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How can you give a trading update and not state the unaudited revenue?

35% gross margin sounds great but on what revenue?

This is a highly selective trading update.

If that doesn’t ring alarm bells to you guys then nothing will. GLA.

AJP please can you re-read resolutions 6 and 7.

It uses the word “disapply”. I took this to mean they are not proceeding?

Please see resolutions 5,6,7 below. Does this mean ITX were planning to make an acquisition but are no longer proceeding? They never have explained why they needed to make such a large capital raise last year. That’s a lot of money just sat in the bank at the cost of shareholders who suffered the dilution.

5. To grant the Directors authority to allot shares.

Special Resolutions

6. Subject to the passing of Resolution 5 to disapply statutory pre‑emption rights in relation to the allotment of equity securities.

7. Subject to the passing of Resolution 5 to disapply statutory pre‑emption rights in relation to the allotment of equity securities for the purposes of financing an acquisition or a specified capital

investment or making a follow-on offer.

Unfortunately looking at the charts (if you believe in chart analysis) the 50 day moving average (186p) still has some way to go before it drops below the 200 day moving average (156p). When shares hit what is dramatically called the ‘death cross’ it tends to precede a near-term rebound with above-average returns. By my calculations this will be around 115p. If it gets to that sort of level the potential reward - risk ratio becomes more attractive providing you are willing to wait it out a couple of years.

Of course there’s always the possibility of some unexpected good news coming out of the company and thankfully Itaconix acid raw material was not on yesterday’s US list of enhanced China tariffs.

Transient investor?? I’ve held Itaconix since 2020.

Having previously run a large factory I can advise that the majority of overhead costs are fixed. We supplied the 5 largest supermarkets and when we lost our largest supermarket accounting for 25% of revenue we became unprofitable. That customer was our lowest margin customer but their revenue previously made our operating costs much lower relative to total revenue. The loss of 50% of revenue for any company is catastrophic. I am amazed that you are trying to paint this as a positive.

My figures on reduced revenue and negative EBITDA are taken from Itaconix’s broker’s report published after the loss of their largest customer.

Hi Elsol, that’s a fair challenge.

Let’s fast forward a couple of months to the H1 trading update. My forecast is based entirely on the updated broker forecast after the 2nd April news broke (please verify the figures for yourselves).

H1 Revenue 3m (broker forecasts 6.2m for 2024).

That revenue would be a drop of £1m from H1 2023.

EBITDA for 2024 forecast by brokers to be -1.6m. That takes Itaconix back to 2021 EBITDA level.

ITX doesn’t get to positive EBITDA until 2026.

JD - not sure why you need it but anywhere here is your proof. If you look through my previous posts you will see they were marked “strong buy”. As soon as I read the 2nd April RNS, I posted the comment below marked as “Strong Sell” and sold my shares. If you look through my previous comments you will see I have always been positive (sometimes frustrated) about ITX and believe it or not I like the company and believe it does have a future. But one can not ignore the simple facts that we have lost our largest customer and while they may be low margin, the loss of revenue means that the company’s overhead costs have doubled relative to their revenue prior to this announcement. If there is no significantly positive news before the H1 update I believe the re-entry point to be around 115p.

Anywhere here is the post:

Absolute disaster

2 Apr 2024 08:09

Itaconix has just lost its largest customer. Predicted Revenue for 2024 slashed by almost half!!!

This might be great for gross margin but it absolutely screws us for revenue.

I’m sorry but you can not paint a positive picture with this and the share price today and for the rest of 2024 will reflect this.

JD - time will tell. I’ve been on the money so far haven’t I, and know the business, trading pattern and market reaction to this share very well. But good luck to you mate.

PS - two words to save you money “ Stop Loss”.

DYOR

Lol Surfie

If you think it’s bad now wait for the 2024 H1 trading update. If you think about it logically without the emotion of being a shareholder you know revenues will take a battering in H1 from the loss of their largest customer and future business not yet factored in.

Thats why I sold out at 190p and continue to wait for an opening later in the year after the likely H1 bloodbath.

Thanks Elsol this is helpful. The ACF guide is fairly basic. Hopefully a full initiation paper with a valuation and forecasts will follow.

I’d like to reinvest but I’m worried that the share price will get hit on release of the H1 trading update as revenues will be markedly lower than the previous trading period.

I’m still sat on the sidelines for now but thought I’d contribute a potential positive tail wind for Itaconix which I think has been overlooked.

In its most recent presentation Itaconix commented that it was unaffected by the Suez Canal shipping issue as all its raw material comes from the opposite direction. This has been mentioned on here.

But what I don’t think has been elaborated on is that this could give the company a financial and strategic advantage over other chemical companies who do traditionally use the Suez Canal shipping route as they have seen a 300% increase in shipping cost which they will have to pass on to customers.

It might encourage more companies to switch their products to include Itaconix formulations.

Bearded - Let’s see how well your post ages. Today’s rise on a bit of publicity won’t change the fundamentals for 2024.

No hidden agenda. I’ve made my intentions very clear.

I believe the time to buy will be next January before the H2 trading update. That’s the earliest we will get any insight into the expected improved margins because of the timing of the exit of the largest customer during H1.

I continue to maintain there will be share price drift downwards unless the company salvages a deal with its largest customer. The figures don’t lie!

Thanks for the acknowledgment Dougerboy. For those who have followed my posts here over the past 3 years you will know I am not a day trader and I am pro-Itaconix.

Unfortunately as soon as news of the loss of the largest customer dropped and the revised forecast income for 2024, I worked out that this put us back 1 year which was confirmed by their broker and in yesterdays presentation.

Unless they manage to renegotiate with their largest 2023 customer the share price will drift down to where we were at the start of the year. That means 110p to 120p. It’s even feasible we touch 100p. Ask yourself why invest now when we are months away from H2 trading update at the end of January 2025. Holding Itaconix shares during the next 8 months is like dead money unless they pull a rabbit out the hat.

Long presentation and a lot of questions. So here is my honest take on today and whether now is the right time to invest or not.

Positives:

1. The company clearly justified its decision and reasoning regarding its largest customer. Feels like the door is still open there.

2. Really liked all the graphics. They illustrated gross margins of 72% in hygiene and 63% in beauty which are very impressive.

3. Clear explanation on super absorbents and the company are 100% right to get the product right first. It has to match or be superior to existing products to justify the premium.

4. Glad they are going to be pushing investment in Itaconix outside the U.K. I noticed there are listings for Itaconix in France (18GO.F) and Germany (18GO.SG and 18GO.DU).

5. Overall the company is doing all the right things.

Negatives

1. Unless the company wins back their largest customer of 2023 revenues for 2024 will be lower than 2023. We all know why that it but the market will focus on cold hard numbers.

2. As a result of point 1 the next trading update for 2024 H1 will be underwhelming (unless it does a deal with its largest customer).

3. As was repeatedly said break even and all numbers have shifted back 12 months.

My overall conclusion therefore is that the company is a good long term investment. I’m just not convinced that now is the time to invest. I am worried that there will be share price drift until the next really positive RNS. So I’m going to maintain a watchful wait for when best to reinvest.

It was the outlook part of the statement that interested me. Hopefully we will get more insight this afternoon:

“We are pursuing growth from other existing customers and from new accounts with a view to replenishing this revised expectation with higher margin revenues.

“Our balance sheet provides us with new opportunities to target higher revenue growth. There are many exciting opportunities for us to develop new ingredients and increase revenues and we are positioning ourselves to better capture the commercial value of our performance ingredients with new customer wins, new volumes in non-detergent uses, and important new product development initiatives.”

FG - No. I was right to cash out at 190 as demonstrated by this week’s share price. Monday could go either way so I’m happy to wait and see whether I should reinvest or not. It’s much safer to catch a rising tide than to be left high and dry when the tide goes out.

I hope it is a rising tide on Monday and wish all investors here good luck.

Elsol. I agree and I go into Monday with an open mind. If I like what I hear I will reinvest. I am hoping they will spell out what gross margins look like post the loss of their largest but lowest margin customer. It is no time to be secretive and coy.

After Monday I guess it will be summer time before the H1 trading update, so they need to seize their opportunity on Monday and fill investors with confidence. Ball is in their court.

On Monday it will be interesting to see, now that Canaccord is Itaconix’s sole Broker and nominated advisor, whether there is any change to the style of presentation.

I also wonder whether Canaccord had any influence in the recent decision to axe their largest but lowest margin customer. At the very least the company would have got their prior approval for such an important decision.

I am hoping that with Canaccord’s influence there will be a much more polished cut-throat display on Monday that can give old and new investors confidence to invest moving forward.

Monday is compulsive viewing whatever side of the track you are on.

Hi AJP

In the spirit of transparency these are the 2 questions I have submitted:

1. The company had previously referred on many occasions to “sticky revenues”. The recent loss of Itaconix’s largest customer has therefore shaken investor confidence, as reflected in the share price. What assurance can the company give to investors about future growth trajectories?

2. What impact will the decision have on gross margins? Please can you give before and after (estimated) % gross margin figures. If investors can see expected improvement in gross margins this would go a long way to improving investor confidence. A graphic would be nice!

Out of curiosity I did a bit of research to try and work out who was Itaconix’s largest customer in 2023. My money is on Hannaford Bros for these reasons:

1. Their HQ is within an hour of Itaconix

2. Itaconix’s polymer makes up 10% of the powder in Hannaford’s automatic dish detergent pods

3. Significant sized company

4. I believe their president Mike Vail and John Shaw are friends.

5. Profile matches the information in the proactive video posted earlier this week.

5. I also found this article from last year.

https://www.businessnhmagazine.com/article/itaconix-the-nh-company-you-donrsquot-know-but-is-part-of-your-daily-life