EcoSynthetix (TSE:ECO) reported lower second-quarter sales and an adjusted EBITDA loss as softness in its pulp and wood-composites markets affected demand from key strategic accounts.
Sales for the quarter ended June 30 totaled CAD 4.5 million, down 9% from the prior-year period. Adjusted EBITDA was a loss of CAD 150,000, compared with positive adjusted EBITDA of CAD 240,000 a year earlier. Chief Executive Officer Jeff MacDonald said the results reflected continued softness seen in the first quarter, driven by near-term uncertainty involving major customer relationships in pulp and wood composites.
Pulp Pricing Spread Weighs on Demand
Historically, softwood pulp has traded at a CAD 200 to CAD 300 premium to hardwood pulp, a gap that supports the economics of EcoSynthetix’s strength-aid products. A key customer, described as a top-10 global pulp producer, uses the company’s products in an enhanced hardwood pulp designed to provide performance comparable to longer-fiber softwood pulp.
However, the current environment has reduced incentives for end customers to switch because softwood pulp is available at depressed prices. MacDonald said independent reports indicate that 40% of merchant softwood pulp capacity is being sold below cash cost, which he characterized as unsustainable.
The company’s pulp customer has nevertheless expanded its prospect pipeline by a reported 20% during 2026 and has experienced a high technical success rate in trials, according to MacDonald. He said the customer remains engaged with EcoSynthetix across purchasing, commercial and research and development teams.
In response to an analyst question, MacDonald said the company has not received a firm forecast for when the hardwood-softwood spread will normalize. Historically, the spread can remain at current levels for six to 12 months, he said. EcoSynthetix is also advancing programs with three additional pulp producers, although he said some prospective customers have moved more slowly.
Tissue Trials Advance, Including Major Producer
EcoSynthetix said it conducted an extended trial during the quarter with a top-five global tissue producer, and the trial continued successfully into the third quarter. The initial tissue line represents an estimated CAD 200,000 annual opportunity, and the company has begun work on two additional lines with the customer.
MacDonald said the tissue producer operates about 20 manufacturing facilities and more than 30 tissue lines. The company sees the account as a potential flagship customer in the industry.
EcoSynthetix also said it expanded its pipeline among North American tissue producers during the quarter. The company has historically made more progress with European tissue producers, but MacDonald said gaining traction in North America represents an important development.
While the hardwood-softwood pulp gap remains a factor in tissue, MacDonald said the company’s tissue offering has a broader value proposition, including enabling producers to substitute hardwood for softwood within their mills. He also cited potential energy savings, as stronger fiber structures can reduce the refining work needed in tissue production.
MacDonald said momentum in Europe has remained relatively strong because a price gap between hardwood and softwood pulp still exists there. In North America, where the gap is near zero, he said customers may have less immediate incentive to make changes, though the company has seen interest based on other benefits.
Wood-Composites Customer Reduces Usage
In wood composites, EcoSynthetix said a key international retail customer that is backward integrated into wood-panel production has shifted its near-term priorities toward lower-cost products and manufacturing simplification amid affordability concerns.
The customer operates both conventional petroleum-based formaldehyde glue systems and EcoSynthetix’s biopolymer systems. MacDonald said the customer views the cost of operating two systems as a source of complexity and has reduced the volume of EcoSynthetix biopolymer it uses.
Chief Financial Officer Rob Haire added that the account also had a mill-maintenance shutdown during the quarter and is prioritizing manufacturing efficiency amid softer end-market demand, reducing demand for the company’s DuraBind product.
MacDonald said the customer remains committed to sustainability goals and continues to work with EcoSynthetix on development projects intended to create a more durable economic advantage over conventional adhesives. He described the situation as one of timing and reprioritization rather than product competitiveness.
Financial Details and Cash Position
Haire said lower volumes were the primary reason for the CAD 460,000 year-over-year decline in sales. Gross profit, net of manufacturing depreciation, improved to 34% of sales from 33% a year earlier, primarily due to lower manufacturing costs.
- SG&A expenses rose to CAD 1.7 million from CAD 1.2 million, reflecting a CAD 200,000 change in foreign-exchange gains and losses, CAD 100,000 in higher salaries and benefits, and CAD 100,000 in higher repairs and maintenance.
- R&D expense declined to CAD 340,000 from CAD 430,000, primarily related to refundable SR&ED tax credits recognized during the period.
- Cash and term deposits totaled CAD 29.1 million at June 30, compared with CAD 29.6 million at Dec. 31, 2025.
- During the quarter, the company spent CAD 150,000 under its normal course issuer bid to repurchase and retire 61,500 shares. Year to date, it spent CAD 730,000 to repurchase and retire 307,000 shares.
In personal care, MacDonald said Dow began the year slowly, which EcoSynthetix attributed to inventory stocking at the end of 2025, but volumes returned to normalized levels in the second quarter. He said Dow remains bullish on 2026 growth following growth in 2025. Although personal-care volumes are modest relative to the company’s other markets, MacDonald said the segment’s higher margins supported bottom-line resilience during the quarter.
MacDonald said EcoSynthetix remains focused on expanding its pipeline through customer trials, development programs and distribution partners. He acknowledged the current headwinds but said the company has the team, capital and strategy to manage through the period.
About EcoSynthetix (TSE:ECO)
EcoSynthetix Inc is a renewable chemicals company. It is engaged in the development and commercialization of ecologically friendly bio-based technologies as replacement solutions for synthetic, petrochemical-based adhesives and other related products. The company operates in one reportable segment and generates revenue primarily from its biopolymer nanosphere technology platform. Its products include EcoSphere biolatex and DuraBindTM biopolymers. EcoSphere biolatex binders are used by manufacturers within the coated paper and paperboard industry, whereas the DuraBindTM is used in the production of wood composite panels.
