What can we make of Celtic Renewables' performance?
A bit like a jigsaw, this is where we try to pull together all the facts and reports into a cohesive understanding of the company. Nevertheless, a number of questions remain unanswered.
Let's start with the relationship between the two companies
Celtic Renewables Limited is the main 'holding company' and Celtic Renewables Grangemouth Ltd (somehow once a plc) was set us as a subsidiary to report the trading of the first production site.
Period to end 2024, for which reports are available shows that CRG Ltd £3.9m of production costs, £2.35m of administrative costs, operating income of £.62m and debt interest of just over £1m, leaving a loss before taxation of £6.67m. Net liabilities stood at -£24.8m.
Bearing in mind that no product was shipped until 2024.
Celtic Renewables incurred a loss of £4.4m (£5.4m for administrative costs) and net assets of £14.4m at the end of the period.
Income projections
Caledon Plant
In its 25 April 2024 'We are crowdfunding' newsletter the Company stated that has a 3 year offtake agreement with Caldic worth £2-3m for 850 tonnes of product per year. Elsewhere it says that Caldic is its exclusive customer and distributor, somewhere else that there are 40 customers testing the product (do we presume customers of Caldic?) but then elsewhere that the Offtake agreement is for 50% of the production.
But let's just assume Caldic is set to buy £2-3m for 850 tonnes of product. Offset against £3.9m of production costs, £2.35m of admin costs in 2023, and the small scale plant is not sustainable unless the costs are reduced. Energy is supplied to the plant through local renewables. What is the cost of the feed product? Usually this cannot be provided free of charge as their is competition for the beer from animal food producers to RipCell, another Scottish company in this sector. Perhaps we are wrong, but it be nice to know what the costs are.
Proposed 2nd plant
The originally site proposed for the second plant was abandoned. The landscape has changed as the original petrochemical plant at Grangemouth closes after 100 years, creating a new opportunity for a low carbon manufacturing hub as analysed in Project Willow Report. It is not clear but it seems that this is now where CR propose to situate their second plant.
Furthermore, according to the company's newsletter that launched the spring crowdfunding in 2024, the company expects to have 4 more plants each capable of producing up to 8,000 tons of product per year between 2024 and 2029 (8-10x the capacity of our first plant). However, the new plants don't need to be 8 - 10 times larger than the original. The first two of the new plants will be “Build, Own, Operate” and the last two joint Venture business models. With these in place they target to achieve revenues of over £120m by 2029.
Further fund raising
As part of the enticement to crowdfund shareholders to invest again in 2024, the Company mentioned its expansion plans, and also that it was raising £6m of capital of the spring/summer 2024. In addition, it was looking for Phase B funding to the tune of £25m, due to be concluded in September 2024 , would fund the business for the next 2 years ie to September 2026, but NOT funding of any new refineries.
Since that announcement in spring 2024, we've not had an update on the success or otherwise of the fund raising. Furthermore, the CFO that came into partly to manage this process only a year or so early, departed the company in April.
So what are we to conclude? How much does a plant cost? What does the feed for the plant cost? What assumptions can we make about the £129m turnover due to be recorded in 2029? Can we expect a 50% gross margin (£65m?) Admin costs £24m (£12m/year). Interest on borrowing - £5m? Who knows?
But let's say that 'the business', in whatever shape or form it may be, makes £40m profit before tax (after interest). 4.5million shares. That's just under £10 earnings per share! But the fact is, we're having to second guess when , anything is happening, when to expect a profit and where to expect any form of dividend, and when we might actually get our money back.