Xebec Adsorption Inc (TOR: XBC) is a provider of clean energy solutions for renewable and low carbon gases in energy, mobility, and industrial applications. Various project lines includes the design and manufacture of purification, separation, dehydration, and filtration equipment for gases and compressed air - biogas upgrading systems from waste sites - and hydrogen purification and generation systems. To date they've completed 253 RNG installations and 253 hydrogen installations, with $208m in research and development.
On 12 April 2022, Xebec announced a $113.5m binding contract with Summit Carbon Solutions to supply large-scale CO2 compression equipment for what is expected to be the world's largest carbon capture and storage project, if approved.
Furthermore, this contract represented the largest in order value the company had received to date and their developing technology portfolio for carbon capture and sequestration.
Following Xebec releasing a 'three-year strategic plan to power its growth in sustainable gases' on 29 March 2022, the share prices climbed and took Xebec to the number one gainer on the Toronto Stock Exchange during intraday trading.
Targets included capitalising in renewable natural gas, carbon capture & sequestration equipment, the hydrogen economy, and investing into new clean technologies. They also aimed to have CAD$300-350m in revenue with EBITDA of 8-10% in FY2024.
However, upon releasing their Q1 results in May shares came crashing down - more than halving in value over the space of two days. The price further slumped over the next months, with prices currently trading at CAD$0.75 (01 August 2022).
Despite revenue beating most expectations with CAD$41.2m, investors were spooked at losses worsened to (CAD$18m) - nearly doubling from last year's quarter loss of (CAD$10m).
The net margin for Q1 was a loss of (43.9%), lower than last year's quarter loss of (47.6%).
Xebec haven't always been loss making - in the final quarter of 2021 they earned CAD$2.42 on record revenue of CAD$46m.
Based on last years schedule, revenue tended to increase in the Q2 and losses slightly improved - however, with geopolitical tensions and an accelerated CEO transition in March, its unpredictable what the upcoming Q2 earnings could be.
The company have been ramping up yearly revenues over recent years - while also having reporting a profit of CAD$2.02m for FY19.
It may not have just been the losses that were putting off investors, as Xebec's balance sheet was beginning to look slightly strained.
In the short-term, the current assets and current liabilities can measure a company's ability to pay short-term debt or obligations due within one year. Xebec's liquidity percentage in Q2 was 55.8% (current liabilities/current assets). This compared to last year's quarter, which was 27.9%.
The liquidity percentage was 24.3% in FY20 and 50.9% in FY21.
Total cash levels had been incrementally declining to CAD$24m, down from CAD$100m in last year's quarter - leaving investors worried about how Xebec would raise further cash and the risk of dilution or increasing debt levels amidst interest rate rises. Total assets were CAD$464m, which was up from CAD$419m in last year's quarter - but were down from record levels of $497m as of 31 Dec 2021. Total debt was CAD$83m - representing a debt-to-assets ratio of 17.9% (compared to last years quarter of 13.1%).
Xebec's balance sheet has been growing considerably over the last few operating years, with the 2020 trading year taking assets levels up to elevated heights.
The debt-to-assets ratio was 12.8% in FY20 and 17.7% in FY21.
Xebec Adsorption release their Q2 earnings for the year on 15 August, 2022.