Accsys Technologies PLC

Good morning. Welcome everyone to our interim results presentation for the six months ended 30th of September 2022. Before we get started, I want to draw your attention to this picture. It's of a newly built family house in the middle of a Lithuanian forest. I always like to start by talking about our products because we are all very proud of them in access. You can see the house features Akoya wood cladding installed vertically in narrow battens. Akoya was also used for the garden decking and also used for the walled garden snug. Akoya was an ideal choice for this harsh environment, which experiences extreme cold in the winter as well as very hot summers. Interestingly, in this project, it was the clients themselves that requested Akoya, showing the strength of our brand with our end users. This is supported by our recent brand awareness studies, which show that around one in three of our target audience in the UK and Germany is now actually aware of Akoya. Here is our usual disclaimer. Next slide, please. In terms of this morning's agenda, I will begin with an overview of the results, then we'll is going to take us through the financials. I'll then walk through the business review, highlighting progress on our growth and expansion strategy, the recent challenges we've had and overcome, and the outlook for our business. Turning now to the overview of the results. We have delivered revenue growth in the last six months up 5% to 589 million euros compared to H1 2022. This has been driven by strong pricing power and product mix, despite lower volumes. You'll see volumes were down 19%. This was due to the previously announced temporary production shutdowns in April and May related to our site expansion in Arnhem. We actually expect 50% higher volumes in H2, but more about that later. Gross profit is up 5%, and remarkably, our Akoya profit is up 30% per cubic meter. This reflects the strength of the Akoya brand and the pricing power it commands in the market. Our ability to push through higher selling prices has offset macroeconomic inflationary pressures, such as historically high energy and chemical prices. EBITDA is steady at 4.5 million euros compared to the same period last financial year. Demand for ACOIA continues to exceed capacity, and we are pleased to say we continue to have strong customer demand for the next three months and beyond. We have just 2% market share of our target market for ACOIA and Tricoya, leaving us a 98% opportunity. During this period, we have made excellent headway with our ACOIA growth projects in Arnhem, and with the Akoya USA Kingsport site in Tennessee. We are pleased to have completed the reactor capacity expansion of our Arnhem site in September and are focused on ramping up production there. As I previously said, we expect to see the benefit of this in sales volumes and operational leverage coming through in the second half of the year. Construction progresses very well at our exciting USA joint venture site in Kingsport, which will have a capacity of 43,000 meters cubed. The plant will service the substantial latent demand in the North American market and is on track for completion in early 2024. In Hull, We have previously reported on some ongoing challenges and delays with the construction of the world's first Tricoya plant. This has been a very challenging, very difficult and frustrating period, hampered by COVID, commissioning challenges and our capability needs. Discussions and validation work across the period have led to the restructuring of the Tricoya Consortium earlier this month. giving Axis 100% control and 100% of the potential earnings from Tricoya. We believe this is a good result for Axis, giving us the optionality to continue the project firmly on our terms and to our timelines. I'll provide more detailed updates on our projects in the business review. I will now pass over to Will to update on the financials.

Thank you, Robin. Good morning, everyone. First of all, just a comment on the image on the financial results page. You can see here a pool cover made of Akoya colour, made for a private residence in the Swiss Alps. Here, Akoya was selected for its durability and stability, even in this harsh alpine landscape. Moving on to the financial highlights, looking at the financial highlights for the six-month period to 30 September, Axis delivered a flat EBITDA, as Rob just explained, despite a 19% reduction in sales caused by the production capacity constraints. The 19% reduction to just under 24,000 cubic metres was due to the extended plant shutdown in Arnhem in April and May, which was required to complete the tiles of the fourth reactor expansion project, as we've previously reported. However, despite that, revenue grew by 5% to 58.9 million, driven by an increase in our average sales prices compared to last year. With inflationary cost pressures resulting, and those resulting from higher gas prices, our key manufacturing profits were, however, strong. We continued to achieve target gross margin, with 31% achieved in the period. More importantly, again, as Rob explained, the profit per cubic metre increased by 30% to €755 per cube, with an opportunity for further growth going forward as we start to benefit from the fourth reactor. This enabled gross profit to increase by almost €1 million, with our price increases more than offsetting the raw material costs and the impact from lower sales volumes. The resulting underlying EBITDA of €4.5 million in the period was the same as last year, after allowing for a moderate increase in other operating costs. We have recorded an exceptional non-cash impairment charge in the period of €58 million in respect of the tri-carrier assets. This takes account of up to 35 million euros of capital costs identified to complete the plant construction, a whole period of at least six months, which we report on the 2nd of November. And in addition, the impairment reflects other factors, notably current higher forecast acetyl costs and higher market interest rates, which impacts the discount rate. Rob will cover the Tricolour project in more detail a bit later on. Net debt increased to $61.4 million as a result of investments into the U.S. joint venture, completion of the fourth reactor, and investment into the hull project for Tri-Koya. We are expecting the cash balance of $7.2 million as at the end of September to increase over the second half of the year, or in completion of the Arnhem expansion, and as we focus on ramping up the Koya sales and unwinding a high inventory position. Coming to the next slide and looking in more detail at our sales mix, During the period, we've continued to balance our customer demands with our capacity constraints while successfully targeting key growth markets. The chart sets out the proportion of our coil sales by end market, with the percentages in brackets reflecting the change to this proportion compared to last year. We continue to see strong underlying demand for a coil across our regions and with our tri-coil panel manufacturers. We increased sales into North America by 4% of total sales, where we are targeting the market ahead of our planned US capacity expansion, and what also remains the largest market globally. With total sales volumes down year on year, given low production in the period, other markets saw a small decline in sales volumes. This does not reflect a change in the underlying demand. The next slide sets out how the group EBITDA compared to the same period last year. Now, we have sought to carefully manage our profitability at a time of increasing raw material costs. Average ACOIA prices increased significantly, as represented by the left-hand green bar, with higher pricing having been implemented to help offset high raw material prices and ensure we achieve our target 30% gross margin. There are a number of components within this 11.1 million increase, which is summarized in the pie chart on the right. 8.9 million is due to ACOIA price increases implemented both last year, but also in the most recent six-month period. 1.5 million was due to the benefit of the US dollar strengthening, noting that while we sell the coil in euros to most of our customers, our North American pricing is in US dollars. And 0.7 million was attributable to the energy price premium, which is implemented from May this year. This is a mechanism whereby we invoice our customers an additional amount if gas prices increase above certain thresholds and enables us to mitigate the effects of volatile CETRs pricing, which I'll come back to. The 3.3 million Sales volume reduction is due to the 19% reduction in sales volumes, resulting from the lower production as explained before. Raw material costs increased driven by higher acetic anhydride costs and raw wood costs, and I'll explain that in more detail. Other manufacturing costs also increased due to high inventory levels and high utility costs, most of which is due to high energy pricing. Akoya operating costs and other group operating costs both increased more moderately, but the main increase is due to higher staff costs and insurance costs. The ACOIA USA joint venture share of loss also increased as planned, following the investment decision in March and reflecting an increase in the project activity levels. Most of the costs incurred in respect to the US joint venture have been capitalized within the joint venture. The total of $31 million have been invested in CapEx within the joint venture by the end of September. Coming up to the next slide, this next slide summarizes how our key raw material costs have increased. As a reminder, our key chemical raw material is acetic anhydride, the price of which is linked to gas prices. However, we produce a byproduct, acetic acid, which is also linked to gas prices, although we produce less acetic acid compared to the volume of anhydride we use in the process. As a result, while there remains a partial natural hedge, the net cost of acetals has continued to increase by 49% in the period, given the significant increase in European gas prices. mentioned earlier we've been able to mitigate this increase with price increases for acquire and continue to manage the volatile changes in the cost for the implementation of the energy price premium from may which has been understood by our customers raw wood pricing also increased in the period with average prices up by approximately 14 compared to last year broadly as expected we continue to purchase higher grade timber and benefit from a number of long-term supply agreements as a result we've not experienced significant volatility volatility, which has been seen with some other timber products. Looking forward, we expect raw wood prices to remain or wood price increases to remain moderate. The next slide looks at the profitability. We continue to achieve our 30% gross margin. Fortunately, we've continued to grow the profit per cubic metre, which has increased by 30% to the €755 per cubic metre. This chart shows this key metric has continued to grow over the recent periods with 124% increase since 2000, or the financial year ending March 2019. This is a result of price increases, but also the economies of scale resulting from when we bought on the third reactor, which helped drive the increase in FY20. Going forward, we expect to continue to achieve our 30% target gross margin and expect to continue to do so, although this margin will remain a little volatile depending on the sales mix and the effect of the energy price premium. The opportunity is to grow the profit per cubic metre further as we see the benefits from the fourth reactor in Arnhem in the second half of this year and beyond. The next chart shows the movement in net debt for the six-month period. We start on the left-hand side with net debt of £27.2 million at the 1st of April and ended with net debt of £61.4 million at 30th September. There are a number of parts to highlight. The Akoya business and its steady profitability generated significant cash inflows, again, of €10.4 million, while the Tri-Koya, Corp and R&D segments have partially offset this. And we've also reported a €6.9 million increase in working capital in the period, which I'll explain in a bit more detail. This working capital increase was largely driven by high inventory levels, which actually increased by €12 million, partly offset by receivables which decreased by 5.6 million euros. While inventory was expected to increase ahead of the additional capacity coming online and due to higher input costs, the increase was more than we had planned and as a result of the previously reported delays completing the fourth reactor expansion. Former material levels ended the period at higher levels given the long lead times from New Zealand and work in progress levels also increased as we commenced operation of the fourth reactor in September. As a result, we do anticipate inventory levels reducing significantly in the second half of the year. The 22.6 million of capex in the period includes 6.3 million relating to the completion of the fourth reactor in Arnhem, plus 16.3 million in respect to progressing the construction of the whole plant prior to ceasing construction and completing the tri-core re-organization, which Rob will explain in more detail. The 29.1 million investment into the Khoi USA joint venture represents the earmarked cash which had been committed to be invested in March 2022 at the time of completing the final investment decision where the funds were only contributed into the joint venture in the current period. This cash represents Axis 60% investment and was made alongside Eastman's 40% investment. Finally, Axis completed an equity raise by way of a placing in May this year to help strengthen the balance sheet, increase liquidity headroom and fund additional costs for the fourth reactor. The final finance slide just looks at the cash and net debt position in a little bit more detail. As I said, net debt at the end of September was 61.4 million. This takes into account a number of debt facilities. 45 million was drawn under the ABN term loan entered into last October. Five million utilized under the ABN revolving credit facility. Just over 15 million was drawn under the NatWest facility, which was subsequently reorganized in November. and $10 million drawn under the convertible loan agreement with Daeng, which was entered into in March this year. The cash balance was $18.1 million. However, $10.9 billion of this cash balance was pledged to ABN AMRO to support the $20 million U.S. dollar letter of credit, which was put in place back in March to support the U.S. funding arrangements. Excluding this, our adjusted cash balance at the end of September was $7.2 million. And therefore, with a focus on cost and cash management. The second half of the year is expected to benefit from increased acquire profits from the staff of the fourth reactor, no planned shutdowns, reduction in inventory, as well as significantly reduced cash outflows in respect to the whole task, and therefore a strengthening of the balance sheet as we go forward. With that, I'll pass back to Rob to discuss the business review and outlook.

Many thanks, Will. Turning now to the business review. Before I begin, I want to draw your attention to this picture of the Edgewater Public Market in Colorado. You can see rough sawn Akoya wood manufactured by Delta Millworks installed as cladding. This public market was previously a 55,000 square foot abandoned grocery store. The owner's vision was to transform it into a food market and brewery using sustainable materials to minimize environmental impact. As a repurposing project, with sustainability front of mind, Akoya, with its strong sustainability credentials, was a natural choice of material for the developers. The project was commended by the American Institute of Architects Colorado for adaptive reuse in 2022. Next slide, please. Many of you follow our business closely, so I'll run through the next few slides pretty quickly as a recap on what we do, our products, our market and our strategy. Our proposition is this. We have world leading products and innovative technology with an outstanding global market opportunity of over 2.6 million meters cubed, coupled with a global growth strategy to increase our production capacity. While the six month hold period in Hull will naturally push out our five times capacity targets by six months, we remain committed to significantly increasing our capacity over the coming few years. We've already made great progress in increasing capacity with our fourth reactor at Arnon coming online in September. Next slide, please. Many of you will also be familiar with this slide and our product, so I'll skip over it. We'll upload the presentation to our website after this call, so if you wish to review it in more detail, it will be available. So now, let's look at ACOIA's performance in the first half. Next slide, please. We achieved good segment revenue growth for ACOIA despite 19% lower volumes due to the shutdowns of the Arnhem site in April and May, as previously reported. Revenue was up 6%, comprising of a 5% growth of wood revenue and a 9% growth in acetic acid sales, our manufactured co-product. We achieved a phenomenal 30% growth in gross profit per meter cube for Akoya compared to the same period last year, increasing from 581 euros to 755 euros per cubic meter. During the summer, we introduced price rises as well as an energy price premium. These price increases have successfully offset the impact of inflationary pressures and increased raw material costs. Our main raw Our main raw material cost is acetic anhydride, which we use in our acetylation process. The cost of this is closely linked to the gas prices, which, as you know, has been impacted by wider geopolitical events. At their peak, they were actually 10 times higher than the normal average. We expect further good progress over time on our profitability metric through, one, operating with greater economies of scale, two, improved product mix, and three, additional downstream activity. These Akoya price rises were largely repeated in the main for Tricoya wood sales from Arnhem, which is very encouraging for our future potential. The fact that customer demand remains strong following these price increases is testament to the outstanding pricing power of our inspirational Akoya and Tricoya propositions. The launch of Akoya Color has continued successfully with further distribution in the DAC markets and North America, as well as preparation for launch into France and Australia and New Zealand. Customer feedback and demand remains very positive, in particular for decking and siding applications with Akoya Color. H1 has seen a 172% increase in sales versus the same six-month period in FY22. And it's set to grow further across H2 at potentially higher price points. Next slide, please. We are thrilled to have successfully expanded our capacity at our production site in Arnhem with the addition of Reactor 4, a new 20,000-meter cube reactor. This is a great step forward in realizing our ambitious capacity expansion plans. As previously reported, there were unfortunately unplanned delays in the final installation, pushing back the expected startup. This also resulted in an unexpected second shutdown across the plant in April through May of this year. Subsequently, during commissioning in June, defects were also identified, which required repair work over the following eight weeks. The remedial costs were around 1 million euros, and we have started a program to recover costs from third parties. In September, we were delighted to produce our first commercial batch of Akoya from the new reactor. And I'm pleased to report that it is working very well today. I have now commenced the operational ramp up of the reactor to increase its output to full capacity over a two year period. And of course, if we can accelerate this, we most certainly will. As an aside, our other three reactors at Arnhem are operating at full capacity and we are anticipating a 50% increase in total volume in H2 compared to H1. Our customers are really delighted with this news as they have been waiting patiently for more product and remain strong proponents of both Akoya and TriKoya. I'd like to thank them for their loyalty, commitment and patience. Next slide, please. In the USA, during the first half, we make good progress together with our joint venture partner, Eastman, in progressing the construction of the plant in Kingsport, Tennessee, in line with our expected timeline and budget. The plant is expected to take around two years to build and to be operational by March 2024. Once fully operational, it will have the potential to produce up to 43,000 meters cubed of aqua. with a site allowing for further future expansion. In the first part of the period, groundworks and deep drilling were successfully completed. This has been followed by the commencement of steel work. Today, the site is a hive of activity with construction of the main warehouse building well underway. And you can see that in the photo in the top right. Access and Eastman teams are working seamlessly together, reflecting the joint and complementary expertise and strong project leadership between us. The construction is managed by an EPC contractor with Eastman taking a lead role within the joint venture in overseeing the EPC contractor and construction project management. We are using the lessons learned from our previous projects. A strong focus on projects and cost management continues by the JV. All major equipment has now been ordered, and multiple large shop contracts, including piping, have now been placed. We anticipate delivery of our two new Akoya reactors to the site from Germany in January. And as a live update, today they are actually on their way and left the manufacturer's premises with destination Kingsport, Tennessee. Safety has been established as a key priority at the site, Around the end of H1FY22, we are able to celebrate 50,000 hours worked without accident. And you can see the team enjoying lunch in recognition for this. Celebrating good HSC performance is something we do. The overall forecasted project costs remain on track. The market opportunity remains tremendous with an anticipated achievable market of 1 million cubic meters. And importantly, both current and projected selling prices remain ahead of our original forecast. Once complete, the site will be a huge value add for our business and will dramatically increase production volumes and our ability to service the US market, which is actually very hungry for our products. I'll take the next slide, please. Oya continues to be specified by some of the world's leading brands for prestigious and innovative projects. Akoya has been specified by the architects Heatherwick Studios and Bjark Ingalls Group for several projects for their client, Google. Yes, Google, including, I'm very proud to say, its flagship London headquarters at London King's Cross. The large horizontal building has been described as a land scraper. At 333 metres long, it is as long as the London Shard is high. Selected for use with the large wooden facade for the building, Akoya can be seen within what will be one of the world's largest timber and glass facades at 23,000 square metres in total area. Akoya has also been specified for exciting and ambitious new tourism projects in the Middle East. Red Sea Development Company is creating a new development of hotels and an airport across 90 undeveloped islands in the Red Sea. Akoya will be used as part of the building materials and was selected once again for its sustainable properties and performance. Moving now to Tricoya. Tricoya Revenues represents 27% of total group sales volume. I'm pleased to share that Tricoia revenue is up 2% in H1, again supported by a strong pricing power in the market, which over the past two years has increased by approximately 30%. The market for Tricoia remains extremely strong, and the applications for our product continues to be many and varied. One of our Tricoia partners, Medite, wanted to showcase the possibility of wood panels and set its sights on the RHS Chelsea Flower Show, a meeting of over 150,000 garden designers, architects, and enthusiasts in London. Working with award-winning garden designer and innovator Sarah Erbel, they created a garden showcasing the possibility of wood panels. Medite Tricoya Extreme, was chosen for the centerpiece of the garden. And as you can see in the picture, they created a large Tricoya cavern-like structure with waterfalls on the interior. The structure demonstrates the durability, versatility, and sustainability of Tricoya. The garden actually won the award for best constructed garden. Tricoya was also selected for this medical center in Santiago, Chile, in the top image. More than 2,500 square meters of tricoia panel was used for interior and exterior cladding. I'll take the next slide, please. During H1, we ran into several challenges with our whole tricoia plant. These challenges were related to cost overruns, partly due to commissioning challenges, and partly due to our resource capability. A new and clear path forward was needed and a positive intervention was made. Following detailed discussions with our consortium partners in November, we announced a restructuring of this consortium. Access now owns 100% of Tricoia and 100% of Tricoia Technologies Limited. That's the intellectual property associated with Tricoia. This gives us full control and the optionality to complete the structure the construction on our terms and at the right time. It also means that we, Access, benefit from 100% of the potential long-term returns. As part of the restructure, consortium partners receive 11.9 million new Access shares, which represents approximately 5.7% of Access's current issued share capital. We've also restructured our loan facility with NatWest Bank. NatWest has agreed to lower the principal amount by approximately $9 million to a total $6 million facility under a new seven-year term. We're also very pleased to maintain the continued support of INEOS and Medite as supply and off-take partners, respectively. Following the restructure, we've taken the decision to put the project on hold for a minimum of six months. While it's disappointing not to be moving forward right now, our board is supportive that this is in the best interest of Access and its shareholders. The validation work undertaken to date as part of the restructure has demonstrated that the opportunities produced tricoia of attractive margins in the future remain strong. The Access Board will have tight control over decision-making, and we have identified several factors that will inform our next steps. These include validating the cost to complete and commission the facility, monitoring asset hours pricing, volatility, supply, and margins, ensuring we have the project delivery capability, skills, organization, and structure in place to give certainty, visibility, and assurance of the project completion. And importantly, we'll be looking at full exploration of funding options by Access, including consideration of trade and financial co-investors, debt, new equity, and contributions from Access's cash resources from our product sales. Looking now in a bit more detail on the project status and outlook, Third parties have validated the plant is substantially complete and that commissioning has progressed. This photo above was taken very recently. During the six-month hold period, we will carry out further validation work and focus on cash generation from our increased capacity at Arnhem. By putting the project on hold for this period, it also increases the opportunity to improve plant startup profitability so that we would not be coming into operation during a time of volatile and historically high acetic anhydride and gas prices. During the hold period, the plant will have a monthly cost of approximately 500,000 euros. Two separate specialist firms were engaged to validate the capital costs for the remaining construction and commissioning work. Noting that the plant is the first of its kind, the additional cost to complete and commission the plant is suggested to be up to 35 million euros. In terms of funding these additional costs, we will explore a range of options, including consideration of trade and financial co-investors, debt, new equity, and contributions from access to cash resources. The Access Board will continue to closely review the project and will ensure necessary returns on further capital commitments. With the plant on hold, we will continue to profitably seed the market for Tricoya from our Arnhem supply. And now a chart of a summary of H1 and the outlook for H2. Throughout the period, we have achieved good EBITDA and revenue growth despite lower volumes. This comes back to the outstanding pricing power of Akoya. The high performance and sustainability of the product means that our customers will remain loyal and committed to our proposition. Looking ahead, we have reasons to be cautiously optimistic. Our pricing power is proven. We have increased capacity through the expansion at Arnhem, and current trading remains good. Additionally, H2 has started on a good footing. with 6,600 meters cubed sold in October, and demand continues to look strong. So we are showing resilience in the face of continued global economic uncertainty. We anticipate that revenue growth and EBITDA will accelerate over H2 as the R4 plant volumes ramp up, making it an exciting period for Axis and its customers. We will remain focused on our ambitious expansion plans. In Hull, we will use the whole period to validate the remaining construction work, the risks, and the full range of potential funding choices. We will be ramping up production in Arnhem, further demonstrating value-add integration with Akoya Color, and continuing with the construction of our USA joint venture plant, all with a focus on ongoing cash and rigorous cost management. Thank you for your time. Thank you for listening. We'll now open it up to questions. Thank you.

Thank you. As a reminder, ladies and gentlemen, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. Please note, questions may only be asked by investors and analysts only. Please stand by while we compile the Q&A roster. Our first question comes from the line of Martin Dendriver from ABN AMBRO. Please go ahead. Your line is open.

Yes, thank you, operator. Good morning, gentlemen. I will take my questions one by one, please. With regards to the gross profits per square metre, you expect good progress over time, which is logical. Would you be prepared at this time to provide any guidance as to where that £750,000

might actually go in the second half and perhaps even in 2023 that would be question one please um uh good morning my friends will i'll answer that i don't think we're going to provide specific guidance i think the opportunity is for it to grow um clearly with the fourth reactor and operational and without the shutdown that we had in h1 um so to grow um i think what we've set out in the presentation is a trajectory So that's possibly the best guidance is to look at that as the order of magnitude as we're targeting the 50% volume growth in H2.

Just to follow up on that, that is volume. Can you elaborate a little bit on your price increases that you're going to effectuate in the second half or that will have an effect because of the price increases of the first half? There's a bit of color around the price effect in the second half.

So price increases were implemented in the summer, and they ranged a little bit, but approximately 12%, 13%. Price increases have been implemented in October this period of around 2% to 3%, and there are no current further pricing increases planned at this point. However, the energy price premium is still in place and is an important part of the way we're managing the volatile raw material prices and ensuring that we can target that 30% gross margin as well.

Got it. Then my second question on Akoya Color. Obviously, you have capacity available now. Could you tell us your thoughts around what type of volume and therefore also maybe price we should be taking into account for the second half and perhaps beyond?

Yeah, so let me take that one. Well, the facility that we produce in-house following the acquisition of those assets that we referenced or previously reported has about 10,000 meters cubed of capacity we're not running at full capacity today and due to the challenges we've had on on volume and trying to keep supply into our more traditional customers rather than just penetrate with the new new products as acquire color but what I can say about pricing as we go further downstream we notice an uplift on on price opportunity And today we're selling a Koya color at a price somewhere between 15 and 20% higher than traditional Koya.

But I just want to come back to volume. Is there anything you can say about what we should expect coming from a Koya color? Because obviously you have capacity. It's not running at full capacity, but a bit more meat on the bone here would be very much appreciated.

We're currently running that unit at about 50% capacity in that sort of region. We'd like to continue to ramp it up to go after those attractive margins. We're seeing the penetration into specifically the DAC region, very positively received as a coir colour, and also into North America. We're seeing that as a terrific product into decking and siding. We clearly want to use fully utilize that plant and capture that additional margin with those higher prices.

Okay. You also mentioned when we talk about tricoya and the 40% gross margin that aesthetic asset prices should normalize. What would be a range that you consider normal before, well, we can actually call the market normal between brackets.

I think there's two elements to it. I don't think we necessarily expect gas prices to go back to their historical averages. Normalized also means stabilized, and I think that's a really important point. Having stability and therefore the ability to predict with more certainty what the impact will be enables us to potentially have conversations with customers as to pricing. And that's important. We've been able to do that very successfully with the coir business. It's been harder to do that with the tri-coir farm, which is not yet operational. What we do know is if we went back to sort of 100 pence per therm levels, that would be sufficient to give us sort of the appropriate margins without any further pricing adjustments.

Okay, that's fair. And my final question, obviously R4 is now doing well. You mentioned specifically that demand still outstrips your production capacity. I know it's very early days, but are you thinking about a fifth or a sixth reactor?

I'll take that, Will. You know, our plans that we've described out to 2025 and moving those slightly to the right now with the delay of Hull are still currently valid but under review. We're seeing exceptionally strong demand for ACOIA. To look at a feasibility to expand the Arnhem facility is something that is ongoing. But we also see the US market and the integration of our new joint venture facility, the integration into the supply of the chemical there. As you know, we've constructed that site with two reactors, but with a footprint to accommodate eight reactors. And we see the market opportunity, the achievable market opportunity for Akoya in North America to be in the region of 1 million meters cubed. And we're bringing on 43,000 meters cubed of capacity. So all of these options are under review to how we further accelerate the growth for access.

Am I reading this right? Do you have a slight preference if you're thinking about down the line expansions? It would rather be in the US than it would be in Europe?

Yeah, I don't think at this stage, looking at the returns on those assets, I would be as clear as that. But please bear in mind that the site in North America is vertically integrated. We're currently seeing better sales prices as well in North America than we did in the in Europe, but I'm not going to speculate on those preferences, and please respect me for that.

No, I do. Thank you very much, gentlemen. Thank you.

Thanks, Martin.

Thank you. We will take our next question. Hello. Our next question comes from the line of Kristin Hall from Numis. Please go ahead. Your line is open.

Thank you very much. Good morning, everyone. So three questions from me, if that's okay. So first is just a little bit more color around the confidence for a 50 cent increase in sales volumes in H2. Obviously, October, as you referred to, was very strong. But, you know, we're moving into a tougher macro environment. So just any indications from clients, et cetera, that gives you that confidence around supply and demand. The second one, just referring to the bridge of price increases versus cost inflation, and obviously, sales prices meaningfully above raw material cost inflation. I'm sure there are some other, but even when including the other manufacturing costs, still above on that. Just sort of unpicking that a little bit, obviously demonstrates strong pricing power. I know sort of general timber prices, whilst not a direct competitor, were sort of quite volatile, maybe increased quite a lot over that period. I don't know if that sort of allowed little bit more price to go through um so just just a bit more more color around that please um and then third just on the whole plant um i mean obviously the third parties have sort of come in and said you know substantially complete uh but then you know the higher end of that range of of potential costs is still pretty meaningful uh in in the overall cost of the project so just trying to understand you know what the key areas they're pointing to, which is going to take the lion's share of that potential higher capital cost to complete. Thank you.

I'm going to kick off on that. Anyone remember all your questions? Christian, thanks for rolling a three at the same time. Appreciate that. First one around the 50% increase in volume in H2 versus H1. Clearly, we've got the ramp up of the fourth reactor, which seems to be behaving itself at the moment and running well. And we want to ramp that up as quickly as possible. Two, you recall that we did have the outages on the plant in April, May and June last year, where we essentially lost nearly 20 percent of the outages. of the capacity of the plant. So that's going to reverse out in the second half a year. So those two factors in terms of available capacity will play very strongly into allowing us to grow the sales. In terms of the sales pipeline on our three-month look ahead, clearly there is a headwind of recession there. But at this stage with the niche applications and niche markets that we target Koya and Tricoya at, we are not seeing any reduction or diminishment of the order book looking forward in that three-month period. So that gives us some comfort and solace that A, we'll have the capacity and B, the demand is there. In terms of your second question around cost inflation, we and how we see that with timber price sort of volatility. Our pricing strategy is not to get caught in that volatile commodity pricing world. We are selling a speciality material in a coir and a speciality material in terms of tricoir. And we try and keep our prices stable, but as Will has described, we put up prices in the summer around about 12.5% and then a further 3% in October importantly with our customers we've been very transparent and open around the challenges on energy prices on gas prices and how we need to recover that I think it's important so I've never met a customer who likes a price increase but with the proposition of our products customers are working with us on supporting this energy price premium to recover and offset the additional costs that we see in our business on acetic anhydride, gas, and the additional labor costs as well. And because we're doing it in a transparent way, they recognize that when the world improves, that energy price premium will come off, but clearly the sales price would stay. So we're not getting caught up in those timber price volatility, and we're not going to commoditize our speciality product. And then to answer your third question, which I believe is really around the 35 million outstanding capital cost when we've got a plant that's substantially complete, we conducted two independent assessments of the facility. We brought in third-party engineering and construction companies to assess what is required to finish the construction. to do the commissioning, and then we built in a contingency around that within this 35 million. But importantly, what we've seen here is that the two companies that we used actually came out with quite different numbers, not necessarily to complete the construction of the plant, but to get the plant fully commissioned. And that spread was telling us something as well. So we bookended that spread, taken the higher number with our track record and understanding of our capability to manage these projects and put that into the 35 million number.

Excellent.

Thanks very much. I hope that picks up your three questions there, Christian. Thank you.

Yeah, perfect. Thanks. Thank you. We will take our next question. Please stand by. Our next question comes from the line of Johan van den Hoeven from Edison Group. Please go ahead. Your line is open.

Good morning. It's Johan van den Hoeven, Edison Group. First of all, a few questions about the guidance for volumes. If you look at the October month with 6,600 cubic meters, if you then take the full capacity, total capacity of 18,000 and then simply divide it by 12, I come to a 6, 6, 6, 6 cubic meters output. So you're close to that. Can you explain that you seem to be close to full capacity? Or, second half of the question, are reactor 1, 2, 3 having a higher output than 20,000 each?

Good morning again, it's Will. I'll try and answer that. I think your logic has some sense, but there are a few sort of parts. I think the overall guidance is that we're targeting the 50% increase compared to H1, so 24,000 and H1 gets us to about 60,000. That's what we're targeting. The opportunity, as Rob said earlier, is to do more than that. I think the October figure reflects also a little bit of unwinding of work in progress that I mentioned earlier. We built up a little bit of work in progress as we started the fourth reactor. It's not necessarily indicative that we'll be able to do that figure every month for the rest of this financial year. But the opportunity is there, and that's what we're working towards. But given the number of moving parts as we ramp up consistently, the target of 50% is the right figure to look at.

Okay. Thank you. And in the past, I think with reactor one and two, you sometimes manage to get a higher output than the 20,000 cubic meters. Is that still possible?

It's still possible. Absolutely. And it depends sometimes on our product mix. Some dimensions, some products go through the reactor a little bit quicker, but it's certainly possible. And that's sort of the high level guidance of 20,000 cubic meters per reactor. also takes into account the planned downtime we have every year for maintenance stops.

Yeah, okay. Thank you. Another question about the capacity 2025. If I heard it correctly, what Rob said, there's a delay of six months. Well, my calculation is at least nine months, but that's the six-month holding period and then six months finishing the construction, I guess.

Yeah, so we're sorry it's rob johan um we're going to go into this whole period fully validate um the cost and time to complete look at the options for funding importantly look as we'll describe look to see where the market is as well in terms of the margin we can achieve the tricoia project uh products produced in harlem and make a decision around timing so our our strategy for 5x out to 2025 has moved slightly to the right, but as one of the previous questions was, are we looking at other options as well? Clearly, the demand for our products is still exceptionally strong and we see the growth potential and maybe that portfolio will shift slightly, but that's all under review and nothing concrete at the moment.

Okay, thank you. Last question for me now. Medout is still a partner with the offtake agreement. What about Finza? What is their position towards the delay in Tricoya production?

Yeah, so the arrangement with Finza, and apologies, remiss of me, and certainly apologies to Finza, I should have mentioned it, that that offtake agreement is still in place as well. They clearly weren't an investor in the Tricoya consortium, but they're... They're still very committed to the product. They're frustrated with the delay. They still take material for their market seeding from Arnhem, where we produce lower-grader coir and convert it to tri-coir. So they're still committed as an off-taker and to the project. Apropos, frustrated and want the material.

Okay, thank you very much.

Thank you. Thank you, Johan. Thanks, Johan.

There are no further questions at this time, so we'll hand back to Rob Harris for closing remarks.

OK, well, thank you very much for your time and listening today and through the key financial highlights, the operational highlights and our outlook for H2. And we feel very positive targeting the 50% growth and our focus on Akoya generating cash to support our optionality around Hull and to maintain the very positive momentum we have in the USA to bring that project on time and on budget. So thank you very much for your time this morning and your support. Thank you. Thanks very much.