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Itaconix - expanded opportunity in detergents

Itaconix (LON:ITX) (US OTC:ITXXF) has announced an expansion of its existing agreement with New Wave Global Services, in the field of dishwashing formulations. The agreement will allow New Wave to offer its customers a new dishwashing formulation based on the new Itaconix TSI 322 detergent polymer that Itaconix introduced last month, and includes a supply agreement giving New Wave a guaranteed level of supply of Itaconix’s detergent polymers to support a volume ramp-up of up to 1,000,000 lbs of polymer over two years. We estimate that this could generate up to US$1.5mln of incremental revenue over and above Itaconix’s existing business with New Wave, heavily weighted toward 2021.

 

Itaconix announced its original licence agreement with New Wave in December 2018, for use of the Itaconix CHT polymer. Since that agreement, New Wave has been growing its volumes and adding new customers, and we believe that the expansion to include the new product will help sustain that growth. New Wave is a leading automatic dishwashing detergent supplier in the North American private label market (retailer own-brands and similar).

The significance for Itaconix’s detergent additives segment

The non-phosphate detergent market is an important application for Itaconix’s family of polymers. This segment accounted for some 2/3 of the company’s revenues in 2019, at a segment growth rate of 37% for the year.

In January 2020 Itaconix announced that it would terminate its distribution partnership with Nouryon, a market leader in the detergent space, and focus on directly selling to customers (such as New Wave). The partnership with Nouryon had not yet reached the stage of producing any revenue in 2019, or in our expectation for 2020.

We argue that the expanded deal with New Wave demonstrates the continued growth potential for Itaconix in detergent additives, through its direct relationships with the customer base.

Quick facts: Itaconix PLC

Price: 0.425 GBX

LSE:ITX
Market: LSE
Market Cap: £1.14 m
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