Q&A - Woodly's answers to investors' questions
1. Which countries with FSC and PEFC certified forests will be the primary wood suppliers?
Forestry companies, whose pulp products we use in Woodly® material, are responsible for procuring wood. At the moment, we have confirmation from our suppliers about forest certifications – FSC and PEFC - and information that it is softwood cellulose and from, for example, forests in Northern America. However, we currently do not have accurate lot-specific information on which country the wood purchased to produce cellulose comes from at any given time. Instead, we require that the suppliers’ entire supply chain is FSC and PEFC certified, and that all procurement and production comply with the requirements of the FSC and PEFC standards.
2. Will forest or leftover wood be used?
Currently, FSC- and PEFC-certified softwood cellulose is used in the production of Woodly® material. In addition, we are exploring the possibilities of using, for example, industrial or agricultural side streams and waste wood in the production of the material in the future.
3. What is the quality requirement for the wood used => which assortment is used?
The cellulose we use is one significant factor that determines the properties of the Woodly® material. On the other hand, the quality of cellulose is affected by its source and, for example, the quality of the source wood. As part of the mapping of future raw material flows, we are also researching the connections between cellulose sources and the properties of Woodly® material.
4. Which tree species can be used?
Currently, our main source of cellulose is softwood. On the other hand, besides trees, cellulose is also available in huge quantities from plant-derived by-streams. As part of
research and development work, we evaluate the suitability of different wood species and other cellulose sources as a future raw material base.
3.5.2023
Q&A - Woodly's answers to investors' questions
1. How is the Woodly® material different from regular plastic? Does it degrade faster and is it much more expensive?
Fossil plastic is made from completely non-renewable raw materials, causing carbon dioxide emissions. The main raw material of Woodly® material is softwood cellulose and the material is carbon neutral (based on life cycle assessment in accordance with ISO 14040 and ISO 14044 standards).
Woodly® material is designed to be reused and recycled in mechanical and/or chemical plastic recycling, and it is not biodegradable. The sustainable use of renewable natural resources – such as wood cellulose – requires that the used resources can be kept in beneficial use and circulation for as long as possible. The importance of this matter is emphasized when a larger amount of material is produced. That's why we have chosen recycling instead of biodegradation. In addition, recyclability gives Woodly the opportunity to develop and offer a wider product portfolio in the future to meet the growing and changing needs of the market.
Currently, the price of Woodly® material is about 4–5 times that of fossil plastic. The price difference is primarily because the Woodly® material is new and the production volumes are still very low compared to fossil plastic. In addition, fully outsourced production increases the price of the material when there are several operators in the production chain.
In the next phase, our goal is to focus on selling Woodly® material for use in end products where the price difference of the material is not significant in relation to the added value the material brings in the end product. For example, the additional price, for a packaging solution intended for fresh products for end customers, is a few cents only. In addition, when food waste can be reduced with the help of a packaging solution, the cost saving is more than the additional price of the material.
2. How does the product differ from PAPTIC? Is the market the same or different? Is it plastic or wood?
We can comment on Paptic's technology based on publicly available information only. Paptic says on its website that it is a plastic-free material that is produced with a paper machine. Paptic material is not transparent. The Woodly® material, on the other hand, is a transparent and new type of plastic, from which end products are made using already existing production equipment in the plastics industry. Paptic is recycled as paper, and Woodly® is recycled in the plastic fraction.
According to this, in our opinion, Woodly® and Paptic are different and complementary materials in terms of their properties, where wood cellulose is used in both. We currently do not sell products that compete with Paptic. It is also public knowledge that the companies have the same owners.
3. How long does it take for Woodyl® material to degrade?
Based on the composition of the Woodly® material, we estimate that it degrades significantly faster in nature than current high-density plastics. However, Woodly® material is not certified as a compostable or biodegradable material, and we do not market it as such.
Synthetic and modified materials do not belong to nature, and in our opinion, the best way to prevent littering is to improve recycling. In a circular economy, materials have value as new raw materials instead of being seen as waste or trash. Woodly® material is designed to be recycled in mechanical and/or chemical plastic recycling. However, if the products made of Woodly® material end up in mixed waste to be incinerated, its incineration produces up to 70% less fossil carbon dioxide emissions than a corresponding amount of fossil plastics.
4. What happens at the end of the lifecycle of the ‚plastic‘, is it biodegradable or dissolves otherwise? As this is probably the biggest issue of the plastics industry?
Packaging and products made of Woodly® material should be sorted according to local guidelines for plastic recycling, and it is designed to be recycled in mechanical and/or chemical plastic recycling. However, if the products made from Woodly® material end up in mixed waste to be incinerated, the burning of Woodly® produces up to 70% less fossil carbon dioxide emissions than the equivalent amount of fossil plastics.
The recyclability of Woodly® material with standard equipment for mechanical plastic recycling has been studied and tested by Next Generation Recycling Machines GmbH (NGR), as an example. Information on the subject can be found here.
5. Jaakko Kaminen, CEO of Woodly, states, "Our vision is to become the world's most valuable material brand by 2035, to achieve a 15% share of the global plastics market." Since Woodly plastics are made of wood-based and carbon neutral plastics - Given the vision goal, isn't the intervention in forests immense to get the wood-based raw materials with which to make the plastic?
Reducing carbon dioxide emissions requires switching to renewable resources and minimizing the use of fossil sources. However, the challenge is that humanity is already currently using more renewable natural resources than the Earth can produce. This is why replacing fossil raw materials with renewable raw materials alone is not enough, but it is essential to invest in the circular economy – the reuse and recycling of raw materials – because otherwise, all natural resources will run out. Woodly® material is designed to support the circular economy. In addition, we have chosen cellulose as the main raw material for the material, which is the most common natural polymer. We currently use wood cellulose, but there are also other sources of cellulose in nature, such as various plants. So, our view is that achieving a 15 % market share of the plastic market can be done sustainably if the material can be kept in use for a long time and recycled effectively.
6. The company presentation states, "The company does not manufacture any material grades or end products itself. All manufacturing is done through industry partners. The company focuses on developing materials technology and supporting the sales and marketing functions of its partners." Is it true that Woodly only goes as far as manufacturing plastic pellets in granular form along the value chain?
Correct. Our product is Woodly® – a granulate form plastic material, which is used as a raw material in the plastics industry. The production of Woodly®-granulate is also outsourced.
7. While there is a patent on the technology, how does Woodly assess the risk of similar plastic products coming to market?
We believe that several new and different materials will come to the market, which aim to replace fossil plastic in various applications. We see this as a very good thing because the market is huge and one material cannot replace all fossil plastics in the world.
However, Woodly® material is suitable for many different manufacturing techniques in the plastic industry, which is why its market potential is exceptionally high. In order to protect the technology, we have invested in patenting and have already received a grant for more than twenty patents from seven different patent families. In addition, we invest in building the Woodly® brand, which is protected by trademarks. Strengthening the IP portfolio is part of our strategy in the future as well, and the company has more than 40 active patent applications.
8. The market presentation states, "Many companies are developing sustainable alternatives to fossil-based plastics. However, none of them have yet succeeded in gaining a significant market share." Why should Woodly succeed better than its competitors?
We believe in the potential of Woodly® material as a breakthrough technology, because it is not a substitute for plastic, but a new type of plastic from which the plastics industry can produce various end products with existing production equipment. In addition, the Woodly® material has very versatile properties and is suitable for use with several different manufacturing techniques. From the point of view of sustainability, it is essential that the raw material is based on cellulose, which is the most common natural polymer in the world, and that the material can be recycled and reused.
9. In the financing purpose, it states, "Due to the current stage of development of Woodly®, investments ... in research and development ... are the key points for growth ... The planned allocation of funds is as follows: ... Research and development 39%." Is the existing Woodly plastic product not yet developed to the point that such a high proportion of the planned use of funds is allocated to R&D?
We have developed and commercialized the Woodly® material, of which the single most prominent commercial use is a heat-sealed bag for sandwiches. We have also tested the suitability of our material for other different applications with several of our partners. These tests have shown that the Woodly® material is versatile.
Today, the plastics industry and applications that utilize plastics use highly optimized solutions to guarantee production efficiency, among other things. Therefore, it can be seen that in the future, as the number of applications utilizing Woodly® material increases, the demand for various processing and material properties will also increase. The development and optimization of different Woodly® qualities will also require significant investment from us in the future.
In addition, we will direct our R&D investment in the future to expand the raw material base of the Woodly® material, for example from the current wood cellulose to other widely available cellulose sources.
10. How could I theoretically disinvest my purchased shares in Woodly Oy?
As described in the information memorandum the company shares are not publicly or multilaterally traded on any marketplace, so there is no active or liquid secondary market for the shares and the transferability of shares is limited by the consent clause in the Articles of Association. In the info memo, the listed exit scenarios are 1) IPO, 2) trade sale and 3) the company is acquired by a VC or PE. If one of those exit scenarios would happen it could offer the possibility to disinvest the shares.
