PyroGenesis Canada, a growing AM powder manufacturer, recorded revenues of $1.4 million in Q2, 2018, a decrease of 35% from $2.2 million posted in Q2, 2017. This decrement, which still sees the company record a gross margin of 34.9%, is likely to be due to a transitional phase as Pyrogenesis also reported signing of several contracts and upgrading its production capabilities with new plasma atomizing systems.
2018, to date, has seen Pyrogenesis enter into significant commercial discussions in all of its business lines. The company expects that these conversations will translate into commercial contracts towards the end of Q3, 2018. In fact, Pyrogenesis is so confident in the upcoming success that it will purchase, from time to time, over a period of 12 months, up to 5,000,000 (approx. 4.1%) of its common shares issued and outstanding.
“At these price levels, we find the value of our shares to be an attractive investment and, as such, a good use of funds, particularly given our recent press releases which describe, amongst other things that the Company contracted for an order of 10 tons (minimum) of titanium powders, is now recommended by a leading 3D printer OEM to their customers […] and continued strategic commercial discussions with significant players within the Additive Manufacturing industry,” said P. Peter Pascali, President and CEO of PyroGenesis. “Despite our daily trading volume being respectable, we believe that the share price does not fully reflect this news. We find it inconceivable that PyroGenesis is approximately half the market value than it was at the end of January 2018, particularly given the news released since that time. As such, we feel it is an opportune time to buy PyroGenesis’ shares.”
During the first six months of 2018, Pyrogenesis started putting in place the required infrastructure and personnel in order to fulfill this growth. Its powder inventory increased to $611K and an amount of $230K has been spent and capitalized for the plasma atomization system and related development. Currently, the backlog of signed contracts as of is $4.1 million as the company contracted for an order of 10 tons (minimum) of titanium powders; o recommended by leading 3D Printer OEM to their customers as titanium powder supplier. Strategic commercial discussions also continue with 3D printer manufacturers, distributors, and end-users.
AM powder production
During 2017 Pyrogenesis successfully assembled and commissioned its first metal powder production system and successfully delivered orders for titanium and Inconel powders, all while still in the ramp-up phase. The company’s new IP provides for more control over particle size distribution, with little to no waste, while increasing powder production even further. In addition Pyrogenesis entered into several NDA’s with significant players in the industry (end users, printer manufacturers, and distributors) all with a view of providing sample orders, repeat orders, long-term orders, contract R&D, and/or strategic partnerships for long-term powder supply contracts, some with a view to a possible acquisition.
Given the level of activity, and the prospect of significant orders in the near term, management decided to order the long lead items for two powder production systems, both of which were scheduled to be fully operational during the summer 2018; due to summer delays this is now targeted for end of September 2018-beginning of October 2018. These new powder production units will incorporate some of the cutting-edge IP that has recently been developed and/or is in development.
Pyrogenesis expect that these units will cost significantly less to manufacture, generate higher production rates, and provide greater control over particle size distributions. Of note, although the Company’s strategic plan has always been based on its existing IP, know-how, and system (the economics of which remain true to this day), management has decided to leverage off of its significant advantage in plasma technology and dedicate certain limited assets to increasing its IP base with the goal of further significantly reducing capital and operating costs of the powder production system while at the same time improving production rates even further. PyroGenesis is confident that these goals once achieved will significantly impact the build-out strategy for the better.
The Company’s press release dated May 17, 2018 (which announced a commercial agreement for a minimum order of 10,000 kg of Titanium powder over two (2) years from Asia), together with those issued on August 14 and 20 (which announced results of powder testing by a top OEM as well as their recommendation to their clients to use such powder), has underscored the need for PyroGenesis to be even more focused than ever before on addressing market demand for its powder. The Company decided to have, at the ready, an optimum industrialization plan for multiple powder production units (in multiples of 1, 3, and 5 units), to be executed on the back of a significant take or-pay contract. This has now been completed and the Company is continuing to look at ways to accelerate the technological advances mentioned above.