EcoSynthetix Q2 Earnings Call Highlights

Q2 results weakened: Sales fell 9% year over year to CAD 4.5 million, while adjusted EBITDA declined to a CAD 150,000 loss from a CAD 240,000 profit, primarily due to lower volumes in pulp and wood composites.

Pulp-market conditions remain a major headwind: The near-zero softwood-hardwood pulp price spread is reducing customers’ incentive to adopt EcoSynthetix products, although the company is advancing trials and expanding its pipeline, including with a major tissue producer.

Financial flexibility remains solid: EcoSynthetix held CAD 29.1 million in cash and term deposits at June 30 and continued share repurchases, while personal-care volumes normalized and helped support margins.

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.

In the pulp, tissue and packaging market, MacDonald said demand has been constrained by the unusually narrow difference between softwood and hardwood pulp prices. The spread has narrowed to near zero in North America and Asia and remains only modestly positive in Europe. 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.

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 ...