Zotefoams' ReZorce packaging could be transformational

In an otherwise steady set of results, much of the buzz (and the money being spent) at Zotefoams (ZTF) centres on the ReZorce product under development by its MuCell Extrusion arm.

A commercial trial will soon get under way that will involve filling 150,000 juice cartons using its single-material barrier packaging in a day. Zotefoams hopes this will prove ReZorce works just as well as current cartons that use more than one material and are therefore more difficult to recycle. ReZorce will also contain at least 30 per cent recycled content.

Although MuCell’s divisional losses more than doubled to £4.4mn, group chief executive David Stirling said the company had garnered expressions of interest in “well over a billion” cartons, which would be a decent start in a market where 300bn cartons are produced each year. 

Of course, it still needs to prove the product works and that it can successfully scale up production, with licensing deals, joint ventures and stake sales to a “strategic investing partner” all under consideration. 

Elsewhere, the core business ticked along, with a revenue decline in polyolefin foams offset by a 7 per cent increase in the HPP division, which produces specialist foams used in Nike footwear and in aviation markets. Group-wide sales were therefore flat, but operating profit edged up by 9 per cent to £15.1mn.

The shares have also been range-bound for most of the past year and trade at 14 times FactSet consensus forecast earnings – well below peers and their five-year average of 21 times. Given the strong start to this year, though, they look like decent value regardless of the ReZorce outcome. Upgrade to buy. 

Last IC view: Hold, 374p, 8 Aug 2023