Strong results show Alexium remains resilient in tough market

Despite retailers doing it tough throughout the COVID-19 global pandemic, there are certain suppliers that have managed to not only remain operational, but also thrive in a trying environment.

Alexium International Group (ASX: AJX) has partnered with an industry leading bedding product manufacturer that supplies Serta Simmons Bedding (SSB), the largest manufacturer and distributor of mattresses in North America.

As we reported in a previous Finfeed article, after months of shutdowns the mattress business is now bouncing back in the US. USA Today report that the bedding industry is enjoying a year-over-year sales increase of more than 30%.

Which augurs well for AJX, which as non-executive direct Dr. Paul Stenson explains, "has developed differentiated patented product lines for thermal management and fire-retardant applications backed by an impressive R&D/Analytical and operational capability to deliver cost effective solutions to its customers.”

Today AJX posted strong quarterly results, reflecting its resilience in relevant markets.

“The transition from the Q4 FY2020 to Q1 FY2021 has been a dramatic shift as everyone adjusts to the new normal of COVID-19,” Alexium CEO Bob Brookins says.

“While many markets have been heavily hit by the pandemic, the bedding industry has fared well which is evidenced by the recovery of Alexium cash receipts in this reporting period. This trend is attributed to everyone’s increased time at home due to quarantining protocols and as a result, consumers are upgrading their homeware. All market information we have indicates that this trend is continuing for the foreseeable future.”

Today’s quarterly results speak for themselves, the highlights of which are:

Sales increase following initial impact of COVID-19

• Cash receipts of US$ 1.7m
• Key markets for Alexicool® products show continued consumer demand

Alexium Launches New PhononTM Technology

• Phonon technology dramatically enhances the rate of cooling via a novel cooling mechanism
• New thermal management technology complements the Company’s established line of Alexicool® PCM products

Commercialisation of Alexiflam NF for cotton FR socks

• Marketing of Alexiflam NF application is fully initiated
• Company publishes a full-page ad in BedTimes detailing products value propositions

Margin improvements for key products

• Significant progress made in improvement of margins
• Improvements are driven by optimisation of manufacturing process and integration of cost-effective raw materials

Breaking down the highlights

Sales for the quarter were impressive.

It seems more people are working from the bedroom these days and require comfortable working conditions.

Cash receipts for Q1FY21 totalled US$1.7m which is up US$0.5m on the previous quarter. While this is down on the projected $1.9M, $180K in late payments have since been received.

Sales came from major accounts with mattress and top-of-bed markets.

Brookins expects demand in Q2 to remain strong.

The company is also working to improve efficiencies, which have come through the optimization of raw material usage and processing parameters in manufacturing and the integration of more cost-effective raw materials for key components.

The changes should come into full effect in Q2.

Another major achievement this quarter has been the development of a new-to-the-world cooling technology for consumer products.

New PhononTM technology launched

The PhononTM technology dramatically enhances the rate of cooling over current cooling products with a novel cooling mechanism that operates by continually pulling heat away from the consumer. This patent pending technology is targeted for thermal management applications in textile and foam products.

The total addressable market in the United States for cooling technologies in total mattress cooling systems (TMCS) is estimated at US$60 million, with an additional US$25 million for top-of-bed applications.

There are further markets beyond bedding including in upholstery, medical products, sporting goods, and outdoor apparel/accessories that AJX will target following proper due diligence.

Commercialisation goals

AJX is currently commercialising its Alexiflam® NF product.

Alexiflam® NF (Natural Fibers) is an enhanced flame-retardant solution that has numerous benefits for the treatment of cotton and cellulose-based textiles.

The company has been successful in UL testing of the NF-treated 100% cotton FR sock and has initiated the commercialisation of Alexiflam NF to FR sock manufacturers.

While commercialisation is in its early stages, the company is on track to meet its growth targets.

AJX is also in the throes of finalising the Supply and Evaluation Agreement with a major flame-retardant company for the commercialisation of Alexiflam NF in Q4 FY2020 and has initiated work on this effort for market opportunities in FR cotton applications.

Coordination of materials and market information is underway and an initial production trial has been scheduled.

Finally, AJX has been actively working on the commercialisation of total mattress cooling systems where Alexicool® textile and foam products are integrated throughout.

The first TMCSs were slated for release in early C2021 with production initiated in Q2 FY2021.

COVID-19 has had an impact on this product and the product release has been delayed by 4-6 months.

“Where COVID-19 has had some impact is on new product development efforts. Material availability of textiles and foam is notably poor, and planning is hampered by restrictions related to the pandemic (i.e., travel),” Brookins said.

“The staff are working diligently to support our partners with these issues to minimize delays. Any delays we have encountered are timing related and do not reflect material changes in the opportunities.

“Fortunately, our site in Greer, South Carolina has not had anyone infected with COVID-19 and the protocols for our region enable the staff to do their work. Progress on our initiatives and the commercialisation of our new technologies such as Phonon and Alexiflam NF for FR socks continues in earnest and we all look forward to the Company’s growth in FY2021.”