Latest news from the team at Eternali
April 11, 2024
We would like to begin by acknowledging that we have been a bit silent on "Eternali Stories" in recent months. This is not because nothing is happening within our organization, quite the opposite, in fact. We have been extremely busy. However, as spring approaches in Sweden, we would like to give a comprehensive update on the progress of our operations, and we hope to maintain momentum with our news stories moving forward.
Since the capital round we conducted a year ago, much has transpired. We have largely succeeded in achieving what we set out to do, while also venturing into new business areas beyond what was previously communicated. Over the past 12 months, we have worked tirelessly to finalize all operational steps for international deliveries of wood fibre from Brazil. Concurrently, we have initiated work on two new business areas based on requests from potential customers. These two new business areas involve sales of wood chips to the local Brazilian market and sales of European eucalyptus to European customers. This diversification of our operations was a crucial part of the business plan we defined nearly a year ago, aimed at spreading risks across countries and industries while also achieving a base of steady cash flow. We have made significant progress on this plan, hence we have much to update on – not only regarding our core business with larger international deliveries of wood fibre from Brazil but also concerning these new business areas.
International deliveries of eucalyptus from Brazil (Business Area 1)
We have invested considerable time and resources in completing all preparatory work to launch our core business, namely delivering wood fibre from Brazil primarily to European paper and bioenergy producers, i.e., international or transatlantic sales. We can proudly say that we have concluded almost all preparatory work. What remains now for starting deliveries according to existing customer contract is to finalize the crucial FSC-certification (FSC® stands for Forest Stewardship Council® - an international organization promoting environmentally friendly, socially responsible, and economically viable use of the world's forests). FSC-certification is not only a requirement from our end but also a necessity to deliver to all major and reputable actors. The work with this certification body is extensive but needs to be completed before for our first delivery. As a final part of our logistics plan, we are also currently in the midst of final negotiations with sellers to acquire a strategically important land asset adjacent to the river port, Itaninga, crucial for unloading and reloading for all our deliveries to the international port. This is a significant final piece of the puzzle for our logistics and transportation plan, and we hope to conclude this negotiation in April. The goal is for this purchase to be executed without straining our liquidity.
We have also been working on updating our agreement regarding the Coopmar plantations. The updated agreement will provide us with flexibility to purchase trees as stumpage and ultimately choose when we want and can acquire the land. This updated agreement will allow us to save on liquidity during our growth years, which will be capital-intensive.
Our international deliveries are capital-intensive, mainly because we pay for the inventory before selling it. We have secured financing for our first delivery, through Almi loans and external capital injections, but are currently seeking additional injections to create room for working capital in the growth phase for the upcoming larger transatlantic deliveries, and also to draw down the remaining portion of the approved Almi loan.
Local deliveries of wood chips in Brazil (Business Area 2 - NEW)
Brazil is one of the world's largest markets for biomass. This is something we have truly noticed. We have received numerous inquiries about whether we can deliver wood chips in northern Brazil, prompting us to start exploring this market about a year ago. What we noticed early on was that it is a growing and highly interesting market. Our team in Brazil has been working with potential customers to determine the best way to start delivering to those who have shown interest. The initial plan developed entails acquiring an existing wood chipping business for biomass, in a region with many sawmills and other timber industries. Here, we will be able to purchase wood raw material, consisting of sawmill waste and residue, at competitive prices, which we will chip and sell as biomass to nearby buyers’ usage for their energy supply. With this plan, we see significant opportunities to diversify our offering and expand Eternali's market segment over time, contributing significantly to our financial upscaling. This revenue base is also characterized by steady ongoing volumes, making it more predictable.
By acquiring an existing business, we gain a project with positive cash flow from the day of the acquisition. The business has existing ongoing customer contracts with deliveries taking place daily via trucks in the local market. However, if an acquisition would fail we have already have a plan B in place with purchase of own land plot and woodchopper and build our own facility from scratch. Financially, both alternatives represents a relatively small investment for us, which we intend to finance through part of the ongoing capital raising. At the same time, we expect the entire investment to be repaid in about nine months. We see great potential to expand this business area by replicating the concept and investing in land and chipper in suitable locations in northern Brazil.
As can be read from the above update, a lot is happening at Eternali. We are also evolving as an organization every day, challenging each other as colleagues and friends. We are also building new relationships in our industry. Above all, we have worked closely with our partner BSL over the past year, and their extensive experience and vast network in the industry have been crucial to our rapid development.
However, our development plan also entails the need to bring in new external capital to pay both employees and suppliers. With the Almi loan we were granted earlier and simultaneously raising 2.5 million SEK on our own, we are funded to carry out the first deliveries. Our plan with the investments we want to complete - both in the wood chip business and the land asset in the river port - as well as the contracts we want to deliver on, means that we immediately need to raise external capital of at least 5.5 million SEK. This is divided into part of the agreement with Almi for an additional 5 million SEK in loans, which presupposes that we raise 2.5 million SEK from our own resources and in addition to these 2.5 million SEK, we want to raise an additional 3 million SEK to finance the acquisition of the wood chip business, which we believe strongly in. When these 5.5 million SEK have been raised (which gives us 10.5 million SEK in cash including the Almi loan), we will be able to implement our plan, which can lead to a significant increase in the value of work performed and our company.
We have a strong belief that the plan we have is the one that can now take us beyond the threshold required by the industry to prove ourselves and thereby become a natural speaking partner for major players in the industry (who have indeed shown great interest in our product and business). We do feel we are on the right path, and we are eagerly looking forward to the next chapter of Eternali.
/The team at Eternali