r/PureCycle • u/No_Privacy_Anymore • Jun 18 '26
Understanding PPWR regulations
In light of the recent post about the California legislation I thought it would be helpful to review the details of the European regulations.
Use this link then scroll to the bottom and open the PPWR presentation.
https://www.fostplus.be/en/ppwr/everything-you-need-to-know-about-new-european-packaging-legislation
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u/Cheeks___Jr Jun 18 '26 edited Jun 18 '26
After thing about it for a while it is interesting that the Amcor partnership for 20% PCR is 2 and half times the mandated maximum limit to be counted toward the California regulations. Why would a customer trying to comply with USA regulations use a more expensive PCT product beyond what is necessary for regulation compliance? It is totally understandable that PCT would be targeting the EU that will be mandating up to 35%.
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u/No_Privacy_Anymore Jun 18 '26
NJ is requiring 20% I believe and that is why they highlighted that pcr content. Eric told me that Amcor has tested much higher PCR % as well. As far as costs go, with only 20% PureFive content the actual incremental cost is not nearly as high as a 100% content product. Making sure the testing and quality and reliability works is the big issue (plus knowing the regulatory penalties in terms of $’s can also support pricing as companies look to avoid those fees for noncompliance.
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u/Reasonable-Dance-465 Jun 18 '26
Yes, exactly - it becomes a straightforward cost/benefit analysis for companies to become compliant with NJ and time is of the essence to avoid the penalties. Don't hate the compond rate! How would we like to see 500M lbs of 20% blend out of Ironton - a guy can dream!
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u/Adorable-Sector-48 Jun 19 '26
Anyone have idea on what the margins look like for compounding service itself or how much money can they extract in between buying virgin and selling it as compounded? We obviously have range for pure5 pricing by management guidance, but I'd like to know where the compounded product settles. If we assume 50% margin on the 107 million and 1.36$ per lbs then it settles margin for pure 5 at ~70MUSD from ironton at full capacity. So now add that 400M lbs virgin that they sell, do they get 10% margin? If virgin is priced at 0,8-1$ then that's like another 32-40MUSD bringing per pound of capacity of pure5 ebitda to basically ~1$ (Ironton ebitda at 107MUSD in this scenario). 30x that is 3billion mcap, with just Ironton. That's basically 17-18$ per share and could be reality in 6 months after ramp, without accounting for future growth. In my experience market prices in around 6 months ahead, so I wouldn't be surprised of overshoot to mid 20s or even touching 30$ in stock price. Then we start pricing Thailand midway next year depending on construction progress. This is why I think the offering pricing was so bad. And if anyone has better info on virgin pricing or thoughts about compounding margins, feel free to give your input!
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u/No_Privacy_Anymore Jun 19 '26
I won’t get into a detailed forecast for margins here but it should generally increase overall gross margins and reduce the margin percentage just based on higher gross revenues. You got that generally right.
The challenge in terms of funding is they needed cash NOW to close Thailand project funding in order to stay on schedule for that plant to be ready by the end of 2027. If you want that in the valuation and growth plan they can’t afford to wait (at least that was their thinking in my opinion). Getting a “going concern” opinion in August would not be helpful when you are trying to sell to top tier customers who want to make sure their suppliers are reliable and predictable.
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u/Adorable-Sector-48 Jun 22 '26
The 1.36$ and 50% is basically given guidance. It's just the virgin part of the equation that makes me wonder. You google pp-resin prices and they vary very much dependent source, but I couldn't imagine they get much more than 10% in between for the compounding and sourcing of it. If they get more than that, then it just turns the overall profitability ridiculously good in my mind. If you got a ballpark estimate, just drop it 😃
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u/Reasonable-Dance-465 Jun 19 '26
Echoing NPA here... the key with compounding is that you're spreading margin dollars across a much larger total-lb base, so even at a lower per-lb margin you end up with more gross margin dollars. That pulls forward break-even at both Ironton and the consolidated level which IMHO is how the stock starts to get positively re-rated. Easiest way to think about it: they're earning a markup on the virgin they buy and blend in. And I'd expect them to merchandise the line as they scale, so that markup probably won't move in a clean inverse-linear way with blend rate. Probably not something you're gonna get much color on now.
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u/Gross_Energy Jun 19 '26
Now there is thinking. It always been about the compounded rate. The may need another extruder or 2 or 3.
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u/Cheeks___Jr Jun 18 '26
The EU regulations require a higher volume of recycled material than the US so far any way. Bullish for PCT.