Alexium Delivers 30% Increase in Cash Receipts in December Quarter

Alexium International Group Limited (ASX:AJX) has delivered an impressive result for the December quarter with cash receipts up by approximately 30% to $2.2 million on a quarter-on-quarter basis.

We first took a position in AJX in early 2020 at around 6.5c per share, and the company is one of our long term portfolio stocks.

The December quarter’s cash receipts were the highest of the past two years, largely driven by the top-of-bed and mattress markets which reflect the continued strong consumer demand in the US bedding market.

Regarding operating activity outflows, they were predominantly comprised of raw material purchases, manufacturing costs, staffing costs, and corporate/administrative costs.

On the technology front, management is preparing for upcoming growth through the investment in new ERP (enterprise resource planning) systems.

This system will provide improved systems for product management, quality assurance, resource planning, and customer management.

The ERP system was taken live at the beginning of the 2021, and all core functions are fully operational.

Alexium traded strongly as 2021 unfolded with its shares increasing 20% from 5.2 cents at the start of January to a recent high of 6.2 cents.

There are a number of upcoming catalysts that could see this momentum maintained, including commentary in the half yearly report they will provide an insight into the commercialisation of bio-based PCMs, total mattress cooling systems and the FR Sock for flame retardation of foam mattresses, as well as information regarding the commercialisation agreement for Alexiflam NF with a major flame-retardant company.

Commercialisation of new line of phase change materials

Alexium is a performance chemicals provider for advanced materials applications with a focus on flame retardancy and thermal management.

The group is driven by an innovation model for addressing market gaps with patent-protected technologies, and in December Alexium announced the commercialisation of a new line of proprietary bio-based and biodegradable phase change materials for thermal management applications.

Beyond the environmental benefits, these products provide further performance enhancements and expand the range of applicable market segments for the Alexicool® portfolio.

These environmentally friendly solutions have applications for several industries and can be customised to meet customer needs.

Key markets for Alexium are military uniforms, workwear, and bedding products with the group’s brands including Alexicool® and Alexiflam®.

Demand remains strong in the face of COVID-19

Notably, sales demand remains robust despite restrictions due to COVID-19, though it has slowed down trial activity/qualification at customers.

While the March quarter is historically a slower period, management is seeing indications that consumer demand is continuing for the foreseeable future.

Examining the company’s operational achievements in the December quarter, the aforementioned development and commercialisation of a proprietary line of bio-based and biodegradable phase change materials represented a significant milestone.

Phase change materials (PCMs) are the key active material for the Company’s Alexicool® products and are used in a range of consumer products including bedding materials and activewear.

These bio-based products are the result of extensive research by the Alexium team to provide a range of cost-effective benefits relating to eco-friendly materials and cooling performance features where significant enhancements have been made.

These products were developed with corporate partners and leverage a range of insights gained from Alexium’s years of research and analytics in thermal management application and will allow the Company to expand its portfolio to address a broader range of end-market segments.

COVID-19 relief package to provide financial support

Alexium applied for $468,000 in funding in January 2021 in the form of a five-year 1% annual interest loan from the payroll protection program that was recently passed as part of the US COVID-19 relief legislation.

Approval is expected in the coming weeks, and this program explicitly states that the funds are to be used for payroll, lease payments and utilities.

Given the controls and processes implemented to comply with the permitted use of the funds, management expect the loan to be granted in full.

Commenting on the company’s enhanced financial position and reflecting on its progress over the last two years, Chief Executive Doctor Bob Brookins said, “Over the past two years, a priority for the company has been to expand our portfolio of flame retardant and thermal management products to provide a broader range of application/market opportunities.

‘’The fruition of that work is evident with the commercialisation of a number of proprietary products over the past 6 months including Phonon, Alexiflam NF for FR socks, and now our bio-based phase change materials.

‘’The addition of the latter product once again highlights the theme of developing high performing products based on ecologically friendly materials.

‘’These developments were driven by our customer-centric culture which focuses our team on delivering products that meet our customers’ end market needs.’’

Indeed, what distinguishes Alexium in this regard is the combination of performance and eco-consciousness in its products, a factor that is increasingly important at a time when investors and regulators are increasingly focused on environmental, social and governance (ESG) issues.

Far too often, eco-conscious products are brought to market that are either too expensive or underperforming.

With its products Alexium finds a balance in relation to these factors, largely because of its demonstrated expertise in innovation and development.

In looking to the future, Brookins said, “Given these exciting product developments, the focus of our organisation has shifted towards commercialisation and to that end I am pleased to have Chris Crawford join the management team as Vice-President, Sales and Marketing.

‘’Chris brings a notable mix of sales acumen and technical know-how that makes him extraordinarily well-suited for the commercialisation of Alexium’s flame retardant and thermal management products.

‘’He is focused on driving sales and on making the sales team the engine that pushes Alexium to profitability and beyond.”