Zotefoams very optimistic about the long term positioning and potential for the group (LON:ZTF)

Zotefoams plc

Zotefoams plc (LON:ZTF) Chief Executive Officer David Stirling caught up with DirectorsTalk for an exclusive interview to discuss full year results, how the footwear market is progressing, the Poland manufacturing plant, significant progress with MuCell, sustainability and the outlook for the group.

Q1: Zotefoams have published full year results today, and I see that you’ve announced sales that have exceeded £100 million for the first time in the group’s history. Could you just talk us through those highlights?

A1: £100 million is an interesting milestone over our three main divisions:

Polyolefin foams which is the genesis of the business, sales there increased 10% to just around £56 million.

Our high performance products which is dominated by footwear where we have an exclusive relationship with Nike, sales were up 41%, which was astonishing up to just over £42 million.

The balance of our businesses, MuCell Extrusion, where we employ unique technology to help people reduce plastic content and also, we’ve developed some very interesting new technology for consumer packaging so sales there we’re up at 39% in dollars.

Overall, we feel that the sales last year were really pretty representative of where our business is. A couple of markets not really quite back where we expected to be or it could be, in aviation and automotive, but everything else was a very strong performance.

Q2: Just picking up on the footwear market, how is that progressing for the business?

A2: Well, obviously very well, that growth rate is astonishing. We have a very good, strong, and as I said, exclusive relationship with Nike who use our materials in their high performance footwear, running shoes. They’re obviously designing products using our material and selling very well so we get the pull through from that.

Our team are closely engaged with Nike to make sure that the supply chains work, that we are working with technical developments that meet their needs etc., and I think we can both see the benefit of that.

Q3: Now, the Poland manufacturing plant was commissioned in February 2021, what does that add to the group?

A3: Well, Poland was our third major full manufacturing site after UK and Kentucky in America, and the site at Brzeg which is south-west Poland, quite close to the German border, is actually designed to give us additional foaming capability, to supply the Central European customer base, going back into Germany, and give us not only additional capacity, but inventory and distribution capabilities so that facility is really just starting.

I think the team there, led by Wojciech who’s our General Manager there, have done a fantastic job in getting the site up and running and performing at a level which is consistent with the other sites in the group. There’s plenty of room for expansion there and we expect that site to continue to grow in the future.

Q4: You mentioned MuCell earlier, can you just talk through the progress that you’ve made there? I can see there’s been significant progress in developing the resource mono-material barrier packaging solution.

A4: This is something which has been designed to be a mono-material, it’s an important thing, because it’s single material means it’s completely recyclable, it’s also been designed to use recycled content in its construction and therefore can future proof it. It’s obviously a very demanding market, the consumer packaging for oxygen barrier goods that don’t want to be spoiled is an extremely demanding market.

We do believe we’ve got a technology that will perform against those requirements but turning it into a package with all the requirements of sealing, caps and closures, printing, going through equipment etc. is the next level of challenge. That’s something we’re working on right now so I think we’re making good progress.

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Before we get very excited, it’s something that’s still got quite a bit of work to do on it, to get to the point where it’s in market product but if we succeed there, the potential is very large so it’s something well worth doing. It’s one of the key things that the business is doing from a sustainability perspective at the moment, very much lower carbon footprint and recyclable consumer packaging.

Q5: I know sustainability is a key factor for the company, what can you tell us about your involvement in that area then?

A5: In our main foam business, I think we’ve always taken the view that we use less material than our competitors, that the applications that use our foam are permanent or part of a product rather than a single use disposable. In some ways we’re too technical and too high value to be single use so that’s positioned us naturally in the areas where people want performance.

A lot of our products are used to reduce weight for insulation or other sustainability factors and I think really what we’ve done is relatively minor realignment around that, to make sure that our supply chains, our internal processes on how we manage waste, how we think about our carbon footprint are much more visible to everyone, internally and much more robust. When we’re looking at new markets or new products, to have that as a very explicit requirement that we consider the sustainability position and and how that’s going to benefit people going forward.

So, it is something which is a naturally evolution for many businesses, I think for us, it’s been quite a straightforward transition because we were largely already aligned along those lines and it is obviously key to both our future and the future of the planet really to make sure that we are aligned with the low carbon economy.

So, very happy to be there and I can see our products making a difference every day.

Q6: Just looking forward, how would you describe the outlook for Zotefoams?

A6: Well, we’ve obviously come off a year where there was a lot of volatility, we are still in a very uncertain environment so we can make assumptions about what’s going to happen but it’s difficult to get those right, with level of uncertainty.

What I will say is that right now you can see good demand, it feels like our product positioning is right, we’ve got a lot of interest in projects going on and we are increasing prices in the market to our customers to pass on that cost inflation. Whilst we are cautious about some of the macro factors, particularly in the second half of the year, we are very optimistic about the long term positioning and potential for the group.

So, it’s been a difficult couple of years for everyone and I feel, for employees and customers and suppliers, everyone’s had to endure a lot of difficulty and I think we’re still in an area where there’s a lot of volatility and COVID has not gone away yet and it may never do. So, we’ve just got to learn to manage and I think we’ve got a good team who know the business and are doing broadly the right things so, as I say, the optimism is  there.

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