Accsys Technologies PLC (AXS) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Accsys Technologies plc investor presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Accsys Technologies plc, Jelena, good afternoon.

Good afternoon, Jake, and thank you very much for this opportunity. We are here today to present our H1 results of FY '26 and also to give a little bit broader view on what is company doing and how is our transformation journey going forward. We are today going to talk a little bit about us, the introduction from me and Sam, H1 FY '26 overview. We will skip to the financial review, business review and then give finally outlook for the rest of this financial year. My name is Jelena Arsic van Os. I'm CEO of the company that joined the company 2.5 years ago. I spent over more than 25 years operating in the chemical business sectors, running large businesses for international companies, most of my career for the AkzoNobel and later on for the company called Imerys.

And I'm Sam Vohra, I'm the CFO of the company. I've been with the company since September 2024. So just over 14 months. I'm a U.K. trained chartered accountant, but I spent over 20 years working for U.K. listed companies and over half of that time was working for engineering and manufacturing companies.

So a little bit about Accsys Technologies plc. Company has a very strong purpose of changing wood to change the world. What does this mean? We see ourselves as disruptors in this industry space, in the space of building materials. We are taking fast-growing, sustainably harvested wood and passing it through our proprietary process that is protected with more than 300 patents across 45 countries. We give that wood superpowers, superpowers in terms of durability, in terms of dimensional stability, in terms of resistance to rot. Company today is producing 3 main products: Accoya, Accoya Color and Tricoya. Accoya is acetylated wood. Accoya Color has additional step of coloring impregnation of acetylated wood, so coloring impregnation of Accoya that is the first step. And then Tricoya starts with Accoya wood that is being shredded in a small pieces and then mixed with a little bit of resin, and we are producing the panels that are going to sustain a very, very long time exposed to the environment. All of our products are having warranty of 50 years above the ground and exposed to the environment in the outside applications and then 25 years in the ground or in the water. Today, most of our applications, most of our wood is used in the windows -- making windows and doors, cladding, decking, fencing, outside furniture or submerged in the water, protecting the canals in the Netherlands or even siding the canals along the dams in the U.K. We have all the sustainability credentials. We are very, very passionate about sustainability. And if you are looking at as a carbon capturing product, every single person that is working for Accsys is actually here because of that fantastic product that we make. Today, we have 3 production sites, 2 acetylation plants, one in Arnhem in the Netherlands that has 4 reactors and 80,000 cubic meters in the production capacity. That is operational since 2007. We have a second acetylation plant in Kingsport, Tennessee, which is a joint venture with the Eastman Chemicals Company. Accsys is holding 60% in this joint venture and Eastman is holding remaining 40%. It is operational since September last year, and it has a capacity. It has 2 reactors installed, so the capacity of 43,000 cubic meters today. Barry in Wales is our coloring facility. So wood from Arnhem, acetylated wood from Arnhem or Kingsport will come to Wales to be colored impregnated by -- through the core to produce Accoya Color. The Arnhem plant is actually supplying, strategically positioned to supply Europe and the rest of the world and our Kingsport facility is supplying local U.S. market, including Canada and Mexico. So why the company has a unique value proposition for our investors. We have genuinely very unique product, really innovative product in our portfolio with this unrevealed warranty of 50 years that we are offering, and there is no industry match that can compete with the durability and performance of Accoya. So there is a very clear product differentiation. Product and technology is protected by patents. We have 27 patent families, so more than 300 patents across 45 countries that are protecting the product and the technology. We have a unique and very known brand among the wood products in the market for all Accoya, Accoya Color and Tricoya. And last but not least, certainly not least, the company has established manufacturing footprint. And if you know that building Accoya plant of acetylation plant, you need an investment that is around EUR 150 million. Having established 2 manufacturing sites in the 2 largest and the most profitable wood markets in the world, the premium wood markets in the world, does create a significant barrier to entry to any newcomers and giving us a very good position for growth in this -- in the building materials industry. Now Accoya Color and Tricoya have a significant market share opportunity in our core markets that are driven by the trends of population growth in the need of more housing being built everywhere. It doesn't matter in which country in the world you look, there is a general housing shortage everywhere. But there is also the sustainability trend materials that are looking on a carbon footprint in the building industry as being one of the most impactful for the carbon emissions are very much needed and also our products are having quite a nice natural look so that biophilic design is very much wanted at the moment, is very trendy at the moment. But looking besides the trends, if you look what are the addressable markets for our products today, we operate in 2 large ones. Our oldest home market, I would say, is Europe, including U.K. And there, we are talking about 1.9 million cubic meters of addressable market for Accoya in the application we are playing today. If we look at the available capacity that we have in Europe and even with the plants completely full, it is very obvious that the market share for Accoya is in the low single digits. In the U.K., we have a market share of circa 4%. So there is still significant opportunity for us to grow and develop in Europe and U.K. On the other hand, looking at U.S., cladding, decking, windows and doors market, it is by far the largest premium market for Accoya. It is almost 4x, if not more -- higher, bigger than the one in Europe. And looking at our available capacity, even if we have things called completely full, the market share in the U.S. is going to be less than 1%. So there is enough space for Accoya to establish itself and to grow and still not reach even a very single digit of the available market we have in those 2 important geographical regions for us. Now when we look at Accoya, how does it compete with other products, we certainly focus on a premium market segment. When we are talking about premium, we are also having a pricing premium that is reflecting the value that our products are adding. So here, you can see all the other available products that you can find in cladding, siding, decking or windows and doors. Depending on the current cost and the performance, you see that Accoya with this green dot is always on the completely right side with critical performance attributes that are far above any other competitive material, but that also comes with a premium values. So we are very proud that our critical performance attributes are certainly stability -- dimensional stability of our products that remains -- would remain stable over -- even in the very extreme conditions. That means that if you -- that your maintenance cycles are quite lower. So value in use is getting a benefit over time. In the decking market, for instance, our products have a significant decay resistance. So that means that they are going to outlast any other wood option in the 10-year test. So people who are looking for durability are certainly counting on Accoya in that segment. And for windows and doors, again, low maintenance for coatings because our material is very stable when you put a coating over it because wood below is not moving, that coating can stay significant time longer. So on our windows that we have on the test field, we have a window just sitting there 15 years with no maintenance. So we are very proud that Accoya is certainly a flagship product, if you like, in this space of wood building materials. Coming now to the H1 and how the company performed for the first half of the financial year '26. We have delivered excellent first half with significant improvement in profitability. Accoya sales volume increased 22% across different regions with 61% of growth in U.S., where we, since September last year have our new production plant. Group revenue delivered was EUR 76.1 million, which is a 23% increase in group revenue on a like-for-like basis versus the first half of last year when we are talking about like-for-like basis in the first half last year and this half last year -- in the first half last year, we have transferred 13% of group volume and 14% of the group revenue to be produced and supplied from our new production site in the U.S. So if you take that volume out of equation, then you look that underlying Accoya and underlying group revenue grew 23% because we were able to replace all of this transferred volume with the new business in our Arnhem plant. This is a significant positive news and significant success. And why is that? Because underlying building material market didn't really grow in this period of time. So because our growth is double digit and high double digit, if you look on what is happening in the U.S., but also in the rest of the Europe, that means that Accoya is gaining market share compared to all the other building materials. At the same time, we are continuing our pricing and our cost discipline. So we were able to contain EUR 2.3 million of savings from our transformation program, which is helping us, of course, now in improving that profitability line that significantly changed since last year. Just to remind you that for the full financial year last year, company made EUR 10.8 million EBITDA -- adjusted EBITDA. And for this first half of the year, we have delivered EUR 10.4 million adjusted EBITDA going from EUR 4 million last year. So this is a significant improvement, and Sam is going to tell you a little bit more later on when we dive deeper into the financials. Company is above gross margin target of 30%. And very -- we are very, very pleased to show progress on deleveraging our balance sheet with the refinancing that was completed just in the first week of October. Our leverage ratio end of September was 2.1% compared to 2.5% at the end of March, so at the end of the financial year last year. And if we look on where we are on all the targets that company actually put forward in our Capital Market Day, we are tracking quite spot on, on each one of the KPIs that we said that we are going to measure ourselves on. So we are very, very happy with where first half of the year is, and I'm going to take you later on, on the -- where we are going to after Sam explain a little bit more details on the financial, how do we see the rest of the year progressing with this. Okay. Sorry, we are continuing to build a strong and sustainable platform for growth. In January last year, we had a Capital Market Day. In the Capital Market Day, we said that we want to build Accsys to become fundamentally strong, operationally efficient, customer-centric and preferred with the United team safe and sustainable company going forward. If we look how do we track on those pillars, fundamentally strong, we are showing much stronger financial performance than what we have in the past. Business is considerably de-risked with now 2 fully operational manufacturing sites that are operating in the 2 largest and most profitable markets in the world. And we are strongly positioned to grow from that position of strength. We also have a refinancing completed. So we have now funds in place to basically fund the growth for the next -- until October of 2029. So that is for the Phase 1 and Phase 2 of our strategy. Operationally efficient, our like-for-like gross margin increased 1.1%. So this is at the same time when we are growing the top line and the bottom line. As I mentioned on the previous slide, EUR 2.3 million of benefits of business transformation are still kept. And we are also finalizing now the investment in our acetyl storage in Arnhem, which is one of the significant CapEx that we did this year. We spent EUR 2.5 million for this project, and Sam is going to walk you a little bit later on to more details around it. Everything what we do, we are doing because of our customers. They are core on every single activity company is performing. We are seeing good significant market share growth of Accoya in every single region. We are adding new distributor partners. In this first half of the year, 3 new distribution partners are added to our customer portfolio. We rebranded Accoya, and we are continuing to be specified for the high-profile projects around the world. At the same time, following a very strong demand for our Accoya Color, we are seeing doubling of capacity in Barry. We invested in operation adding the second shift. So now we can produce double than what we did last year. We are strengthening our talent across the sites. We are investing in revenue-generating headcount and also the headcount that is in the operational sites, our finance teams and key management functions on our locations. And last but not least, we have launched our sustainability strategy just a couple of weeks ago and invested in a new stacker hall safety improvement and environmental improvement in Arnhem. So it was quite a busy and quite a successful first half of the year. So with this, now I'm giving it to Sam to walk us through the financials.

Great. Thank you very much, Jelena. So over the next couple of slides, I'm going to go through a lot more detail on the financial performance and talk about a number of the key financial metrics and show how they progressed during the period in terms of waterfall graphs. So really, what we're seeing here is a summary of the financial performance that we saw for the first half of the year. And as Jelena mentioned, it really was a very strong performance and an excellent first half of the year for us. Whilst sales volumes by the group, which excludes the joint venture, were up 1% on a like-for-like basis, when you do exclude the volumes that were transferred to the joint venture in the previous year, the group sales volumes did increase 15%, which is very, very strong, and it shows the strong growth that we've had in all of our key regions that we operate in. Total sales volumes for Accoya, which is a much stronger indicator of global demand for Accoya were up 22% to 38,618 cubic meters, a really, really strong performance. So then when we think about revenue, revenue growth, as Jelena mentioned, like-for-like revenue growth was 23% which is really demonstrating that volume growth plus the focus on strong pricing that we have and aggregated revenue, which includes our share of the joint venture was up 21% to EUR 89.9 million. When you start to think about this joint venture in Kingsport in America, only commenced operations in September 2024, it's done EUR 23 million of revenue just in H1 itself. So with that EUR 23 million and the EUR 76 million, Accsys and the JV's gross revenue is effectively the best part of EUR 100 million first 6 months of the year. When you think -- it was only a few years back in 2021 that the business only used to do EUR 100 million revenue for the whole financial year. It shows how we've successfully scaled up the capacity, produced it, sold it and at the same time, increased our pricing to gain market share, which is a very, very strong performance for the group. Our gross profit margin increased over 110 basis points on a like-for-like basis and remains above our 30% strategic target number, and I'll talk more about that slightly later on. Underlying EBITDA was up 29% and the margin was up 260 basis points, which is a very, very strong performance. And that is excluding the joint venture, so EUR 10.7 million underlying EBITDA for the first half of the year. Really, really strong point for us for this year was the joint venture. So the North American operation only commenced operations, as I mentioned, in September 2024. And we've always said that for the first 12 months of operations, it would be loss-making, because it's a start-up. There's always those initial costs that you incur as the business ramps up. We then said at our Capital Markets Day that we expect this business to be profitable at an EBITDA level for its first full financial year. So for the first half of the year, the business was close to breakeven. The share of the loss of the JV was only EUR 0.3 million loss, which is a very, very remarkable progress that has been made there. And that was really off the back of particularly strong growth in North America with 61%, but also a really good manufacturing environment that's been created with very tight controls over costs and a really strong operational base there. So overall, our -- adjusted EBITDA, which is our main profitability performance measure, was up 160% year-on-year from EUR 4 million to EUR 10.4 million. And when you think in our last full financial year, say, the year ending March 2025, the group, including the joint venture delivered EUR 10.8 million of adjusted EBITDA profit. Well, we nearly achieved that just in H1 of this year, which is very good. The adjusted margin was 11.6%. At our Investor Strategy Day, we said we would like to be at 12% adjusted margin at the end of FY '27, while we're nearly there now some 18 months in advance. And then really from an overall debt position, our net debt stood at EUR 39.8 million, which was a leverage ratio of 2.1x, and that was an improvement from the 2.5x that we saw 6 months before at March 2025. And now I'll go into more detail about revenue, profitability, margin and also our cash flow growth over the first half of the year. So from a revenue perspective, you only mentioned earlier that when you start factoring in the volumes that were transferred to the joint venture in the first half of the previous year, it was just over 3,800 cubic meters. That represented 13% of volume, but it was 14% of revenue. So when we exclude that, then like-for-like revenue growth was up 23% to EUR 76.1 million. And that's really off the back of very strong growth, and Jelena will talk about our regional end markets later in the business review. But the other key thing is around the pricing discipline. We operate a premium product in a niche market, and we don't have to discount to gain market share. So as a result, during the year, we were actually able to increase our average selling price by 1.7%, which is a really, really strong performance in a broader market that is flat. License fee and royalties represents the return that we get from our joint venture. We get an ongoing percentage royalty on every dollar of sale they make and the license fee actually relates to the construction and establishment of the plant. So license fee was effective in 3 phases. One when the JV agreement was signed, one when the plant was completed, and the final license fee payment, which was made in September of this year was really when the plant passed its final performance test. That showed that the plant was operating exactly to the same specifications and tolerances as the Arnhem facility, and that gave rise to that final license fee income. Our return now from the joint venture is effectively a percentage royalty on all of the sales. So overall, very strong growth in revenue. Total aggregated revenue, including the joint venture was GBP 89.9 million, and that was after a translational FX gain of another 1% or so. So aggregated like-for-like revenue was also up 23% as well as like-for-like revenue. So from a gross margin perspective, very strong improvement. On the face of it, it looks like the gross margin, while still being over our strategic target of 30%, looked like it dropped by 20 basis points. But when we factor in the volume that was transferred to North America in the previous year, it was 13% of volume, 14% of revenue, but 18% of gross margin and 23% of EBITDA, primarily because sales to North America command a far higher average sales price than the rest of the world. Then we saw 110 basis points increase in our gross margin through volume growth, favorable sales mix where we were able to increase our proportion of Accoya Color sold in the first half of the year. We added a second shift to the Barry facility in June. It wasn't a CapEx investment. We've added 4 heads to the operation. So the facility operation is now producing over 2 shifts, and that with a combination of external drying of the Color resulted in a more than doubling of capacity from 6,000 to 14,000 cubic meters per year. That took place in June. So we had a couple of months benefits of higher Color production, but we're continuing to see strong Color demand over the year. The license fees and royalties I mentioned earlier. From a production cost perspective, about 62% of our cost base relates to our raw materials, so wood and net acetyls, which is used in the acetylation process. So wood we buy from New Zealand from about 15 sawmills that we work with, and really over H1 -- compared to H1 of the previous year, the wood cost was pretty flat year-on-year. Even though we saw a slight increase in the cost of appearance grade wood, that was more than offset by a reduction in wood chip grade wood, which we effectively use for the Accoya, Tricoya product. From a net acetyls perspective, we actually saw a favorable benefit here in terms of our gross margin. And that was really because of an improvement in the usage of anhydride that we use in the production process. So we can still access the same quantity of wood using a slightly lower amount of anhydride, which leads to a reduction in the unit cost of production, which hence improves your gross margin. We also benefited from a change in our supplier mix, but also given one of our suppliers for anhydride is a U.S.-based company, which invoices us in U.S. dollars, we saw a favorable FX benefit because of the weakness of the dollar against the euro in the first half of the year. So overall, GBP 23.2 million gross margin with a 30.5% gross margin percentage, which remains above our strategic target level. From an overall perspective in terms of looking at profitability, we more than doubled our adjusted profitability from EUR 4 million to EUR 10.4 million, that was a 160% increase year-on-year or a 620 basis points improvement in the margin, a very, very strong performance. That was driven by the gross margin improvement that I mentioned before, but also keeping those operating costs, so SG&A costs below gross profit really under tight control. We only grew our OpEx cost by EUR 0.2 million year-on-year. And as Jelena mentioned, we've retained EUR 2.3 million of the benefit from the business transformation program undertaken in FY '24, that's retained even after we've made additional investments in terms of adding sales and marketing staff, but also upgrading the talent we have in the operations in health and safety and finance and other key functional areas. Any costs to do with the Hull business or Tricoya U.K. have all completely gone. That business was put into liquidation in December 2024. So you've got a EUR 1.6 million swing in profitability H1 on H1 because the Hull is no longer part of our group. And then you can see the big benefit from the performance of the joint venture, which last year was a EUR 4.3 million loss, and now we're pretty close to breakeven. So a big EUR 4 million swing in the profitability of the joint venture over that time period. So what does this mean from an overall segmental perspective? So the first bar here shows the operating assets of the Accsys Group. So it excludes the joint venture and really focuses just on Arnhem and Barry. And that showed a significant improvement in profitability to EUR 12.7 million and an improvement in the margin to 16.7%, which is really, really strong performance. Corporate costs, which really represent the cost of the listing. So it's the corporate functions in head office, the cost of the listing fees, the Board of Directors, anything to do with our listing on AIM and also Euronext reduced by EUR 0.4 million to EUR 2 million in the year. And that was really, again, because of the tight cost control we have, but also there were a couple of one-off costs in the previous year. So the overall -- the middle bar, which is the light green bar shows Accsys Group, and that's excluding the JV. So that shows the underlying profitability of EUR 10.7 million, which is up from EUR 8.3 million in the previous year, but really that big improvement in the margin, which is up 260 basis points to EUR 14.1 million -- 14.1%, sorry. The JV, as I mentioned earlier, was close to breakeven with our share of the loss of EUR 0.3 million, which took our adjusted EBITDA profitability up to EUR 10.4 million or 11.6%. And as I mentioned before, that 11.6% is very close to the 12% target that we set ourselves to be at March 2027. So nearly there, but some 18 months in advance. So net debt overall. This chart shows the progression of net debt. And we ended the year at EUR 39.8 million of net debt with a 2.1x leverage ratio. Our working capital increased during the first half of the year by EUR 4.2 million, but that's really all to do with wood. Our target is to hold 3.5 months of raw wood in stock. This is basically wood that we buy from our sawmills primarily from New Zealand. And we keep 3.5 months in stock because of really that long lead time. We then keep about 1.5 months' worth of stock as finished goods to meet customer demand and to provide availability of SKUs to our end customers. So given the substantial growth that we've seen in H1 with 23% growth and the forecast growth that we're seeing in H2 compared to the previous year, it's necessary for the business to carry higher levels of working capital or to meet that demand. There's also a feature of timing here because the cutoff point is effectively 30th of September, the end of our first half of the year. But effectively on the 1st of October, the Arnhem business undertakes this annual maintenance stop. So the plant closes of 3 weeks while we maintain and clean the plant and eventually make sure that all the parts are in working order and any maintenance CapEx is undertaken. So really ahead of that maintenance stock, you build up inventory levels and then during the month of October, when the plant isn't producing anything, you're selling out of finished goods. So there is a slight feature there in terms of working capital as well. Net interest went up by GBP 2.3 million, of which about half of that relates to our convertible loan notes. CapEx investment in H1 was EUR 2.9 million, and that comes from a couple of projects. So the largest project was a project we internally call Project Elm Tree 2, and this was really about increasing our acetyls storage capacity in the plant in Arnhem. So we can now store about 7 days of acetic acid and anhydride in the plant. Previously, we were reliant on tanker deliveries. So if there's any scheduling issues with tanker deliveries, it could have a knock-on impact on production. And that's been taken away by the introduction of Project Elm Tree 2. The CapEx involved was front half loaded with the project being effectively connected to the rest of the plant during October, and it will then go live later this month. We also made a good investment in terms of improving the health, safety and environmental conditions of our stacker hall in Arnhem to improve soundproofing, light and ventilation, which makes it a much better working environment for our operators who operate in that hall. Tax received was EUR 0.7 million in respect to previous tax years. And hence, the overall net debt was EUR 39.8 million with 2.1x leverage. And really, the final slide for myself is just summarizing that excellent first half of the year where we saw a significant improvement in profitability. We saw total sales volume growth of 22% with sales accelerating in North America, which grew 61%, which is particularly strong. The JV was close to breakeven, and we saw a big improvement in adjusted EBITDA with that margin very close to our Phase 1 target already. We've continued to deleverage the balance sheet was, again, one of our strategic aims with a good improvement in our leverage ratio. And the refinancing that we've just recently completed in October by introducing a new banking partner to our banking group has really strengthened our capital structure and given us significantly more financial flexibility on improved financing terms. So with that, I'm now going to pass over to Jelena, who's going to talk you through the business review.

Thank you, Sam. Thank you very much. So my business review, I will start first just mentioning some of the fantastic projects that we realized in this first half of financial year '26. You saw a couple of them passing through the slides as we went through it from the NEMO Museum in the heart of Amsterdam, where we have a new terrace on the rooftop that is now being done in Accoya and also benches and tables that are going to be done in the future. We had a library in Barcelona, where beautiful cladding was chose because of the durability and resistance to harsh environment of the sea air in that area. Here, you see a beautiful hospital cladding in New Zealand that is important market for Accoya as well. Let me remind you first about where do we stand on -- with our focused strategy and the targets that we gave ourselves in January 2025. As we said, strategy is going to be delivered across -- along the 3 phases. And in the first phase, that is focusing on resetting operationally, maximizing returns and cash flow from the existing assets and increasing and reinforcing the fundamentals, including reducing the debt and optimizing our capital structure. Our first half year results demonstrate excellent progress against the Phase 1 targets. We are spot on, if you like, on delivering almost each of the KPIs that we gave ourselves as a target. With our sales volume on a run rate of 77,000 for the full year, we are very good on the target -- of making this target of 100,000 that was at the end of our Phase 1. Significantly improved profitability, moved from 5.4% of adjusted EBITDA margin from last year to 11.6% this year, which is very, very close to the adjusted EBITDA margin target of 12% for the first phase of our strategy. Importantly, we are deleveraging and derisking the business, placing company in a much stronger position for growth. Our successful October refinancing is giving us more favorable payment terms with a reduction in quarterly payment -- capital payments going forward. So if you look at where do we stand on the first phase, I would probably say that with the good efforts of the team, we are ticking basically each one of those boxes. Now going what is happening in our markets. We see quite a strong demand across all the geographies. U.K. and Ireland demonstrated growth of almost 14%, rest of the Europe, 22%; rest of the world, 28%, and fantastic 61% in North America. At the same time, we are keeping our pricing on the pair. So group average sales price was maintained with a 1.7% average increase across of our region. So that means that despite the premium or in addition to the premium parsing, Accoya is gaining market share globally. If you know that underlying market are almost stagnant or growing 1% or 2% in some of the countries. At the same time, we are doubling Accoya Color production capacity and our decking collection is underway to be launched in the second half of this financial year. The confidence of our distributors and our customers in availability of supply of Accoya and also fantastic performance credential are helping us to deliver this growth. We -- as we also said, we are particularly proud on the excellent performance in the JV, 61% growth in the U.S. for the first half of the year, 8,000 cubic meters of Accoya was sold. And as you know, and Sam went into the details of it. So Accoya USA is almost on a breakeven on their EBITDA. We promised to the market that the joint venture is going to be -- show breakeven EBITDA in this financial year and then cash positive in the next financial year. So we are actually on that path, delivering very, very good performance for the reporting period. There was one of the negative impacts or negative potential news in the reporting period, and that were the import tariffs on the softwood coming from New Zealand or any country importing in the U.S., we were able to react and increase our average sales price as from 1st of November. Tariffs were announced in the first weeks of October. So we are passing this without too much troubles to the market. I think everybody in the U.S. is adjusting now and adjusted now to overall inflation and everything. So we are confident that we will be able to manage this impact quite successfully going forward. If -- here, we are going a little bit in depth on what is happening in this U.S. market. Our sales in the U.S. are outpacing overall market growth, allowing us to gain share from competitors. With forecast indicating strong and sustained demand for modified wood overall -- over alternative materials, we are confident that Accoya USA will continue to expand its presence in the growing -- in this growing market. Our main drivers in -- our main application in the U.S. are cladding and decking. And those -- both of these segments are showing very strong growth rates for modified wood. As you can see it from the table, they are showing double-digit growth forecast for the decking. Traditional timbers like hardwoods are seeing sharp declines in demand in a customer who are opting now for the higher-performing modified and engineering solutions. And furthermore, the increased regulation on the import of hardwoods like ipê and cumaru from Brazil had quite a good and positive benefit for Accoya in the U.S. as supply was quite limited for those species. And as you can see from the table, we are expecting them to further contract going forward. Our growth in the U.S. is coming predominantly from our existing distributors, our long-lasting partners who are with Accoya from its start, also investing together with us for many years. But we are also adding some new distributors like hardwood specialty products or GMX Group that is focusing more on a decking and more retail side of the business. And we also add a new -- our first distributor in Mexico, who is having also a milling capacity. So they are capable of not only distributing us on Accoya, but also making more finished product out of it. In Arnhem and Barry, we continue driving operational efficiencies to maximize our returns on our assets. As I said, the underlying gross margin showed an increase of 1.1%. We will continue to work on those efficiencies to drive this margin even higher going forward. And you can also imagine that as we approach the nameplate capacity as we grow our volume, most of that profitability, given that we do not have really a lot of people in our operations, most of that benefit is going to go to the bottom line. We have invested in Arnhem in a new Elm Tree, I think Sam already mentioned a very important capital investment, which is going to give us additional batches, so additional capacity of a couple of thousand in the year and also allow us to be more flexible with the shipments and receiving of our chemical finished goods or raw materials during the week and not doing it in the weekend. In Barry, we see fantastic 56% year-on-year growth for the Accoya Color sales volumes. We invested in a second shift, and we will continue to build the market and also the supply of this very nice product Accsys is having today. Last but not least, we have launched our sustainability strategy where the first time in the company history, we are actually committing to the decarbonization target. Sustainability is in the core of everything what Accsys does. So we are very happy that we are finally at the stage to make the commitments to the market and keep tracking on the progress as we go forward. This will bring me -- this is the last slide that we are talking about existing business, and this is now bringing me to the outlook, and I would like to summarize today's messaging. We have delivered very strong H1, and we are entering the second half of the year from the position of strength. Our trading is remaining robust going into H2, and it is supported by the sustained global demand for our premium differentiated products. We expect to see this continuation of sales acceleration in North America and also noticing the impact of recently announced tariffs, we expect joint venture to be EBITDA positive for the financial year. While we also have to be mindful that the underlying market conditions are relatively soft in the building and building material industry. So there are continuing macroeconomic challenges. The Board is really confident that company will continue to deliver further growth and profitability improvement for the year ahead, which is consistent with the expectations, and we will continue to make further progress towards our strategic targets. With this, I would like just to remind you why Accsys is showing a compelling investment case and sustainable growth opportunity. Company has very unique product that is really backed up with a significant patent portfolio. And we see ourselves as an industry disruptor and generally innovative product that is operating in a growing and sizable addressable market that are underpinned by a very, very strong brand. We have established manufacturing footprint. Even though this technology is known for more than 100 years, nobody in the industry was having a commercial site and available commercialized manufacturing location and be able to actually provide to the customers acetylated wood and knowing that building a plant cost EUR 250 million, then it also creates a sustainable and high barrier to entry for any newcomers. We are improving, and we are showing quite a strong financial performance. And now with the funds in place with the refinancing that we did in October, we do have enough funds to deliver on our focused strategy that we showed in the first half of this calendar year. So we do believe that the company is at an inflection point to deliver significant shareholder value. I don't believe that the markets are recognizing fully with the share price. All of this great work that teams are putting in and this significant improvement in all the results, but nevertheless, if you look where we were in January with the Capital Market Day where the share price was and where is it today, it is almost 60% higher, so significantly higher, and we will continue to work very hard and to -- as we improve and further strengthen the company, this recognition will come, I'm absolutely sure. So with this, I'm going to finalize this presentation, and we are going to open the stage for the Q&A.

Perfect, Jelena, if I may just jump back in there. Thank you very much indeed for your presentation this afternoon. [Operator Instructions] I just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Guys, as you can see that, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But guys, at this point, if I may just hand back to you to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you.

Thank you, Jake. So I will start with the first question from Michael H. Can I ask what you are doing for the share price as you have been CEO now for 2 years, and the share price hasn't given shareholders any returns at all. Why is that? Michael, thank you. This is a very good question. And as I just mentioned at the end of my presentation, I do not believe that share price is giving the justice on all the excellent work and excellent progress that is being done in the last couple of years. Of course, the moment when I joined the company, company was on the -- with some difficult decisions needed to be made. We had 2 unfinished big capital projects, one in the U.S., one in Hull at a time with a company of our size, having 2 large capital projects unfinished means significant risk on the company results. And I do believe that, that's why share price reacted at that time as it was. We have done a lot of improvements. Today, we have -- at that time, we had 1 site. Today, we have 2 acetylation plants and 1 coloring plant, a much, much stronger financial performance, completely derisked with this exposure to the unfinished projects. We have a strategy in place that is really proving that it is working. And again, as I said, as from the Capital Market Day that we had in January this year, our share price increased almost 60%. We are going to -- we are very much committed to continue delivering on this road map. And I'm absolutely sure that with the team that we have in place, with the talent that we have in place, that we are continuing investing, we are going to continue showing progress and as a company, continue to show the progress, share price will come.

Great. Next question. Can I ask why you changed brokers from Numis to Liberum? Yes. So, good question. And it was in April this year, we did move from Deutsche Numis to Panmure Liberum. But really, why do we do that? And Deutsche Numis are very, very good, but we felt it was time for a fresh pair of eyes from both a broking and a NOMAD perspective. And it's always good to refresh your advisers periodically to bring fresh ideas and fresh initiatives as well. And really linked to Jelena's last point about driving that share price higher, it's about introducing us to new investors, people who are excited about the strategy just as we are. And really, we felt that by changing brokers that we could get those introductions to potentially new shareholders who could help drive that share price higher.

We have a question from Nigel. Given that Phase 1 of the focus strategy targets improved utilization of existing assets, what is your current planned utilization rate? And how much further headroom remains before requiring new capital investment? We are today at around 70% of utilization rate. We will not need any new investment at least through the first 2 phases of our strategy. So no expansions at least in the next couple of years.

Great. Next question. As utilization of your existing capacity increases, do you see opportunities through efficiency gains, product mix improvements or pricing to move gross margins above the 30% target? What indicators should investors watch to assess this? So I think really, we have said we want to maintain a gross margin of 30%, but we want to improve that each year. And it is through a combination of all of those above things. So it is operational efficiency. How do we get more through -- coming through the plants, looking at cycle times, looking at our costs. I mean just over 60% of our costs are wood or net acetyls. So through procurement activities, looking at overall efficiency about how the plant operates, how we engage with our suppliers and partners and also pricing, which remains a firm part of what we do. But you can't just rely on pricing to drive your -- to drive revenue forward and drive the gross margin forward. It has to be accompanied with operational efficiency. So what indicators should investors look for? Well, I think every 6 months as we're reporting, you're seeing volume growth and revenue growth. And you can see that in terms of how that is benefiting gross margin. So next question, which is probably one for me. What are the terms of the new bank loan? So yes, so we undertook a refinancing of our banking activities that concluded in October of this year. So just in the second half of the year. And really, it was important for us to diversify our banking partner base. So I mean, ABN AMRO have been very, very supportive to the business for a number of years and continue to do so. But we wanted to introduce a further bank. So as we get to the end of Phase 2 of our strategy, as we start looking at expansionary growth for Phase 3, you don't want to just put all your eggs in one basket and be reliant on one banking partner to effectively provide the debt funding to do that. Having a second bank gives you greater optionality and ability to fund growth through debt, and we couldn't be more delighted than getting a partner of the strength and caliber of HSBC. So I mean the key terms, I mean, I'm not going to go into terms of the commercial terms, but it is at least 1 percentage point better on pricing and the pricing is now linked in terms of the margin pricing to our level of leverage. And also, we get to keep more of our cash in the business. So the capital repayments on the loan are significantly improved on the -- compared to the previous facility. So you could think that overall, the business will be approximately after FY '26, EUR 2 million a year better in cash terms than under the previous facility.

We have a question from Michael. Is it worth it having 2 share price quotes on Euronext and AIM? It's an excellent question, Michael. And it was worth it having 2 share price quotes because if you know the -- all of our investors, 60% of our investors are family office from the Netherlands listed on Euronext, and then 40% of the investors is listed on AIM. At the time when company needed the funds for the big capital expenditure, all of those listings were quite logical. It is a little -- it is complicated for us as a company of our size to be listed on 2 markets. But at this moment in time, we are really focusing more to deliver operationally and listing is not in our priority in this moment of time. Then we have a next question from Johan. Johan, AU backed research presented through the life Tricoya results indicates promising long-term potential for Tricoya. What role do you see Tricoya playing in Accsys future? Thank you, Johan. This is an excellent question. Tricoya -- company still has patents and technology as important assets for us. At this moment in time, we are focusing on getting returns from our existing assets of Accoya and focusing on Accoya as a product range. But nevertheless, I could imagine that in 1 or 2 years, as we are -- if -- when Accoya USA is fully cash positive when the growth is there, when the factories are full, that we are going to very, very actively look at Tricoya again.

Next question from David S. What financial measures do you utilize to approve CapEx? What are the hurdle rates? How do the current CapEx projects compared to those hurdles? So the key thing is, you know, we have a very disciplined governance approach to evaluating CapEx. We look at a number of metrics, NPV, cash payback, IRR. And the key thing is the CapEx for expansionary growth projects has to be in excess of our overall cost of capital from an NPV and an IRR perspective. But there are effectively 3 categories of CapEx we look at. One is expansionary growth where we can then effectively apply that hurdle rate evaluation and the projects like Elm Tree 2 absolutely beat that hurdle significantly. But then we have 2 other types. One is regulatory, where we just have to do it because there are compliance -- legislative compliance reasons why we have to do it. And the other is health and safety. So I mentioned before the improvements we made to the stack in Arnhem. Well, that is to improve the working conditions for our staff in there in terms of lighting, ventilation, sound proofing. You don't apply hurdle rates to CapEx like that. It's really important from a health and safety perspective as to why we do that.

And since this is our last question, I would like to -- just to summarize the presentation for today. So looking ahead, we remain confident in the long-term potential of our technology and our strategy. We have a clear road map. We have a market-leading product in attractive growth markets and a fully funded manufacturing base that position us to deliver significant shareholder value. I continue -- we continue to be very excited by the prospects of our business. We are transforming, we are delivering and we are growing. Thank you very much for your attention and interest in Accsys.

Thank you.

Perfect, Jelena, Sam, if I may just jump back in there. Thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Accsys Technologies plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon.