickling our wood with acetic anhydride, a form of industrial vinegar. Our process transforms our sustainably grown raw soft wood into a high performance product that is highly stable. It doesn't shrink, it doesn't move, and it's very durable. And actually, it lasts a very long time. On the bottom right of the slide, you can see some recent awards we have won for Akoya as a sustainable building material. For example, here in the UK, we won the Build Construction and Engineering Award for the best sustainable building materials manufacturer for 2021. and we are all rightly very proud. Looking into the long term, the market opportunity for our products is significant and growing, with a strong macro tailwind of sustainability and consumer priorities. Access is very well positioned to benefit from these two global trends. Firstly, sustainability and the global decarbonisation agenda. You must have been hiding under a rock or even behind the plank of sustainable aquaia for the last three weeks to have not been reminded through COP26 of the urgency of the climate challenge the world is facing. The United Nations Sustainable Development Goals have been in place since 2015 and all industries need to move to embrace more sustainable development, as Axis itself is doing. This global United Nations-led agenda on climate will continue to be embedded at a national level as governments regulate to drive the industrial and consumer changes needed to reach their carbon reduction objectives. The building and construction industry is a carbon emitter, where buildings are responsible for approximately 40% of global energy-related carbon emissions. Importantly, our products help to reduce the embodied carbon in buildings and allow other less sustainable, more polluting building materials to be displaced. The second mega trend is consumer priorities. As technology advances people expect smarter buildings and over time more consumers are actually valuing the quality and performance of products and materials more highly. Things that look good, that last the distance and things that support busy lifestyles. There is also a continuing growth in indoor outdoor living. and consumers also demand to know more about the lifecycle of products and renewability. This is indeed Axis' sweet spot. These global megatrends are creating a shift in purchasing decisions by end users towards products like Akoya and Tricoya because they are more sustainable or because they are of a higher quality and have better performance. Indeed, actually, it's both. Moving to the next slide, ACOIA and Tricoya are being used in commercial and residential building projects and in civil buildings and publicly owned spaces. Some of these images are from our new ACOIA projects digital book online and you have a moment please have a flick through from our website. On the commercial side, our products have been selected by material specifiers and architects for some leading global brands and you can see names like Louis Vuitton and their store in Cancun, Mexico. and Starbucks, as well as UK supermarket chain Waitrose. On the residential side, Akoya and Tricoya offer both highly functional, high performance features for key components in homes, whether it is in a flat, a garden office, terraces and decking, or some larger architecturally designed homes. You can see here homes from the Italian Alps to the south coast of Australia. And on a civic side, because ACOIA and Tricoya are lower maintenance and have long lifetime guarantees, they become a compelling choice in the refurbishment of old buildings and public buildings where maintenance budgets are closely managed. You can see ACOIA in the Cambridge University Botanic Gardens walkway and ACOIA cladding on a hospital in Belgium or even as a canal siding in the Netherlands. Shifting gear to our progress with our strategy, On this slide, we show the three key values that sit under our purpose, being ambitious, respecting all our stakeholders and being committed to safety, quality and sustainability. We have a four pillar strategy, which you can see on the left of this chart. On the bottom right of this chart, this breaks down how we plan to expand our production capacity to 200,000 metres cubed by 2025. Starting from 40,000 metres cubed in 2019, this is a 5x expansion in our capacity so that we can grow our operations to deliver more products to more great projects like we've just seen on the previous slide and to capture the large market opportunity. As I mentioned earlier, we are on track to double our current manufacturing capacity within the next year and I'll come back to the status on each of these projects shortly and just how We are planning to get this done. Turning to the COIA performance, firstly on our production output and sales volumes, we have delivered 12% growth in our COIA sales volumes against the prior year, which was negatively impacted by COVID, as Will explained. If we compare this period against the same period two years ago, i.e. the first half of the 2020 financial year, which was pre-COVID, this would be a 6% growth. Arnhem is operating at capacity levels and our team is doing a great job of focusing on productivity, reliability and efficiency. Production was also supported by the annual maintenance stock being in the second half of this year versus first half last year. And actually this shift will support the planned operational tie-ins for the new fourth reactor. Now that travel restrictions have eased for the time being, I've been pleased to get out and meet with our customers. I met with one of our European distributors recently who are big fans of our products and our long-term customers that continually would like more product. We worked closely with them on supporting their sales through marketing, brochures, training and other things. But what I noticed when I was there was what the team were wearing. Their company jackets with their company branding. But on the sleeve, they also had an Akoya logo. It was great. They are so pleased with the product and pleased to be Akoya suppliers and Akoya ambassadors, that they chose our logo to go on their own jackets. And they actually distribute quite a range of materials, by the way. But only our Akoya logo made the cut on their sleeves. Looking at the regional trading trends, Will has summarised the full sales mix picture. But I'd just like to add here that we're very, very pleased with the North American results, with a 75% increase in sales volumes. We have some great foundational customer distributors in North America, and we are ramping up sales ahead of our US expansion plans and future plant capacity. Moving to the next slide, turning to our strategic expansion projects, we are adding an additional 20,000 metres cube capacity with our fourth reactor at Arnhem. This will increase capacity by 33% to 80,000 cubes. We envisage a three-year payback on this expansion investment. The project is on track, both on time and on budget from our 2019 plans and promise. You can see the Arnhem site in the top picture, which I think was taken a week or so ago when I was over there as I stood next to that big red crane lifting circulation pumps into position. The project also includes a new wood stacker, which you can also see here in the bottom right of the slide, and that will be a fabulous addition to the Arnhem overall site, improving efficiency by quicker handling, and improving employee productivity. We anticipate commissioning of this stacker next month ahead of schedule. In July, we expanded our ability to produce Akoya Colour through a €1.2 million acquisition in the UK. The integration is going very well. We produced our first batch of Akoya Colour and you can see a photo here in the bottom right. Overall, we're very pleased with the acquisition and the business is performing ahead of our expectations. Strategically, the investment will let us accelerate our growth plan for Akoya Colour in its current markets and into more geographies. There is a strong opportunity for Akoya Colour in decking, in Europe and indeed North America. In the US, last year we established our joint venture with Eastman Chemical Company. We plan to build a new Akoya plant with an initial 40,000 cubic metres of capacity at Eastman's Tennessee site and copy and paste our existing and proven Akoya technology at Arnhem into this facility. In the first half of financial year 2022, we have completed a number of work streams in the planning stage. The detailed front end engineering design of the plant is done. The design is for a two reactor plant with the room to expand efficiently in the future up to eight reactors in total. The key commercial agreements between Eastman and Access regarding operational support, raw material supply, support services, land and utilities etc. have been well advanced and they are ready to be entered into as soon as the financing work stream is complete. We are funding the project through both equity contributions from Axis and Eastman and project debt finance. We successfully raised our share of the equity in May this year through replacing an open offer. The project debt finance work stream is continuing and we expect to finalise terms in the coming months. We expect it would take around two years to build the plant from the point of the final investment decision. Once built, we've allowed for two year sales ramp up to full capacity. The planning to date confirms the strong financial returns from the plant itself with the leveraged pre-tax IRR of over 20% targeted and to exceed a break-even financial position in year one of operations. Turning now to our whole plant, we are building the world's first tricoia plant. The two key things I'd like you to take away from this slide are firstly, we are in control and on track for July 2022 operations as per our last update. And secondly, we've actually added some wood chips to the plant last week in some early phase commissioning and the entire team and myself are really very, very excited about that. During the period and despite some challenges, we have further progressed the construction towards completion. We have issued a number of updates on hull over the period and I'll quickly recap these. In April 2021, we updated that we expected a three to six month delay to the lead contractor's schedule in completing the construction. Subsequently, in June 2021, the EPC contract was terminated. Once again, sorry, once Axis gained control of the project, we then conducted an extensive gap analysis to review and validate the remaining works, the remaining costs and the timeline. and third-party expert reviews of the plant's integrity. Pleasingly, these reviews did not indicate any material issues or indeed any red flags with the plant. In line with our August update, we anticipate the plant will be commercially operational by July 2022, and work is ongoing to potentially accelerate that milestone. In addition, we reported the total project capital cost is expected to be between an additional $9 and €15 million, taking the total cumulative project capital cost for the plant to be in the range of €90 to €96 million. This remains our expectation today. The additional costs are overall largely due to the extended project duration, i.e. time delays, some of these due to COVID, and also due to the demobilisation and remobilisation of the site. We entered into a settlement agreement with a former EPC contractor, which gave us a clean break and an opportunity to move forward with pace. So since the 23rd of August, we are directly project managing these works and now have over 150 contractors under our direct management on site, covering the mechanical, electrical and civil work streams. As mentioned, last week on the 17th of November, we ran our first batch of wood chips through the front end of the plant. This was the first time that we have run the equipment and to be honest with you, we were delighted. Just look at the smiles in the photograph. It's been a great milestone for us. The final piece to cover on this slide is that we have also agreed how we will fund the additional costs. In October, we agreed that Access will provide a commercial interest-bearing loan to TUK for the additional cost to complete the project. We have also updated the supply and offtake agreements with our whole partners, Medite for the sale and purchase of the tricoil wood elements and with INEOS and the acetic anhydride, reflecting their ongoing commitment to the project. Looking beyond the completion of the plant, we continue to allow for a three year production ramp up to full capacity because it's actually the first plant of its type anywhere on our planet. We maintain our expectations to be breakeven at 40% capacity with a 40% target margin on tricoia. Once Hull is operational, we currently plan to expand tricoia production in Malaysia, where we have an ongoing feasibility study with Petronas Chemicals Group to build a plant. Shifting to the next slide, the first half of 2022 has been an important period for building our organizational growth platform. We have invested in people and processes to increase our capability to manage our growth ahead. Our average full-time employee headcount increased from 190 to 241 people. Key hires in place include new heads of departments who are developing platforms for supporting our growth and ensuring that the group can expand effectively into these new locations. We have created functional centres of excellence and added skills in areas like HSE, technology, engineering, IT, assetiles management, etc. Because these are key areas that we need good leadership with a unified strategy to effectively deliver our global expansion plans. We have also increased our headcount to support our anticipated expanded plant capacities at Arnhem and Hull. We have also expanded our project management team at Hull in the period overseeing these 150 contractors. Turning slightly now, we have also made good progress in four key SG material areas under our group ESG framework. These are society and communities, energy and climate change, sustainable and quality products, and of course, safety. Safety is an absolute priority for access. We are committed to a goal of zero harm. In the period, we have reported zero lost time incidents. Actually, I always say good safety is good business. So in summary, and to finish up today, this is a good H1 financial performance with strong revenue growth despite operating at full capacity at Arnhem. We have successfully used our pricing power and been able to increase prices and withstand the challenges on supply chains and raw material costs that are facing many companies. We have maintained our ACOIA margin at and above our target 30% level and demand remains strong and we are well positioned to benefit from the long-term growth megatrends around decarbonisation and sustainability and customers wanting higher quality and greener products. Work at Arnhem and Hull is progressing And the wood chips milestone at Hull has been a real buzz for our team. We have invested in the organisational capability to manage our compelling growth plans. Our strategic projects for our 2025 growth outlook are progressing. And by July next year, we're on track to double our capacity from 60,000 metres cubed today to 120,000 metres cubed as the fourth reactor and Hull are safely bought online. I'm thankful to our entire team for their unwavering commitment to our purpose of changing wood to change the world. And looking ahead in the near term, we will continue to actively manage our supply chain to maintain a level of resilience from wider industry shocks and disruptions. We all remain excited about our future and believe we are well positioned to capitalize on the sustainable megatrends I've described. Moving forward, we remain confident in delivering on market expectations. And with that, thank you. And Will and I will now take your questions, please.

Thank you, dear participants. We will now begin the question and answer session. As a reminder, if you wish to ask a question over the phone, please press star and one on your telephone keypad and wait for a name to be announced. The first question comes from the line of Christian Hjorst from UMIS. Please ask your question.

Thank you. Good morning. A couple of questions from me. The first one, just on pricing, just a reminder on how that works. Obviously, in the inflationary backdrop, is that also headline price increases or are there surcharges added as well? I'm just asking in the context of you potentially appointed some softening of inputs over the next 12 months and whether that higher price point could be held on to in that environment or whether we should expect price decreases to reflect this. And the second one is just mostly on expansion. Obviously, there's loads going on at the moment, potentially between the U.S. and Malaysia as well. But, you know, once the R&M expansion is done and the whole tricoil plot, how do you think of the bandwidth in terms of future projects? Could you run just the U.S. and Malaysia expansions, or would the scope for a third to be added in terms of management bandwidth and the heads that you have added? Thank you.

Thank you, Christian. Shall I take that one? Well, those two will. Firstly, on the pricing, we're delighted during the period to illustrate and deliver on our pricing power. And these have been driven by headline price increases that we've really diligently and carefully thought through to place not only to recover raw material price changes, but to create a sustainable pricing system level. We did not want to during this period get involved in commoditising the business and seeing some of the massive fluctuations we see in wood products. We are a speciality company with speciality products and we plan to retain those prices as we move forward. So we've kept those to a very reasonable level because of the ability we've had to offset and manage the changes in input raw materials in our supply chains. Secondly, in terms of your question around expansion, looking at the US, Malaysia, the fourth reactor and Hull, clearly we brought in additional headcount to operationalize the fourth reactor and expansions at Arnhem, and we brought in additional operational headcount to manage the operation of Hull. What I will say is that the key piece for us here as we've built this platform of talent is we've set up the organisation with centres of excellence which are focused on engineering, global technology, lean operations, improving our sales capability, etc. And that resource there is available to us as we move forward. Where access was previously, we were in a place where we probably lurched from project to project. and we couldn't sustain the resource and expertise in the company. We've taken a different approach to build that platform to redeploy that resource into the future so when the fourth reactor and hull are operational, that resource is available, is skilled, and trained to deliver on the US project and the Malaysian project. Does that answer your question, Christian, or two questions?

Yeah, that's excellent. Thank you very much.

Thank you.

Thank you. I believe we have some questions on the webcast.

Thank you. Yes, we've got a question here from Toby Sorrington, who's an analyst at Edison. Toby's asked, I'm curious to know whether pricing increases for larger customers are either indexed in any way or include surcharges?

Shall I say that one, Will? Thank you, Toby. We don't index our pricing... As I say, we're selling a speciality product and by the way we take those products to market through the indirect channel into distributors and create this market pool, we believe those prices into the future are sustainable. Additionally, we generally don't put surcharges on or indexes around raw materials. That's something for us to manage and we really focus on the end sales price rather than just building it up through surcharges, which we would see potential for getting reversed in the future.

Okay, thanks. We've got another question from Tom Rams at Investec. Please could I ask for some guidance and sales mix comments for second half 22, a coir manufacturing margin and outlook for full year 23? And then Tom's got a second question we'll come back to.

Hi, Tom. So I think for sales mix in the second half, it will continue to be some fluctuation, but we'd largely expect it to follow the first half of the year. I think last year was different, but this year we perhaps re-based and re-normalised our sales mix, taking into account what we sell for tri-coil. And for gross margin, therefore, we continue to expect the low 30s to be achieved in the second half of the year. For FY23, there will be potential further change in sales mix. The two key changes are, first of all, that the hull plant will turn on in July, and that will free up 20 or so percent of our capacity for higher price sales for normal Akoya. And secondly, we will be seeking to increase the amount of coloured Akoya that we can produce out of our new site in South Wales. Both of those will have higher price points and therefore may alter the salesman's game. We continue though to believe that 30% gross margin is achievable, but obviously we'll be benefiting from improved efficiencies in particular the fourth reactor on stream as well. The group as a whole, will have a benefit from the tricoia material. The tricoia material will generate higher gross margins up to 40% once at reasonable capacity. So the group as a whole will start to see gross margin edge up a little bit higher as the whole plant comes on stream. And I think your second question is around finance charges. Guidance for lower interest rates given the new debt facility. Our new debt facility has an interest rate which varies according to our net leverage and higher net leverage has a higher interest rate, and then as that decreases, the interest rate comes down. So it will change a little bit over time, but at a high level, I'd guide that our interest, our cost of interest will effectively approximately half compared to what it has been. But important to note, as the whole plant comes on stream as well, interest that has previously been capitalised will start to be expensed, so that will partially offset our actual finance charges going forward.

The final question we've got is from Hugo Lago at ABN AMRO. I understand that there are agreements regarding the tricoil prices with your commercial partners, but given the increasing gas prices, do you expect you'll need to increase tricoil prices to maintain the targeted profitability in the segment? Plus, have you seen inflation in the raw wood chip prices?

Thank you, Hugo. In terms of taking the front end of it and the back end if I may the tricoia price the sales price of the wood chip element that we sell as mentioned in the presentation we've been in discussion with our main off taker Medite and we've reconfirmed and actually renegotiated pricing on the back of the future commitment that they are making to the project so that has been adjusted as the passage of time has meant that various things have changed in the pricing structure. So we've seen some flexibility there on pricing from our off-take partners to absorb that and pass that through in the marketplace. In terms of the other end of the supply chain, in terms of raw material in, just taking those two pieces, likewise on the whole plant and the Tricoya Consortium, Ineos, our supplier of the pickling agent, the acetic anhydride, those prices have also been renegotiated and adjusted to reflect the current environment that we see ourselves in. As I say, that will be passed through in the main onto the sales price of the chips. In terms of the actual wood chip purchasing itself, the green wood chip of them, I call it that, that you saw in the photograph that we ran through the plant last week, Those wood chips are caught up in the commodity cycle of the timber products at the moment, and they are fluctuating up, up and down. But at the moment, the way we've adjusted our pricing mechanisms, the pressure there has been absorbed.

That's the final question, I should say. So we'll pass back to the operator to close the call now.

That does conclude our conference for today. Thank you for participating. We all disconnect. Have a nice day. The speakers please stand by.

Thank you very much.