Battery recycler Li-Cycle's newly released 2023 earnings show a company whose “finances are in dire straits,” according to one analyst.
And suggest the Canadian firm might not complete a once heralded project at Eastman Business Park
Li-Cycle abruptly halted construction on its multi-million-dollar Greece hub last fall, citing a dramatic increase in project costs. The question since has been how and if the company will move forward, and deliver on promises to create more than 250 jobs.
In its latest filing, posted after markets closed Friday, Li-Cycle offered no definitive statement about the project. Officials initially were steadfast in their commitment. But when referring in this filing, as they had previously, to their “inability to develop the Rochester hub,” added: “as anticipated, or at all.”
“I think that that's them introducing the idea that they're not going to come back to the Rochester hub,” said Ethan Wade, senior vice president and chief development officer at Brighton Securities. “They have to start kind of breaking it lightly to the market.”
Li-Cycle, thought a spokesman, did not address the change in wording but maintained the "priority is to re-start construction and develop the Rochester Hub."
The company has scheduled a Tuesday conference call to review its earnings report and “provide a business update.”
The company recycles lithium-ion batteries using a patented spoke-and-hub system, breaking down and processing the material for reuse by battery manufacturers, including for electric vehicles.
Li-Cycle's financials show the company burned through half the cash it had on hand in final three months of 2023, while posting a $138 million net loss for the year.
“That is a meaningful discrepancy. A loss of $138 (million), almost $140 million on sales of only $18 million is significant,” Wade said. “Especially for a company hoping to get more funding from the federal government.”
Li-Cycle says it “continues to work closely with the U.S. Department of Energy on the conditional commitment for a loan of up to $375 million.” Earlier last week, the firm announced that it had secured an additional $75 million investment from business partner Glencore while continuing to evaluate its operations.
“That's barely 20% ... of what they would want from the U.S. government,” Wade said. “And I don't see where the U.S. government's gonna give them that. And if they don't, that means the Rochester hub is essentially dead.”
Li-Cycle has raised the possibility of building the hub in phases, but noted in the filings there is uncertainty about how that might impact state permitting.
In a written response to questions, the company responded:
"As an existing investor and partner who knows our business, Glencore’s additional investment is another endorsement of our technology and the development plans for the Rochester Hub. We had a strong level of interest during our financing review process and received and evaluated multiple proposals; we believe expanding our long-term partnership with Glencore provided the best value for all our stakeholders.
"We’ve also taken meaningful steps over the past few months on our comprehensive review, including securing this bridge financing, reducing costs, working with the DOE and progressing the go-forward strategy for the Rochester Hub development plans. We will continue to prioritize the key objectives of advancing mid-term financing for the Rochester Hub, working with the DOE, and completing our analysis for the Rochester Hub go-forward strategy. We also continue to receive great support from our customers, suppliers, the DOE and other stakeholders. We are excited about Glencore’s support and continued collaboration, and the next steps for the company."
Wade likened Li-Cycle's financial situation to someone having a monthly income of $100, monthly bills of $750, and trying to get a loan. The company’s filings showed assets of $149 million, and current liabilities of $156 million.
“It's never a good equation to see that, if nothing changed over the course of the next 12 months, that your debts would outpace just the cash and short-term assets that you have on hand,” Wade said.
