Dive Brief:
- Textile recycling company Renewcell secured 100 million Swedish krona, or approximately $9.8 million, in short-term funding, the company announced in a Wednesday press release.
- The backing is intended to “resolve the short-term liquidity need which is caused by the slower than expected ramp up of sales in the textile value chain,” per the release. It comes in the form of loans from Renewcell shareholders H&M and Girincubator, which provided 45 million Swedish krona and 5 million Swedish krona, respectively.
- In November, the company announced it would be initiating “a strategic review to explore and evaluate various funding alternatives.” That followed an October release stating its “sales volumes to fiber producers are behind the levels previously expected,” and a Q3 earnings report of “weaker operating cash flow in the quarter” and a net loss of 94.5 million Swedish krona.
Dive Insight:
Although Sweden-based Renewcell has been ramping up its supplier network throughout 2023, demand for its recovered cellulose-based material, called Circulose, has been slower than expected. In its Q3 earnings, the company also noted that Q2 2023 net losses totaled 105.4 million Swedish krona.
The company said the short-term loans, which will come due at the end of March 2024, are only a stopgap. In addition to the loans, Renewcell obtained a credit increase, an extension of the maturity date of its existing revolving credit until June, and “waivers of financial covenants.”
“Today’s capital injection is expected to be sufficient to handle the liquidity required for the coming months and is therefore not a long-term solution,” the company stated. “The strategic review remains ongoing with highest priority in order to secure long-term funding necessary during the first quarter of 2024. Such alternatives may include equity injection through the form of a rights issue, a directed issue or other possible strategic transactions.”
These bottom line challenges come after some executive upheavals that have resulted in a new leadership team.
Patrik Lundström, who had been the company’s CEO since 2019, left on Oct. 16, and was replaced by Magnus Håkansson, formerly the CEO of struggling electronics retailer MediaMarkt Sweden.
Then on Dec. 13, Renewcell announced the appointment of Peter Schulz as interim CFO, starting Jan. 1, 2024. Schulz, previously CFO at Pacific Basin Shipping in Hong Kong, was replaced Toby Lawton, who announced his intent to leave the company in July.
At this time, Renewcell’s outlook for 2024 remains unclear.
The company said its financial outlook depends on its liquidity and sales recovery, both of which are uncertain. That's due in part to supply chain partner dynamics, so "the strategic review remains ongoing in order to secure long-term funding during the first quarter of 2024 and optimise shareholder value,” Wednesday’s release stated.
