Biome Technologies plc (LON:BIOM) Chief Executive Officer Paul Mines caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, expectations for significant growth in Bioplastics, trading in the Stanelco RF division and his confidence in the business.
Q1: This week you announced that whilst up on last year Biome Technologies revenues were slightly lower than management expectations at the end of the second quarter. Why was that?
A1: Just to remind the audience that Biome Technologies has 2 divisions, one of which is our Bioplastics division and that makes bio-based and biodegradable plastics that go into often packaging and composting applications. We also have an equipment manufacturing division called Stanelco RF Technologies.
Looking back at the second quarter, in both cases, these divisions received orders to meet our expectations but, in both cases, they were unable to secure the raw materials required to complete the necessary manufacturing and shipments.
For RF, this was a hold up in specific electronic parts required to build our systems and for Bioplastics, it was one particular raw material that was delivered very late and prevented a planned manufacturing run in June.
Both divisions are suffering these post-pandemic issues around supply chains and getting hold of parts or materials to complete their manufacturing operations.
Q2: Can you be sure that this is only a revenue delay and not lost revenues?
A2: Very much so, the required parts and materials have arrived post period end and manufacturing is either underway or the goods have been delivered now.
Q3: In your statement you mentioned expectations for significant growth for the Bioplastics division in the second half. What’s driving that?
A3: In the case of Bioplastics, this growth that’s expected is very much underpinned by a number of our customers preparing their supply chain for launches at the beginning of the first half of 2023. The launches that they’re planning are based on Biome’s new ‘home compostable’ products that are bio-based and biodegradable and subject to a patent. So, we know with these customers are very much preparing these launches and they’re preparing to fill the supply chains with our materials.
These home compostable materials is a trend in the market that perhaps I’ve not spoken about before but it’s towards materials that can be both composted in industrial facilities, in controlled conditions, but you can also put in your home, backyard compost bin. Our team has been working for the last 3 years ago building a portfolio for these home compostable products and we’re now starting to deliver them to our customers.
Q4: How is trading in the Stanelco RF division?
A4: This year started very strongly and we’ve got a strong orderbook, we had expected to convert that to higher revenue levels in Q but the component shortages I spoke about hindered that. We very much expect those delayed revenues to be recovered in H2 and meanwhile, we’re working very hard to re-position the business to reduce its reliance on the fibre optic markets and build positions in aerospace, pharma and general industrial markets. That process is going very well and that activity is showing the benefits and we’ve got a good pipeline of orders and enquiries from a broader set of customers now as we look into H2.
Q5: You mentioned in your RNS that Biome Technologies has entered into a receivables financing agreement with Accelerated Payments Limited. Why is that?
A5: We are very aware that the growth that we expect in the back half of this year and into the following year will require further working capital support, particularly in our extended global supply chain. This facility very much gives us flexible access to additional cash should we need it during that big ramp up coming.
Q6: You have been quite confident in this discussion despite the headwinds in the global economies. What is it that’s giving you that confidence?
A6: In the case of the RF division, we continue to see a good order flow coming in diversified non-traditional markets, outside optical fibre, and for Bioplastics, although our customers do continue to face supply chain challenges as they deploy new products, the enquiries in the space are buoyant. That move away from fossil-based to non-traditional bio-based plastics just isn’t stopping and is continuing to build.