Greetings to the Lamor thread! Thomas and I had the opportunity to visit Lamor’s chemical recycling plant in Kilpilahti and interview both the CEO and employees regarding the plant’s operations and recycling process.
Topics:
00:00 Introduction
00:17 What is currently happening at the plant?
01:02 Plant ramp-up
01:58 Number of personnel
03:17 Revenue potential
04:59 Delivery of production capacity
06:06 History of the production plant
07:44 Crushing process in the pre-treatment phase
09:07 Thermolysis process
11:24 Laboratory operations
Has it become clear to anyone else whether Lamor’s estimate for the Kilpilahti investment (€60-70m) refers to the entire four-line plant or just this first phase? I assume it must be all four phases, otherwise it’s a complete disaster. However, it’s a bit strange to give a cost estimate for the entire plant on the one hand, but on the other hand emphasize that no decisions have been made regarding further investments. This is a continuation of Lamor’s already unclear communication. No margin forecasts are dared or wanted to be given, so there’s no idea about profitability. Something can, of course, be inferred from those revenue forecasts: €35-45m for four lines and 1/4 of that for the first one once it eventually starts up. Whatever the margins may be, profitability will be (for a long time) dismal, considering probably €10m in interest costs/year! It was positive to hear other Lamor employees on the video - they gave the impression that they knew what they were doing, whereas with the CEO, that’s not the case. However, I must comment on that ‘laboratory part,’ as it specifically gave the impression that the entire plant is currently a laboratory: testing, seeing what comes out of the pipe, talking with Shell about whether it starts to meet requirements or not, etc. Apparently, the entire technology package is only now truly being implemented; otherwise, I don’t understand such uncertain talk about the final product?
I watched that video. So, if one line generates about 10 million euros in revenue per year (at full capacity), and scaling to four lines costs a total investment of 60-70 million, then by no math is this a good investment.
I can’t say what the operating margin might be, but in the chemical industry, it’s about 5-6% of revenue, and in other process industries, perhaps around 10%. Could the margin be higher in an environmentally friendly circular economy? Would Shell pay an exceptionally good margin for the eco-oil coveted by its green customers? Does the state pay any subsidies? If we put a fairy-tale-like margin of 20% into the calculation, the factory, at full capacity, would generate just under 15 million euros in operating margin per year a few years from now, once all challenges (which always arise in a new business) have been overcome.
Lamor probably pays quite a lot for external capital; for simplicity, let’s calculate with 10%, so about 6 million per year. So, if revenue is 40 million at full capacity, margin is 8 million, minus financing costs of 6 million, and of course, depreciation. We would be in the red for quite a long time, although cash flow would still come in.
Well, the conclusion of a long rambling. The process should work without problems, the margin should preferably be higher than estimated here; if it’s only 10%, this looks hopeless. On the other hand, if it’s bigger, then everything could be fine. Now everything is sold to Shell; is it possible to sell this elsewhere at a reasonable price if the quality is not at their expected level?
Let’s hope the people of Porvoo succeed; I will certainly follow this, but unless the core business shows some improvement, I don’t think there’s a hurry to buy.
Here’s a bit of speculation, as there are no facts.
When I was considering Lamor and then the Kilpilahti aspect, I thought that the raw material is very cheap. Plastic waste, which is transported 20-30 km along the highway to Kilpilahti… as I understand it, to an adjacent recycling plant, from where it then moves to Lamor. That plant is about 500m from Lamor. Therefore, the margin can be very good.
It would be a real miracle if the company announced the total investment as 60-70 million and it didn’t include all four lines. Nevertheless, the interest expenses, among other things, mentioned in the messages above, are absolutely shocking in the coming years relative to the business. That’s why I have wondered in my previous messages why sales aren’t picking up in the core business. If it doesn’t go well in 2026, it’s a bad sign for the entire company’s future. This means a sales volume of over 10 million.
This is some conjecture, partly fact, partly reflection.
Yes, that investment is for getting the first line ready. At least, that’s how I’ve understood it from the company’s communication, and why would the company communicate figures that haven’t yet been committed to, for example, by an investment decision.
Of course, that investment includes many things that are not needed if operations are potentially scaled up with additional reactors. For example, the building, pipelines, tanks, yard area, and distillation column are such that they do not require much, if any, investment, even if operations were expanded.
Huhhuh. In practice, it means that additional investments must be made, if funding can be found somewhere. The uncertainty of funding is likely the reason why investment decisions have not been made. This does not look good, as the 10% interest rate previously used in this thread is no longer sufficient for this company. But it is also quite wild that a company worth €30m invests €60-70m and here small and simple (I’m only speaking for myself!) investors are trying to figure out the rationality of that investment. Either Lamor is withholding information or they have no idea about the project’s profitability. I’m not sure which option is the greater evil.
No further investments should be made until we see whether the first line can be made operational and a marketable product comes out of the pipeline. It’s by no means a given that this would be the case. It’s clear that some product will be produced if the reactor can be heated up, but meeting the specifications is really not as simple as one might imagine. The statements of the lab person who appeared in the video were quite telling in their stark honesty.
Thomas and I had the opportunity to visit Lamor’s chemical recycling plant in Kilpilahti and interview both the CEO and employees regarding the plant’s operations and recycling process.