Alexium enters agreement with multi-billion dollar US mattress manufacturer

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Published 29-APR-2019 11:01 A.M.

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6 minute read

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Alexium International Group Ltd (ASX:AJX) today announced that it has entered into a Supply Agreement with a multi-billion dollar North American manufacturer of mattresses. AJX is now its preferred supplier of phase change material (PCM) products for textile applications to its bedding products with the intent to form a strategic partnership.

The company today also delivered an impressive third quarter performance, having grown cash by 50% compared with the December quarter, while also establishing important agreements with major global enterprises.

Alexicool® provides entry into multiple markets

The broader applications of Alexium’s flame retardant technologies were evidenced by the supply agreement with this unnamed, yet multi-billion-dollar, North American manufacturer of mattresses.

Under the agreement, Alexium will be the preferred supplier of PCM products for textile applications to their bedding products with the intent to form a strategic partnership.

Alexium will provide its Alexicool® products (a proprietary line of phase-change-material products) for application across the mattress manufacturer’s brands.

The agreement has a two-year term that may automatically renew for successive one-year terms, clearly illustrating Alexium’s alignment with a leader in the mattress industry to provide mattresses with improved thermal regulation.

As demand for temperature management in bedding grows, it offers outstanding opportunities for the company to bring Alexicool® cooling technology to a wider range of bedding products and to explore and expand additional areas of technical collaboration with a strategic partner.

On this note, chief executive Dr Bob Brookins said, “Our North American partner has grown and sustained its position in bedding manufacturing and distribution by embracing innovation and technology.

“This agreement combines their bedding experience with our specialty expertise in phase-change-material chemistry and its application to textiles.

“Our new relationships in the bedding industry are now contributing both to accelerated sales and revenue visibility for our PCM business.”

Alexium achieving key milestones

Since the start of this year, Alexium has achieved a number of key milestones, having established strategic partnerships across a number of industry segments, any one of which could deliver transformational growth.

With its proprietary technology — Alexiflam NF, a proprietary flame retardant for cotton and cellulose-based textiles — well sought after, management’s confidence in delivering near-term earnings ahead of entering a strong growth trajectory appears well founded.

Another positive sign is the fact that the company has not only been growing sales, but there is evidence of margin improvement, indicating increased efficiencies and possibly the benefits of the competitive edge provided by its technologies.

The company has a promising earnings outlook for 2019 with management saying today that it expects to achieve positive monthly EBITDA on an ongoing basis by the fourth quarter, followed by sustained profitable growth in the years ahead.

One of the most promising developments in terms of the company’s future growth prospects was recognition by the bedding industry regarding the application of its flame retardant technologies in that field.

Not only will Alexium’s collaboration with a global bedding industry player provide additional revenue streams aside from its traditional military uniforms market segment, but it will offer diversification into a new industry, de-risking the group’s reliance on one-off contracts with a small clutch of clients.

The benefits of having established alliances with high profile corporate and government cannot be understated.

These have been strengthened through the recent negotiation of a development agreement with Warmkraft’s Pine Belt Processing for the development of Alexium flame-retardant chemistry for standard issue nylon/cotton fabrics for US military uniforms.

This is an established target market for Alexium with the potential to deliver strong growth given the resilient nature of the industry.

The group holds patents for a process developed initially by the US Department of Defence which allows for the surface modification and attachment of nanoparticles or multiple chemical functional groups to surfaces or substrates to provide fire retardancy and various additional functionalities.

Further progress in military sector

In late March, Alexium announced the signing of a mutually exclusive Development Agreement with Pine Belt Processing (Pine Belt), a subsidiary of Warmkraft, Inc., covering the development and potential supply of Alexium’s flame-retardant chemistry for the treatment of nylon/cotton military uniforms.

The agreement follows months of product refinement and testing to provide a no melt, no drip flame retardant function for standard issue US military nylon/cotton uniforms.

Pine Belt has significant expertise in the treatment of US military textiles having successfully treated over 25 million US military uniforms with their proprietary insect repellent coatings.

Under the terms of the Development Agreement, Alexium will work with Pine Belt to comply with their production requirements and to facilitate the provision of treated uniforms by Pine Belt to the US military for limited user evaluation (LUE or “wear trials”).

This initiative is in addition to Alexium’s efforts to develop flame retardant fabrics as used for the Flame-Resistant Army Combat Uniform (“FRACU”) program which involves the redesign of a specialist uniform.

While the company remains involved and active with this effort, it is currently focusing its resources in advancing the Pine Belt initiative.

US manufacture & sale of Alexiflam® NF approved

This news comes less than a week after Alexium received US Environmental Protection Agency (EPA) approval for the manufacture and sale of Alexiflam® NF in the US, opening up a broad range of distribution opportunities for the group.

ICL agreement allows Alexium to tighten focus

Another important development during the quarter was the conclusion of negotiations with dual listed ICL (TASE/NYSE:ICL), a specialty minerals and chemical company with a leading position globally in the production and sale of brominated and phosphorous flame retardants.

ICL is the world’s largest provider of phosphorous based flame retardants, providing Alexia with access to global markets via its existing customer base.

Recent negotiations resulted in the signing of a Memorandum of Understanding (MoU), establishing a framework for the potential commercialisation of the disruptive Alexiflam NF chemistry, leveraging ICL’s unrivalled global manufacturing, sales capabilities and extensive existing customer base.

By eliminating the expense and logistical challenges associated with a global product launch, Alexium will instead focus resources on creating shareholder value via further innovation and product development.

Subject to the terms of the final agreement, ICL will be granted sole manufacturing, marketing and sales rights to the Alexium NF product globally, but with Alexium retaining rights over selected key applications currently under development.

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