July - September
Group, IFRS, (compared to quarter 2 2023)

• Net sales for the period amounted to SEK 84.4m (84.8)
• Operating profit before depreciation and amortization (EBITDA) amounted to SEK -50.5m (-59.3) for the period
• Net profit/loss for the period was SEK -94.5m (-105.4)
• Cash flow from operating activities amounted to SEK -83.5m (-34.8)
• Cash flow from investing activities amounted to SEK -4.6m (-13.8)
• Earnings per share, before and after dilution, amounted to SEK -2.3 (-2.8)
• The company’s net debt at the end of the quarter was SEK 905.0m (833.6) of which lease liabilities amounted to SEK 313.8m

January - September
Group, IFRS

• Net sales amounted to SEK 198.9m
• Operating profit before depreciation and amortization (EBITDA) amounted to SEK -190.1m
• Net profit/loss for the period was SEK -325.3m
• Cash flow from operating activities amounted to SEK -221.5m
• Cash flow from investing activities amounted to SEK -74.3m
• Earnings per share, before and after dilution, amounted to SEK -8.4

Events during the quarter

• The production of prime quality dissolving pulp during the quarter was 6,498 tonnes and 6,443 tonnes were delivered to customers during the quarter. As expected, September production was impacted by the planned use of a number of new types of raw materials in the production process.
• On 4 July the CIRCULOSE® Supplier Network was launched, whereby yarn and textile producers promote the delivery of CIRCULOSE® through the textile value chain
• On 15 July Toby Lawton, CFO, announced his departure from Renewcell. The recruitment of a successor is ongoing.
• During the period the company issued 555,110 new shares to Patrik Lundström, the former CEO, through the exercise of warrants of series 2019/2023 at a subscription price of SEK 48.43 per share, which provided the company with proceeds of approximately SEK 26.9m (see Note 9)

Events after the quarter

• In October, the company issued 71,928 new shares to Patrik Lundström, the former CEO, through the exercise of warrants of series 2019/2023 at a subscription price of SEK 48.43 per share, which provided the company with proceeds of approximately SEK 3.5m (see Note 9)
• In October, Renewcell 1 in Ortviken produced 1,161 tonnes of prime quality dissolving pulp. Total production was 2,043 tonnes and 129 tonnes were delivered to customers. To avoid adversely impacting cash flow and due to lower sales volumes, production volume in October was lower than the production capacity. Production in November is also expected to be below the production capacity due to lower sales volumes.
• On 12 October, Renewcell announced the preliminary Q3 financial results and informed that the sales flow of CIRCULOSE® through the textile value chain is taking longer than expected
• On 16 October, it was announced that Patrik Lundstrom, the company’s CEO since 2019, left the company with immediate effect
• On 16 October, Magnus Håkansson was appointed acting CEO for Renewcell

CEO Comments
Since I came onboard as acting CEO a few weeks ago, the work has been focused on a solid analysis primarily of the situation regarding sales processes, raw material supply, production, lead times and underlying demand. There is no doubt the world is transitioning towards green circular product flows and Renewcell is uniquely positioned to contribute to this transition. We have lessons to learn from the initial period with commercial production and we are committed to increase our transparency and predictability.

Slower sales ramp-up than expected
As we communicated in October, the flow of our product CIRCULOSE® through the value chain has developed more slowly than we expected. We are working hard to get the wheels turning faster but have underestimated the complexity and timing to get from consumer or brand demand to an order from a fiber producer at the start of the textile supply chain.

It is clear that there is a strong interest and action-readiness from the fiber producers. However, the two off-take agreements with fiber producers, which have been previously signed and communicated, have so far not translated into orders according to time plan – partly due to a delayed production start from our side, but also delays in the calibration of the new material in their fiber production lines as well as their preparations to sell fiber volumes to their customers, the yarn spinners. In addition, the demand in terms of hard orders from the brands is coming along with less urgency than we had expected.

So far, up until the end of October, Renewcell 1 in Ortviken has produced approximately 16,000 tonnes of prime quality CIRCULOSE®, of which approximately 4,600 tonnes have reached the fiber producers. The brands have over the last couple of years been buying smaller volumes of fiber from our pilot production plant in Kristinehamn, which have resulted in 250 successful launches of capsule collections with multiple global brands such as H&M, Inditex, Levi’s and many others. Now we need to see a transition from development projects to orders for main collections on a larger scale leading to a commercial production in Ortviken. The announced order from Inditex last week was, in that sense, an important step in the right direction.

Our action plan is clear
For Renewcell the action plan is clear:

1. Driving sales is key – we have to stay highly active in relation to ensuring availability through fiber producers and developing demand from the brands
2. We will continue to increase efficiency and capacity in our production processes and secure a balanced mix of feedstock, production volumes and inventory levels
3. We will continue to work on our financial stability and cash flow. This means cost and liquidity control.

Actions to stimulate the value chain
We have indeed a difficult macroeconomic environment, but we don’t really see the economic trends as determinants or constraints for our success – as our product and process technology is uniquely positioned to enable change. Leadership among the brands is now required to realize their ambition statements regarding circularity. The interest in sustainable fashion continues to grow and more and more brands are setting clear circularity related targets for their businesses. But it takes intent, resources and efforts both from the fiber producers and at the same time from the leading brands, to continue the work of co-developing the specifications as well as investing in sample production for the product to be fully available where the purchasing decisions are taken.

Our sales and marketing activities are focused on ensuring that demand turns into action from the brands and that development processes are thereby established to make end products available. The CIRCULOSE® Supplier Network (CSN) – a group of over one hundred yarn and textile producers committed to offer products made from CIRCULOSE® and thus helping the circular economy forward – is a very important and targeted initiative that we launched this summer.

The existing off-take agreement with H&M is also a solid sign of commitment. Furthermore, Inditex recently increased their pace with the aim to have 40% fibers in 2030 from circular sources. As an important signal they placed an initial order of 2,000 tonnes of fiber from one of our fiber producing customers, with plans to continue to add this fully-recycled pulp to their fabrics over the coming seasons through their extensive network of suppliers.

By the end of October, we also received our first order of 1,000 tonnes of pulp from one of the other leading fiber producers. Our partner trading house continues to support our sales and marketing efforts in close contact with the leading fiber producers.

Production efficiency
Renewcell has made a number of improvements in our production processes and now see these giving clear results. We have increased our practical obtainable production capacity to a level sufficient for break-even. The bottlenecks in the shredding area have been reduced as a result of the actions implemented, but we have further improvement actions to make in this area. We are gradually on the way towards a production capacity of 60,000 tonnes per annum.

As was seen in the October production figures, the production levels are lower than the capacity in order to balance the lower sales volumes as well as cash-flow and inventory levels, and this will continue into the fourth quarter. In the meantime, we are also securing a steady inflow of the right mix of raw materials to meet demand.

Financial stability
We continue to keep tight control over the cash flow during the ramp up. Our weaker operating cash flow in the quarter was due the lower than expected sales to fiber producers as well as working capital development. Going forward it is important to firstly ramp up sales, but at the same time to carefully manage cash flow, especially working capital, and our cost base during this phase.

In summary we have sufficient production capacity for break-even levels and we are increasing capacity every month in a stable way. The focus now is primarily on securing demand from the brands and fiber producers and also on making the product available in order to secure volumes of CIRCULOSE®, and products made thereof, at all times in sufficient quantities in all parts of the value chain. Step by step.

Magnus Håkansson, acting CEO, Renewcell

Invitation to presentation of Renewcell’s Q2 report
Re:NewCell AB (publ) (“Renewcell”) will publish its interim report for the third quarter of 2023 on Tuesday, 7 November, at around 8.00 a.m. (CET). On the same day, at 10.00 a.m. (CET) the company’s acting CEO Magnus Håkansson and CFO Toby Lawton will present the report via a live webcast.

The presentation will be webcast live and will be made available thereafter. Participants will have the opportunity to ask questions in a Q&A session following the presentation. The presentation will be held in English.

The live webcast can be accessed at this link: Renewcell | - YouTube

The recorded webcast, report and presentation materials will be published on Renewcell’s website www.renewcell.com after the broadcast.