Carbios SAS (ALCRB) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for attending the Carbios update conference. I'm Philippe Pouletty. I'm the Founder and Chairman of the Board of Carbios and since yesterday, acting CEO. Obviously, since started the company, have a great patent for Carbios, which is truly a terrific company, which has breakthrough technology, which is broadly recognized worldwide by the scientific community by prominent companies, L'Oreal, Michelin, Novymes, Loxitane, Indorama [indiscernible] and others as well as by the experts of the French Ministry of Industry by the European Bank of Investment. After successfully building and operating the Carbios demo plant, which showed that the bioenzyme technology of Carbios could very effectively recycle within about 10 hours, 100 bottles of plastic, Carbios has started to build its first industrial plant in Northern France to recycle about 50,000 tons per year of plastic, which we call PET waste. Carbios has a strong cash position of more than EUR 110 million. As Joe Biden would have said, I repeat the line, a strong EUR 110 million of cash position. However, the French and European economic environment is, I would say, a little bit challenging, while the U.S. seems to improve quite fast after its presidential election, Europe, as it's usually the case, may be slower in its economic recovery. Interestingly, the French state and the Northern France region had pledged to Carbios very substantial, EUR 42 million, which is a catalyst to secure the additional financing, which will be probably nondilutive, which is necessary to complete the construction and the initial operations of Carbios' [indiscernible] manufacturing plant. However, the French government was a little slow in notifying the European Commission about the so-called [indiscernible] because the European Commission must bless state aids and that has resulted a delay to obtain such European Commission green light and getting the result payment from the French government. We, however, do expect this notification to take place within days, nice Christmas present would be and the resulting green light from the European Commission in Q1 and then the pain. Therefore, taking into account this grant delay, which was out of the control of Carbios. And unlike some other companies, hydrogen, batteries, for example, that continue to burn cash irrespective of economic pressures, we at Carbios have decided with the Board of Directors, which was yesterday, delay by hopefully just a few months, the construction of our long plant to secure these grants and additional financing. The additional financing above grants I just mentioned could also benefit from a guarantee for the French government at a level of EUR 86 million, such guarantee being called GPS that, of course, will, if obtained, greatly facilitate securing the private loans under favorable terms. In order to execute our updated plan, which is secured the additional need financing, finalizing several key negotiations which are ongoing of offtake I like to say, agreements for the Long Lille future PE production and reactivate full speed the construction of our Long Lille plant. The Board of Directors, which I chaired yesterday, decided a change of governance. What I bring is about 25 years of successful entrepreneur 13 years in Silicon V, 20 years in France, including 9 years as Chairman of France Biotech, 5 years as Vice Chairman of Bio and founder of several successful life sciences companies in the U.S. and Europe. Allow me to show you a PET bottle, which Long Lille will recycle hopefully soon. And with that, I have direct access, personal access to the highest level of the French government, I say whatever government it is and global banks to help secure in a timely manner, the grants and hopefully the EUR 86 million loan guarantees. During interim CEO mission, I'm very pleased to be supported by an outstanding partner who is here with us today for Q&A. Vincent Kamel, who has been a Carbios' board member for several years, who has a professional background as senior executive in the specialty chemistry field include plastics at companies such as Solvay or Ronpulak. So our updated plan is also crafted to negotiate in a position of strength with potential licensing commercial and financial partners. So at Carbios, we have a great passion for recycling plastics. We think we have now a realistic plan. We communicate and update you in a realistic manner from time to time. The market size is very high. The demand from customers for 100% recycled PET is very high and the Carbios technology is highly differentiated. So since it's soon Christmas, allow me a little sentence. We are not going to press you with Vent the moon, but we promise you to help the planet and work hard to rebuild shareholder value at Carbios. So thank you for your attention to this brief introduction. I apologize for speaking English, but we have a lot of attenders, attendees that do not speak through French. And I'd like to open now the Q&A session. Vincent will help me answer some questions.

So I have one question I see why am I the new CEO. I say the interim CEO starting to search for a long-term CEO why has Emmanuel left? I wish to thank Emmanuel for his 3 years. Well, as many of you know and my 35 years experience is that no growing technology-driven company will succeed with the same team from inception to the commercial stage. And it's very natural at some point to have fresh blood joining the company, especially when the environment is a little tougher than previously, and that's how successful companies succeed. Company which fail often do not make the right decision at the right time. And at Carbios, we are committed now and in the future to try to make the wise decision at the right time. So I see a question which was -- I'm a shareholder for several years, [Foreign Language]. Based on today's press release, it's fair to assume that Indorama Ventures has pulled out of the compact negotiation with Carbios, is that true? Why is that? So my comments, which will be limited again is Indorama Ventures had written to us that they were very pleased with the due diligence, which lasted a long time, but which was in depth. So they recognize Carbios technology potential, its scaling potential, the results of the plant and so on. So I didn't do 26 hours of flight from past to Bank if there was termination of discussions. That would have taken a 5 minutes phone call. I hope that is enough. But of course, we'll continue to discuss but for Carbios, we think in a position of strength. So another question is why don't you finance the plant with worse conditions? You would keep the trust of your shareholders, you will stuck to timetable. So again, the grant that France is a very important catalyst to secure the overall financing. So we wish the government would have done it and not to Brussels. Well, you know the French environment, administration, it's a little challenging these days. So it took more time. And it's very important to build on this and also on the hopefully expected of EUR 86 million to the right financing. And financing very bad condition, we care about securing successfully the financing by 2027 probably we have output from L for 50,000 tonnes of waste, but we also care in rebuilding shareholder value. Vincent, the team, the Board of Directors work very hard at. So this kind of straight question, stop the bullet the stock price has dropped massively. Well, when that happens, and it has happened for many companies in the U.S. and Europe, you need to take action to try to have a realistic plan to take the right vision in governance, in negotiations. And again, the Indorama deal, I would not say at all, has failed. The wrong decision would have been to sign a bad deal with Indorama or with any other partners, which might make a nice press release, but certainly could negatively affect our short, medium and long-term future. So there is another question which is someone spoke to the CEO and CFO and there was no indication. Well, if you look at some of the changes which has taken place at Selenis at Suez other companies, I'm not sure that the previous CEO or CFO would have commented about potential changes. So there are questions on and I think I have addressed them. And there is a question on timetable. In the past, I believe that too many times the company gave timetable. There's no such thing as certain schedule of events for technology-driven companies transitioning to industrial stage. So we do everything possible so that by 2027, the company has strong commercial standing from L and several binding licenses, but I shall not give you very specific timetable and we will not do it because there are always some variables, some under [indiscernible] control and some outside of Carbios control. There is an interesting question on turnover candidates. Many companies, especially European companies get acquired by U.S., Swiss Chinese or other companies, often too early because they can't raise cash, they have failed their milestones and so on. So clearly, the new plan, again, saying we have a strong position of cash today. We are not going to burn it in an uncultural manner so that we are in a good position to resist unnecessary bad decision that's what we'll try to do. Now you know probably that the shareholder base of Carbios has very strong shareholder. I will name as an example [indiscernible] Michelin, L'Occitane and so on. And I do not believe these companies are shareholders of Carbios to try to make a capital gain soon, they are in because they need Carbios product. They need Carbios technology. The customers need 100% recycled plastic with a technology which is planet-friendly like Carbios technology. Now I'm scrolling at other question. It takes me a few seconds. There is an interesting question on ag. with your team, your negotiation do not succeed as a win-win agreement for Carbios, what would happen? I would say if there had been bad agreements with Indorama ensuring most of the economic benefit from Longlaville could happen. Well, that would kill the future of Longlaville for there was no, which I'm not at all saying that will be the case, in fact, with the grants, with the guarantee for French government with private loans under good terms, and we have very strong committed with us to work on such nondilutive financing, could you do it? The answer is yes, I believe we could do it. And maybe Vincent, you could comment on that. But unfortunately, again, we won't be able as a public company to give you too many specifics. Vincent?

Hello, everybody. just one element is, as exits is, if Indorama Ventures still in negotiation with us, just obvious. It's because they believe, as we believe there is no doubt the technology works and the plant has paid back by itself to its stakeholders. And finally, that in a standard mode, we are able to make it happen.

So there was a little question of Longlaville, saying, well, previous management, we believe the Longlaville factory is on track. Is it true? It's absolutely true. The permit is open. The land was acquired by Carbios from Indorama. The orders of equipment took place. The building is ongoing. However, the Board decided to slow it down for the reason I explained so that given the challenging European sanction environment, Carbios is not in a bad cash in the bank situation. Slowing down does not mean stopping. Of course, and I don't expect this if we would not secure in a timely manner the adequate financing, then the delay would be slightly longer. I'm not going to give you dates Retrospective planning is easier than prospective. But let's say that Vincent, the team, the Board are working hard with the right bank partners which the French government at the highest level to secure the complementary financing so that we can continue long with a delay, which would be reasonable. So what do we think about competitors making announcement, delaying or postponing their project? I'm going to talk about competitors. We believe Carbios has best most differentiated technology, which can work not only with packaging like bottles, but also soon with textiles, which is 70% of the potential market, but the demand market potential is very high for 100% recycled PET. For that, you need the adequate technology. Maybe some competitors believe they were a little too optimistic about that technology. I'm not going to comment in detail. Maybe that can explain some of the announcement. I'd like to add something beyond our expertise in enzyme and plastic. We have a very strong expertise in purification, in pharmaceutical grade products. And certainly, you will see that in the coming years, being able to say we have the most defined purity, the most characterization of the small of impurities to make a great difference over the other differentiating structure. Was there any agreement with Emmanuel? Well, when a CEO leaves, when a new CEO or acting being Chairman takes the lead, it may say there was some disagreement, but on very good terms. I think Emmanuel has said when do we have dinner in January I'm not going to tell you in which restaurant, it shouldn't -- it's not in the press release. But certainly, again, it's normal like a growing child or youngsters or adults for successful company to have some changes in governance. Have you shortlisted the new CEO? The answer is not. But as of today, we started an active search Interestingly, with some candidates who are spontaneously their candidates, but we will take the time test to view check preferences and select the best person who will be at for the next step until commercial at least. still invested I don't know if you can answer. But last time I was with the Deputy CFO of L'Oreal as the representative of L'Oreal was yesterday afternoon at 5 p.m. So yes, they are still very much involved and support. So what is the that you receive the money from the government until Christmas. I don't. So I think we don't believe in for a number of years. What we can say is we are confident that government will have notified Brussels by the end of this year and that could result in Q1 from Brussels have not been proposed any position in the government. So I cannot go beyond that. Interesting question on why Michelin [indiscernible] are buying shares. Well, many of you know the rules in a publicly traded company. The window is closed for any insider. So L'Oreal [indiscernible] as an example, a representative on the Board. So they cannot trade shares. I'm sure several like to buy because as some of you said, the price does not reflect the true value of Carbios, the NPV and so on, but there are some strict rules for publicly listed company. Will manage also went, would you to address this.