Loop Industries, Inc. (NASDAQ:LOOP) Q3 2023 Earnings Call Transcript

Loop Industries, Inc. (NASDAQ:LOOP) Q3 2023 Earnings Call Transcript January 13, 2023

Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Loop Industries Quarter 2023 Corporate Update Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today, , and the press release accompanying this conference call was issued after market close yesterday, . On our call today is Loop Industries Chief Executive Officer, Daniel Solomita, Kevin O’Dowd, VP, Communications, Investor Relations. I’d now like to turn the conference over to Kevin to read a disclaimer about forward-looking statements.

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Kevin O’Dowd: Thank you, operator. Before we get started, let me remind you that today’s meeting will include forward-looking statements within the meaning of the securities laws. These forward-looking statements relate to among other things, current plans, expectations, events and industry trends that may affect the Company’s future operating results and financial position. Such statements include risks and uncertainties and future activities and results may differ materially from these expectations. Additional information concerning these statements and related risks and uncertainties is contained in Risk Factors and Forward-Looking Statements section of our latest annual report on Form 10-K, our quarterly report on Form 10-Q filed with the SEC yesterday, in yesterday’s press release.

Copies of these documents are available at the sec.gov or from our Investor Relations department. At this time, I’d like to turn the call over to Daniel Solomita, Chief Executive Officer of Loop Industries. Daniel, please go ahead.

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Daniel Solomita: Thanks, Kevin. Hi, everyone. Welcome to our Q3 earnings call. I’ll just start with the main headlines of what has gone down in the last quarter. First, the sale of the land in Bécancour. It’s just a really solid business decision. The value of that land has increased over 500% in the two years since we bought the land, so that the value of the land has exploded, and there was a lot of people that were looking for land in Bécancour and that was the main motivation behind selling the land. The value had increased significantly. And for us, that was just a really solid business decision, selling the land plus our cost reduction initiative gives us three years of cash on hand. That’s without having any €“ raising capital and dilution, and that is more than enough to get us through this current global slowdown that we’re experiencing.

The Quebec and the Canadian project is still really important for us. It’s an important project for Loop. It’s important for Canada to be able to get to their 2030 goals of eliminating plastic waste. We’re continuing to be engaged with the Canadian government and the Quebec government. We’ve already looked for other land available in Quebec and outside of Quebec and other parts of Canada. So there’s plenty of land available that’s much cheaper than the land that we had at Bécancour. And so when the macro environment improves, we’ll be ready to begin that project. So it’s still a very important project for us, and it definitely still in our cards for the future projects that we’re going to develop. With these uncertain macroeconomic times, it’s important for us to make sure that the projects that we do focus on and that we do build are the ones that have the least amount of risk and the highest amount of success.

And that’s what leads us to the projects that we’re working with our partners at SK Global Chemical. SK Global Chemical is a large petrochemical company with very deep resources. Our project in Ulsan, South Korea has been going on for quite a while. It’s not like it’s a new project that we’re just starting. We’ve been working with SK hand-in-hand. Teams from Loop and SK are working on a daily basis together to execute on the Ulsan project since we announced our partnership when SK became a 10% owner €“ equity ownership stake in Loop in 2021. So the companies have been working really closely together and we have multiple projects with SK that we’re working on. First one being the project in Ulsan, South Korea that is scheduled to break ground in this year in 2023.

Really important project for us, having that foothold in Asia is hugely important for some of our customers, especially on the fiber side. So all of the polyester fiber supply chains for the clothing and textile industry. So that’s a really important area for us. SKGC brings in a wealth of experience. Obviously, they do all of the operation of the plant. So they have an experienced operations team. We’re building the plant on one of their existing petrochemical sites. So they already have a lot of the infrastructure for the site available. We’re working together with SKEE, ecoengineering, who is the SK division of their in-house EPC contractor, very large organization. They built petrochemical plants all around the world, and they have a huge wealth of knowledge in this experience and building not only on the engineering but on the construction of these facilities.

So they’ll be providing all of the construction and engineering services for the projects. SKGC also provides the majority of the capital for the projects, which is obviously very important for Loop. I said they’re an experienced operator. SKGC also is in charge of all of the feedstock sourcing. Loop and SKGC working together on the customers. So Loop brings in the global customers that we have for other projects and SKGC works mainly on the local customers. So it’s really a tremendous partnership between both companies. These are projects are really the ones that are the easiest to execute the least amount of risk because of having a partner such as SKGC. And so in these more uncertain economic times and the macro environment out there, we think it’s best decision for Loop to be executing on the projects with the least amount of risk and the easiest to execute on.

We have plenty of projects in the pipeline. There’s tons of interest for the technology in other parts of the world. I mean, Asia as well. Asia, obviously, with SKGC. We have a plan to build multiple plants with them over the coming years. We also have multiple projects in Europe. We have our project in France, but we are also looking at other projects in Europe as well with the same consortium of partners and we have other projects in other parts of the world. So there’s no shortage of demand for the technology or for the final product. But in today’s world, we have to be looking at which projects are the easiest to execute on with the least amount of risk and the highest return on capital. And so that’s where we see huge benefits in working with our partners at SKGC.

That’s all I have. So we can open the call up for questions now.

Q&A Session

Operator: Thank you. Our first question comes from Gerry Sweeney of ROTH Capital. Gerry your line is open. Please go ahead.

Gerard Sweeney: Good morning, Daniel. Thanks for taking my call.

Daniel Solomita: Hi, Gerry.

Gerard Sweeney: I was hoping that maybe you could discuss maybe the best that you’re permitted to maybe some of the critical next steps with SK. I believe you’re looking at €“ there’s a bunch of scenarios, I think, maybe determining structure of the JV as well as the financing of the project on a go-forward basis and maybe any other items? And secondarily, maybe timing or target timing on sort of hitting these milestones. I know things are in flux, but I want to get an understanding of what big steps are out there and potentially when we can see some resolution on those steps?

Daniel Solomita: Yes. Thanks for the question, Gerry. So with SKGC things are not in flux. It’s been very organized and structured work that we’re working with them. So there’s the finalization of all of the joint venture agreements. That’s something that we are at the6 final stages of completing with them. So that’s one part of it. And then our engineering teams are already working together on the final engineering and construction. Like I said, we’ve engaged with SKEE, the ecoengineering, which is a division of SK Inc., the broader company. So SKEE will be providing all of the engineering and construction for the facility. We’re scheduled to break ground on the facility in Q3 of 2023. So that’s the goal. SKGC has been very vocal about the project and their intentions.

Most of that is in the Korean and Asian media. So it doesn’t really come to the Canadian or the U.S. media very much, but you can look through at the Korea Times and things like that. So they’re very vocal about the project and the timing and the importance of this. Because SKGC really wants to be seen as the largest recycling company in the world and really moving sustainability to the front of their agenda. So I would say, signing up the joint venture, which we’re at the final stages of and then breaking ground in Q3 of this year. As far as the financing, we’re discussing SKGC in the partnership. SKGC provides 80% of the capital for the project. Loop is responsible for the 20% of the capital for our equity portion. And that’s the portion that we’re discussing with SKGC on providing the capital that Loop needs for our equity positioning in the project.

Gerard Sweeney: Got it. That is it for me. I appreciate it. Thank you.

Daniel Solomita: Thanks, Gerry.

Operator: Thank you. Our next question comes from David Quezada of Raymond James. David, your line is open. Please proceed.

David Quezada: Thanks. Good morning, everyone. Daniel, my first question here, just kind of a follow-up on what’s happening with the Ulsan project. Could €“ like are you able to comment on whether or not the long lead time pieces of equipment have been ordered and any thoughts or context around how those time lines are shaping up relative to expectations? And if costs for that facility overall are still shaping up in line with your expectations?