Q4 2021 Danimer Scientific Inc Earnings Call
[music].
Greetings and welcome to get them or scientific fourth quarter and full year 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will followed a formal presentation. If anyone should require operator assistance. During the conference. Please press star zero and your telephone.
Keep had as a reminder, this conference is being recorded it is now my pleasure to introduce your host Russ Zukofsky Vice President of corporate finance. Thank you you may begin.
Thank you operator, and thank you everyone for joining us today for our fourth quarter and full year 2021 earnings call.
Hosting the call today are dead and Mercy E O, Steve Cross Creek, and CFO dragged Dowdy, Mike Hey, just will also be joining us for Q&A.
During our discussion today, we will be referring to our earnings presentation, which is available on the Investor Relations section of our web site at the Edinburgh scientific Dot com.
On slide too. Please note that we may discuss forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
These forward looking statements include among other things future results of operations capacity production and demand levels that could differ in a material way.
From those expressed or implied in the forward looking statements. We assume no obligation to update any forward looking statements to reflect the bench worst circumstances. After the date hereof, except as required by law.
Today's presentation also includes references to non-GAAP financial measures reconciliations to the most comparable GAAP financial measures can be found in the earnings presentation.
I will now turn the call over to Steve.
Thank you Ross good afternoon, everyone. Thanks for joining.
I am proud of the focused execution by our team are many accomplishments during 2021 as we conclude our first year as a public company.
In 2021, we progressed further on our journey to profitably deliver leading biodegradable packaging solutions and products as we dramatically increased customer deliveries to generate record fourth quarter and full full year 2021 revenue.
As you look back at our achievements for the year I would like to note that every initiative, we have undertaken as well as all of our current initiatives aligns with our strategic parties and.
As shown on slide three these prior or do you just drive US two number one <unk>.
Expand our capacity to achieve substantial economies of scale, which is not just about increasing organic production capacity, Kentucky, Bainbridge and beyond but we are also evaluating third party manufacturing and licensing agreements reserve are available capital for key strategic allocations.
A good example is the potential partnership between us and Camaro developing solutions for aqueous coatings that our customers clearly want without us having to invest all the capital needed to drive this growth initiatives.
Another example of executing against the strategic priority is our recently announced on day oil bank collaboration which could be a capital white approach.
Number two lead with innovation to address a broad range of customer needs, which means leveraging our core competency around formulation an application development.
This will be done through our proprietary technology, an experienced team of researchers and scientists and included the pursuit pursuit of new R&D development and licensing agreements with customers.
Number three grove customer partnerships and product volume commitments as we continue to negotiate development and supply agreements with global Blue chip customers to secure future demand for our increasing capacity.
We have several exciting discussions underway, which could give us orders fully in line with our ambitious long term growth objectives.
Number four secure cost effective inputs, while canola remains the most attractive rock today and we are engaged in managing the price of our contracts. We also continued to explore the viability of lower cost alternative feedstocks.
The total core beyond collaboration will provide us with enough cost effective pele inputs for our PHA formulations as the business scales.
Number five attain favorable unit economics to enhanced margins first through increased capacity utilization then ramping up production of renewable following our November acquisition.
Separately, we are continually working to reduce utility costs and chemical usage and our Chevron Phillips collaboration could represent a step change for renewable manufacturing costs.
And finally number six enhancing team capabilities to support growth.
It is imperative that we increase the knowledge and capabilities of our leadership team as we grow in size and complexity.
This includes increasing the overall experience levels in manufacturing business development, R&D information technology, and finance as well as other areas to support global growth.
Examples include the additions of Deborah Mcdonald as Chief Corporate Development Officer, Keith Edwards as Vice President of business development, Brad Rogers as Vice President of Technology development, R&D, and Mike Hey, Joe's two will be our CFO upon the filing of our annual report on Form 10-K , and who is with us on the call today.
Everything we have worked on and communicated during the last year and everything we are focused on going forward. It can be connected to one or more of these strategic priorities. We hope. This provides you with a clear view of our strategic vision as we move into 2022 <unk>.
<unk> is dedicated to creating a highly profitable business that supplies the growing unmet need for biodegradable polymers and addresses the global issue of plastic waste.
Moving to slide for looking at our facility expansions, we remain well positioned to substantially scaled production of note acts in 2022.
At Phase one of our Kentucky facility, we made significant progress and scaling up production levels as the year progressed, most of our staff functions and downstream processing continued to operate on average at nearly twice the speed required in in the first half of December we were able to meet our goal of testing phase one operations at full capacity and the.
Second half of December we had a small fire, which did not impact our ability to supply customer needs. The incident had the silver lining of leading us to perform additional safety evaluations and make some process improvements, which will benefit from in all of our facilities.
Having tested the plant at near maximum operating rates both in December and February we are now comparable we can run this planet full capacity on a go forward basis.
Recent operations suggests that we may be able to operate above 100% of nameplate capacity at some point in 2022.
Looking at Kentucky Phase two we are excited to report that construction progress remains ahead of schedule and as you can see from the pictures on the bottom of the slide exterior construction is nearly complete.
We continue to expect Kentucky face to to come online in just a few months.
As we have discussed in the past the completion of both phases will collectively bring our annual nameplate finished product capacity to an expected 65 million pounds, which as a reminder, is PHA plus other compounded degradable materials.
The completion of this expansion will be an exciting milestone for our company and we expect a year one benefit to our operating results.
For the full year 2022, we expect to Kentucky facility, you have a favorable impact to adjusted EBITDA as we increase capacity and drive operational efficiencies at the expanded facility.
Current to slide five we're showing his schematics of the site of our new state of the art Greenfield facility in Bainbridge, Georgia.
As we discussed with you last quarter, we accelerated or groundbreaking to occur last November in order to retain the contractor team that did such a great job on our Kentucky expansion.
We also acted prudently in the current inflationary environment to order several key pieces of equipment and materials in advance of expected price increases.
Having taken need prudent initial steps, we still face uncertainty with respect to key equipment delivery delays and inflationary pressures.
For these reasons, we remain committed to putting in place. This critical capacity for growth, but we plan to remain nimble and flexible as to the pace of capital spending on this project are current intention is to moderate spending until we are comfortable that outside factors won't causes a delayed startup. Thus preserving cash. This can also provide us with the opportunity to.
Capture and better apply learnings from the Kentucky expansion and the pilot plant.
In addition, it can allow for further value engineering to maximize the efficiency of the plant and potentially reduce project cost.
We will also look to develop a plan to quick and the spending a supply chain issues dissipate and customer contracts allow us to pass through enough cost to justify accelerated spending.
A diagram, we have provided on slide six provides a view of the opportunity from all of the capacity expansion. We currently have underway.
<unk> completion of Kentucky face too and the Greenfield facility, we expect to have overall PHA finished product nameplate capacity of approximately 190 million pounds.
Our acquisition of November was a Prime example of our ability to identify attractive opportunities that are expected to drive down production costs over the long term help us achieve scale and provide further unique product offerings.
As shown on slide seven when including the impact from a future renewable plant sites to produce 168 million pounds of for Novo. We have line of sight to 330 million pounds of PHA based resin out of our Kentucky in Georgia facilities, which represents nearly 75% increase.
And this product along with 60 million pounds of Standalone or novo.
As it relates to our plans for ever Novo plant. We are in discussions with several major ethylene ox oxiclean producers in the U S Gulf Coast for an <unk> optic agreement.
A site co location agreement and other ancillary agreements related to the manufacturing of renewable products.
While we are focused on building out our capacity and operations to serve the increasing demand for PHA. Our ambition also includes partnering with others blended commit their capital rather than ours to build that capacity that would be mutually beneficial and.
In January of 2022, we announced our collaboration with Hyundai oil back to help drive global growth of PHA. This represents a future opportunity to partner with a major player in Asia, who will bring their own capital into the table and speed up market entry in the region.
We are grateful for their partnership in support on this initiative.
Now turning to our customer and business development updates I will speak to slide eight.
We are expanding our market share by developing biodegradable products that leverage are unmatched application development expertise and we have increasingly found that customers are looking for a complete biodegradable systems as alternatives to the traditional plastic products they sell.
I would also like to note that while customer product launch timelines are always subject to change we continue to focus on the factors that are in our control to serve customers a timely manner.
The team at Mars Wrigley reports that they are happy with the progress in our partnership to develop an innovative on Composable skittles bag and exploring several of their apple several other applications for conversion.
We also continue to make progress with our developmental partners like Pepsico Bacardi and numerous others.
We are very excited to confirm that Starbucks has launched no tax base straws nationwide to supply biodegradable straws in their stores across the United States as of September 2021.
As you can imagine this is a significant milestone for us and the industry as a whole.
Additionally are converted partner Genpact plans to launch no deck based home complicit will take out containers this year.
Also major big box retailer target has initiated sales of biodegradable fades straws sold through our converter partner Wind Cup.
Fate strides have also been supported by Yellowstone National Park in the National Football League and other professional sports associations.
In fact, so far stadium the host of Super Bowl 56 has been using phage draw since September .
Mercedes Benz Stadium home of the Atlanta Falcons, The Patriots Gillette Stadium in New New England, Tpc's Sawgrass and the 2021 PGA Championship in queue Island, South Carolina have also all utilized fade straws as an alternative to traditional plastics.
You can also find our note acts draws made by wind Cup and retailers and restaurants suggest Cvs Walmart Burger filled Burger Bill Bonefish grille, tropical Smoothie Cafe, Dunkin Donuts and numerous other restaurants across the country.
Our partnership with Wind Cup has been a great success, thus far.
We have also made exciting advancements with products sold through our converter partner Columbia packaging group.
Columbia packaging is currently supplying note X based e-commerce mailers and shopping bags for the fashion, Brad House of LR and see on by Russell Wilson and Ciara.
CPG is also a sustainability partner of the Kansas City Major League soccer team Sporting Casey to supply PHA shopping bags apparel bags and straws.
Looking at slide nine I would like to draw your attention to our inaugural ESG report, which we published in February .
Our stakeholders are well aware of our mission to develop sustainable alternatives to traditional plastic and this report provides additional details on our ESG efforts across stannum or from supplier and customer partnerships to hiring initiatives.
Overall, we expected our ongoing ESG initiatives and reporting are another important way to align our interests with those of our customers and shareholders that will contribute to maximizing long term shareholder value.
Before I turn the call over I'd like to take a moment to discuss our previously announced CFO transition.
Michael Hey, just joined US in February and we will be named Chief Financial Officer. Upon the filing of our annual report on Form 10-K .
Mike brings considerable experience in managing global growth and profitability, having led to finance an investor relations functions of Sedrah several large companies across a variety of industries.
His skills and perspectives will be instrumental in helping us maintain our leading position as a Bob plastics manufacturer. During this period of industry growth and I'm thrilled to welcome him to Dan number.
I would like to thank Jack for his invaluable guidance throughout Danvers journey from a startup to a public company jet has worn many hats over the years and has helped us build damn or into what it is today.
I am grateful to have his continued support as we execute our growth initiatives you will continue to serve as a valued member of our team will move into the role of senior Vice President of financial planning and analysis next month.
With that let me turn the call over to Jed for an update on our financial results.
Thank you, Steve I'll speak to slots in we closed out the fourth quarter of the year with DHA, representing a growing share of our revenue given that we remain in the early stages of our long term trajectory I'll focus my comments today on our full year 2021 results with fourth quarter context is applicable.
Revenues for the full year 2021 grew 24% to a record 58 $7 million compared to $47.3 million and the prior year.
This increase was driven by higher sales of PHA based resins as we scaled up production of phase one.
At our Kentucky facility this year.
Revenues for the fourth quarter of 2021 grew 47% to a fourth quarter record of $17.7 million.
Compared to $12 million in the fourth quarter last year.
In 2021, we derive 36% of our revenues from sales of PHA based resins, a significant increase compared to 10% in 2020.
In the fourth quarter, PHA based resins climbed to 50% of sales, reflecting our expanded production capabilities.
We produce full year gross profit of approximately $900000 compared to gross profit of 11, and a half million dollars in the prior year.
All year, adjusted gross profit was $11 million compared to $16.6 million in the prior year.
On a margin basis, adjusted gross profit was 18.6% compared to 35.1% in the prior year, primarily the result of elevated fixed cost absorption as production continued to scale.
The Kentucky facility.
As we have mentioned previously we expect our average cost per unit at our existing facilities to improve as production scales.
For the full year, R&D, and SG&A expenses, excluding depreciation and amortization stock based compensation rent and one time items was $31 million compared to $16.2 million in the prior year.
Mainly attributable to an increase in headcount and salaries to support R&D efforts and our future expansion plans as well as increases in costs associated with having a larger asset base, such as property and liability insurance.
Public company expenses added approximately $4.6 million of incremental costs for the full year of 2021, which we did not incur last year and include items, such as <unk> insurance increase public company, auditing and accounting costs and Thought's readiness fees.
In addition, we incurred approximately $1.9 million of R&D and operating expenses as a result of consolidating November and our full year financial results, which we did not incur in the prior year.
The adjusted EBITDA loss for the full year was $22.6 million compared to a loss of $3.2 million in the prior year, primarily due to the factors I discussed in our gross profit SG&A and R&D results.
Just that EBITDA excludes dot com and other income and.
In other add backs as reconciled in the appendix.
Full year adjusted EBITDAR was the loss of $21 million in 2021 compared to a gain of approximately $400000 in 2020.
We had back our rent expense because it is primarily related to a sale leaseback agreement associated with the Kentucky facility and is thus essentially a replacement of depreciation and interest expenses.
Our total long term that was approximately $261.3 million a year in and includes $21 million of low interest new market tax credit loans that we expect will be forgiven in 2026, our cash position continues to support our plan to capacity expansions into 2022.
Looking at our outlook for the full year of 2022 as Steve mentioned, we expect the Kentucky facility to turn adjusted EBITDA positive as we increase capacity and drop operational efficiencies at the expanded facility.
Before I turn the call over to Steve I wanted to briefly comment on our plans to file an extension for the 10-K and our material control weaknesses as mentioned in our press release during the annual reporting cycle for fiscal year 2021, we were required to comply with section 404, B of the Sarbanes Oxley Act and accelerated 10-K <unk>.
Pulling deadline for large accelerated filers for the first time.
During our control of evaluation process, we identified certain material weaknesses that we will be disclosing into 10-K.
Any of the statements identified related to these issues have been corrected prior to releasing a results.
Full confidence that we will make significant progress towards remediation over the course of 2022 and eliminating these internal control matters going forward.
We are working through these issues with our auditors and are confident that we will file the 10-K prior to the extended deadline.
Now I'll turn the call back to Steve for closing remarks on slot 11.
Thanks Jed.
In summary, we are pleased with our capacity expansion progress and record revenue in 2021.
Growing commercial scale production of PHA remains the core focus of our business and I am confident we are on the right path to profitably execute our strategic priorities and capture a growing share of PHA demand in the years ahead.
We have a large addressable market to serve and we are working as quickly as possible to expand our production capacity further in 2022.
You for your time today, and we look forward to update you on our progress next quarter.
We will now open up the line for questions.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask you. A question in my purse star one on your telephone keypad a confirmation tunnel indicate your line is in a question Q you May Press Star two if you would like to remove your question from the queue.
Four participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
Our first question comes from the line of Lawrence Alexander with Jeffries. Please.
Please limit yourself to one question and one follow up question. So we may get to everyone's questions and then you make you for additional questions.
Lawrence Alexander your line is y.
Good afternoon can you unpack the comment about getting to you positive <unk> contributions this year.
Do you see either of the two facilities in.
In the current raw material environment, having a path to the original 30% plus return on capital.
That's happened pet what's being discussed before this inflationary period started.
And can you talk a little bit about what you're seeing in terms of conversion costs relative to what you had expected before construction began.
So Lawrence Thanks for the question as far as conversion cautious I assume you're talking about conversion of canola oil into PHA.
Alright.
Our our costs have.
Run about 10 cents higher per pound than what we had modeled but we think we've got that taken out now and that we should be on plan and so at scale.
We still expect those kinds of returns.
We anticipate that as I mentioned earlier that the Kentucky facility will be positive on and adjusted EBITDA basis before the end of the year and then after that it's just a matter of continuing to increase sales to cover the our corporate overheads and.
A reminder, our current.
Opex spend without we can cover our current carpets capex spin without bringing on any additional capacity of course, that's not our plan. We strategically added expense, mostly in the form of people to support our future growth.
Which includes both completing the greenfield facility in Georgia, and the renewable facility in the Gulf, but in this environment of tight biopolymer supply anybody that can bring on capacity capacity is going to win and we expect to win.
Okay great.
For a question, perhaps given that mikes in the room can you Uhm I quit if you don't mind speaking a little bit about your perspective on <unk> and you know the challenges or the opportunities to.
What where you want to focus first and what's your priorities are.
Sure.
I'm thrilled to be here with the with the group after the first call here I'll look forward to future discussions with all of you but.
On the first call here I think Laurence really want to kind of start out and say why did I why did I joined this company and what did I see and truthfully I couldn't be more excited to be part of this exceptionally talented team they are truly making our planet cleaner and.
I decided to join the team has the CFO for several reasons.
To start I was impressed with the strength and conviction of the leadership team in the board.
It also became clear to me that <unk> has the leading technology position and the near term sizeable commercial opportunity. That's well ahead of its competitors dispositions further enhanced by strong industry Tailwinds as the brands and manufacturers are prioritising sustainability initiatives and finally I saw this is.
Great fit with my 30 years abroad financial leadership experience and skills. Melissa brought me here in the first three weeks in a row has been nothing but confirm my reasons for joining this terrific team and this company so as I'm getting started again.
Again I was just kind of finished off my first three weeks, but my initial focus areas are going to be to get out to the facilities meet meet with the team learned a business and I think they will give me an opportunity to reframe, what our guidance should be to you.
I also I want to improve our communication with investors. So their actions can be clearly tied towards six pronged strategy, let's do you played out.
And lastly can choose strengthen the finance and information technology teams to provide effective analysis and insights to our business leaders, while ensuring appropriate controls. So again I appreciate the question. Thanks.
No. Thanks, I'll hop back in queue.
Thanks Lawrence.
Our next question comes from the line of John Tom One Teng with C. J S. Securities. Please proceed with your question.
Hey, guys. Thank you for taking my questions. My first one is just about the greenfield and the potential changes you might be thinking about uhm is this something that made the latest start date Uhm just tell me the scale and kind of the the the details on what you're thinking about doing a delay as inflation.
Decision, making.
Sure John Thanks for the question, we're very focused on managing of preserving our cash in this uncertain environment that we're in and I should point out that the environment is even more uncertain now than it was even a week ago. We have developed a plan that allows us to maximize the flexibility to.
Do that until we have more clarity moving forward. So we can speed up or slow down as we deem necessary in the meantime, we'll continue to build out the greenfield facility work with customers on product development Antarctic agreements customer interest is still as strong as ever but in these uncertain times, it's incumbent upon us to be.
Careful stewards of our resources My best guess at this point in time, if everything continues to go well through this year is that we could still have that plant up and running by the end of 2023.
But obviously, if we slowdown further.
It will go it will bleed over into 2024.
Got it thank you and then.
The 14th of this year can you give us a sense of how you expect spell through to trend. Your your skills with PHA product says Uhm you bring online your capacity as your customers programs launch no states reopen and we all deal with the continuing headache, a supply chain inflation issues that are still out there.
Well John the first part of the question didn't come through clearly.
Could you repeat it yeah I I was just trying to get a sense of what what's your expectations for PHA sales are going to be like this year and kind of what are the puts and takes to it.
Well, obviously, we can we expect them to continue to grow.
And I guess from putting take standpoint is we always have the issue of customer timing. So as the capacity comes online you know, it's not a commodity that you're going to be able to sell on a spot market. So you have to be coordinated with customer launches and conversions and other.
Than that I think I will defer to.
Mike's comment when he mentioned that he is going to be working on developing a plan for what guidance, we're going to give going forward. So we'll wait for that to come out before I give you more specific guidance.
Okay, great. Thanks, how you went back in queue.
Thanks, John .
Our next question comes from the line of Thomas Boys with Cowen and company. Please proceed with your question.
Thanks I appreciate you taking the questions just following the recent convert off offering you, obviously need some meaningful progress towards funding the Greenfield facility I just wonder if you could talk about the capital allocation approach going forward. You know if you could just touched by any potential there for for the D. O E alone could that be a 2022.
Event, and maybe anything having to do with a potential anchor tenant for the Greenfield facility.
Sure. Thanks Thomas.
As you identify we have plenty of cash on hand, now and I just would like to point out that we control how fast we spend it as I mentioned with respect to our Greenfield construction plan. So.
We believe that our focus right now should be on demonstrated capability in Kentucky, we wanted to get that scaled up and show that we can produce a quality product profitably and then we will continue to focus on our negotiations to secure that anchor tenant for the Greenfield and we think that.
The combination of those two things will help us secure any financing that we need going forward.
With respect to the Doa we're still very optimistic that we will get accepted in phase one, but there's no guarantee of that.
And we expect to hear back from them within the next couple of months at the latest.
Excellent appreciate it and then you know just as a follow up on the Capex plan for the Greenfield facility I think I saw that he was between $500 million and $612 million and it was that down from the 600 to 700 before I wasn't sure maybe if that included phase two construction in it or renewable piece, just you know with the change in kind of how.
Your bill is to break down the dynamic for me.
Yeah. Good question that original 700 million.
Tapia an estimate included the renewable plant.
So that that is updated guidance on the Greenfield facility we.
Got our plus or minus 10% estimate in and and move the midpoint up.
But the top and didn't go up as far because the previous estimate was plus or minus 20%.
So we're we're still somewhere close to that $700 million. We're at the top end of that I think that was an estimate from about six months ago I remember, we're we're still.
Close to that range around the top endeavor.
Got it I appreciate your help I can the cube.
Our next question is a follow up question from the line of Lawrence Alexander. Please proceed with your question.
Hi could you describe discuss a little bit <unk>, where you are on building customer acceptance over and over <unk>, how much trilingual, how much volume do you need to have out for traveling or just how much time do they need for that to be <unk> comparable in acceptances, where no taxes.
Sure.
We're we're working diligently to increase the capacity of the pilot plant in Rochester, which will facilitate the speed of customer adoption in that product development work. So.
We're still working at this point with.
Lift fairly limited quantities of material, but.
We are also having great results and so our confidence is even higher in terms of what we might be able to do with that product.
We also just just to remind you that some of the potential outputs.
Of that plant involve acrylic acrylic acid another.
Derivatives of acrylic and those products. In this example are really commodities, unlike renewable or no tax which are value added highly engineered applications.
Applications.
The acrylic that could come out of this plant could be sold on the spot market. So that's something we're actively discussing with several of potential customers.
That are interested in ultimately a renewable acrylic solution.
And then can you discuss a little bit more sort of <unk>.
What milestones needed to be reached for that to become a material opportunity should.
We are really in the process of papering that up at this point.
So in terms of making having the agreement come together we are <unk>.
Very close.
And then as far as having success in the marketplace.
It's really just a matter of customer adoption, but.
We've always been very bullish on this product and obviously camera is as well where they wouldn't be proceeding with this.
But some of the customers.
We have been in trials with.
Are super excited about the product of the main.
Application that we see at this point, we'd be coding paperboard four cups.
As you heard me mentioned before we are really excited that some of our straw customers are very focused on having a complete biodegradable system, which would be <unk>.
Cops and using our atheist coding is a coating for cups has has the kind of the double benefit of allowing those cups and to be repulsed bolt and so that that paper can be reused which you can't do now with a polyethylene coding so.
As far as milestones I guess, the first would be get the agreement side and then the second will be some potential.
Potential customer announcements as soon as those come through.
And then just.
One last one is the can you talk a little bit about the trend in a S p's mix.
Obviously lots of gives it takes in the supply chain, but maybe just what was happening within the last quarter on how the backlog of orders looks for this quarter.
I'm sorry, it was really broken up at the beginning I couldn't hear we couldn't hear you.
Sorry, if you can just touch on Asp's and mix.
And you know how prices how realized prices have trended.
In queue for and maybe what <unk>, what the backlog of orders looks like for Q1.
Yeah.
Lawrence I'm going to punt on that one too.
<unk>.
To Mike again on this work he's going to do on kind of figuring out what guidance, we're going to provide going forward, but that's that's ah.
A major initiative of his he's he's going to be prioritizing here. So I'll delay answering that question until.
Figured out how we're going to do it going forward.
Thank you.
Our next question is a follow up question from the line of John <unk> Tang. Please proceed with your question.
Hey, guys. Thanks for the follow up could you talk a little bit more about the deal with Hunter and the oil bank, what what are they interested in doing it what scale and Mick how committed are they at this point to actually bring their own capital to the table to bring your product to Asia.
But we're very happy with this development and we hope it will form the basis for a long term collaboration which presents both parties with a compelling opportunity to meet the demand in Asia. We will initially be focusing on providing note X two commercial customers in South Korea, and other Asian regions for.
More sustainable packaging.
All forms of potential investment collaboration and joint projects will be considered under this partnership.
Including establishing production facilities in Asia, and we will provide more updates on that in the future but.
My my concept of how these type of partnerships should work part of that we are bringing that technology and quite often.
The product application know, how that Kid and in fact, even customer contracts and so we're looking for partners who are willing to invest.
Capital in the business to grow the business going forward.
Okay, great. Thanks, and then I just wanted to come back to the prior comment about the return on the facilities, where where you just <unk>, referring to the Kentucky facilities or the Greenfield as well just in terms of your target return and maybe related to that as you talk to customers getting trying to find it an anchor tenant for the <unk>.
Greenfield are you talking about the the increase in prices and then trying to pass them on it as you can get it as he tried to get a contract signed that help you know how are they responding to that if that's what you're talking about.
Yeah, we we've already passed on pricing for this year based on our current.
The current.
Increases that we've received.
So that's already been done.
I'm sorry, what was the first part of your question John .
Oh, yeah, so okay I got yet so.
I was referring specifically to Kentucky, when we were talking about the production costs there.
But going back to your question about the Greenfield tenant.
Tenant, yes, those those the new pricing is.
Based in to all of the discussions and.
Nobody's ever happy to get a price increase that I know, but so.
So far we haven't had any trouble getting those increases passed on.
Okay, Great got it thank you.
Our next question is a follow up question from the line of Thomas Voice. Please proceed with your question.
Excellent Yeah, just a quick follow up here you know I know you longer term working on alternative feedstock soybean Penny crest was just trying to get a sense of what you're seeing on the supply side for the canola market. You know I think last border. You had mentioned me. There's some additional supply that was coming on line longer term is that still the case do you think that <unk>.
<unk> 80 cents is kind of a high watermark, there or what kind of.
Should we be thinking about for so can hold on for a pound basis.
Sure. Thanks, Thomas our average price.
And all the oil in queue for was about 56 cents a pound.
We've locked in Q1 at 59 cents, a pound, but do too.
Is locked in his.
Seven cents a pound.
Futures prices had been coming down as you recall from our last call.
Actually into the low seventies.
But.
Then there wasn't a weather event that affected crops in North America and now the war in Ukraine is putting some pressure on prices, but we still expect them to moderate in the long run as that additional capacity comes online.
But going out.
Into the future now I think low eighties, just kind of the the the.
The trend line, but.
There is there is a current spiking do three.
The nineties, but we have not.
Complete it.
We're we're still working on walking in queue freezing.
Forest prices.
[laughter].
Thank you.
There are no further questions in the queue I'd like to hand, the call back to Mister Croskey for closing remarks.
Thank you again to everyone for joining us today were encouraged by our progress and remain excited about our business prospects as we move into 2022 I'd like to thank you for your continued interest in Danvers scientific and your time on this call. We look forward to updating you on our progress in the future. Thank you.
So ladies and gentlemen, this does conclude today's telecom. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.