PureCycle bullish despite warning in earnings report

Despite financial warnings in recent PureCycle Technologies Inc.'s recent quarterly reports, the company's leader says he's now more optimistic about the company than he has been in years.

CEO Dustin Olson said the Orlando, Fla.-based company, which is operating a chemical recycling facility for polypropylene in Ironton, Ohio, can access hundreds of millions of dollars, if needed, through the sale of bonds or a line of credit to continue operations as PureCycle works to fully commercialize operations.

The CEO's perspective during a recent interview came after one particular line in the publicly traded company's recent quarterly reports received media attention. Under a list of risk factors for investors, the company included a rather stark warning about "PCT's ability to obtain funding for its operations and future growth and to continue as a going concern."

"You have to remember the external auditors that review our business, they have very specific rules for how they define going concern. They take their own independent revenue assumption. They take their own independent irons and reliability assumption, and then they mash it all together," Olson said.

"I can tell you that we're very optimistic about where we are," he said.

"So with Ironton operations starting up and starting to start selling to customers and the revenue generation, I'm much, much less worried about that than I have been the last three years. So, you know, a lot of these [quarterly reports], there are things you have to write, there are things you have to put in there for the completeness of the document, but from a practical perspective, we feel real good about our position right now," Olson said.

The risk factor regarding funding and being an ongoing concern has actually been included in the company's quarterly reports for a couple of years but only recently received attention.

The CEO points to improving operations in Ironton as well as a $200 million line of credit the company can tap into and the ability to sell another $120 million in bonds as strong points for his company.

"We've thought quite a lot about what does it take for Ironton to be break even, and what does it take for the company to be break even, and we're definitely working our way toward that now," Olson said.

The company has spent the last year and a half commissioning the Ironton facility, which has had various technical challenges, including seal and power failure issues at times. "We've worked all through all of that and we've gotten the plant to the point now where it's running much, much more reliably and more stable, and the quality has continued to improve," he said.

Ironton uses solvent technology and pressure to create what the company's calls virgin-like polypropylene from used resin. The company, during one particular seven-day stretch in September, was able to process more than 1 million pounds of feedstock. The Ironton facility was designed to eventually produce 107 million pounds of recycled PP annually.

This is how the company describes, in an SEC filing, what happens in Ironton: "The purification process puts the plastic through a physical extraction process using super critical fluids that both extract and filter out contaminants and purify the color, opacity and odor of the plastic without changing the bonds of the polymer. By not altering the chemical makeup of the polymer, the company is able to use significantly less energy and reduce production costs as compared to virgin resin."

To say PureCycle has been on a journey would be an understatement as the firm was founded in 2015 and at one point had plans to be fully operational in Ironton years ago.

The company uses technology originally invented by Procter & Gamble Co., the large consumer products company, and poured hundreds of millions of dollars into creating a recycling facility near the Ohio River in Ironton.

PureCycle has plans to create similar facilities elsewhere but continues to iron out the kinks in Ohio in an effort to create a financially viable model the firm can use elsewhere. Early stage work is under way for a similar site in Augusta, Ga., and there have been plans announced for a site in Europe. But an earlier proposal for a location in South Korea has fallen through.

Olson, when recently asked about the prospects of the company considering the 10-Q warning, remained optimistic about the company and its prospects.

"This is a transformative technology that does something to polypropylene that no one in the world can do at the commercial scale," he said. "That's a huge success.

"Sure, there have been some challenges to move through the reliability of this technology, but tell me a technology that didn't have bumps along the way. Every significant advancement in society has had bumps along the way, and then you get through them. You work through them," he said.

"I'm ecstatic with where we are because we have done a tremendous job of scaling this technology extremely fast. And I think that if you objectively look at where we are, relative to other technologies or historical technologies or how long did it take for other things over the last century to get to where they are, we're doing good. We're doing good."

Olson's recent discussion about the company's financial position came around the time that PureCycle opened a 300,000-square-foot recycling facility in Denver, Pa. PureCycle is leasing the location for 15 years with total minimum lease payments of $52.3 milion.

That location collects bales of used plastics, separates PP from other resins and then ships the No. 5 plastic to Ironton. The Pennsylvania site, with a capacity to process 10 tons per hour, also has warehouse space.

"This is foundational stuff that is going to be awesome for us longer term because it's going to allow us to control our own destiny on feedstock," Olson said.

Not only will the Pennsylvania location provide a stream of used PP for Ironton, the company also will be able to sell other resins separated at the site to other recyclers.

"I am more optimistic than I've ever been in my time at PureCycle," Olson said.