Loop Industries (LOOP)

Company website 2020 Financial Report Stock Analysis

60^%

Less Global Warming Potential

Loop’s plastic resin will have 60% less global warming potential compared to virgin products

80^%

Less Water

Loop’s PET will also require 80% less water than virgin PET

150000

Metric Tonnes of CO2

The amount of emissions that Loop’s facilities will be able to avoid annually

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The Path to Drawdown: Industrial Recycling

According to Project Drawdown, recycling is the recovery of recyclable post-consumer waste (like metals, plastic, glass, etc.) from the industrial and residential sectors of the economy. Recycling replaces the dumping of recyclable materials in landfills and reduces the need to use new material for production.

Waste from manufacturing, construction, restaurants, office buildings, schools and mines comprises about half of all waste. All that is grouped together as “industrial and commercial waste.” Much of it, though not all, can be recycled, and a variety of approaches can enhance recycling rates.

Some of these approaches are to create marketplaces for secondary materials to facilitate the exchange of recyclable and reusable goods, to innovate conversion technologies to make more materials recyclable, and to adopt circular business models to recapture “waste” as a valuable resource.

Recycling industrial and commercial material can reduce GHG emissions because producing new products from recovered materials often saves energy. As one example, forging recycled aluminum products uses 95% less energy than creating them from virgin materials.

Project Drawdown estimates that, by 2050, a serious commitment to recycling can help avoid 6.02 gigatons of GHG emissions. To get there, recycling practices need to be adopted much more widely that they are now:

<::marker> In 2014, 27% of recyclable waste was recycled
<::marker> By 2050, 68% of recyclable materials should be recycled
<::marker> That’s 2.6% CAGR between 2014 and 2050

If we can achieve this 68% recycling scenario, we can avoid up to 6.02 gigatons of GHG emissions.

About

Loop Industries (stock ticker: LOOP) is a technology company that recycles no- and low-value plastics to create high-quality plastics suitable for use in food packaging and polyester fiber. Headquartered in Quebec, Canada, their manufacturing facilities in Quebec, South Carolina, and Europe are still in the planning or construction phase.

LOOP's Role in Drawdown

Loop owns patented and proprietary technology that depolymerizes no and low-value waste PET plastic and polyester fiber. These include plastic bottles and packaging, carpet and polyester textile of any color, and even ocean plastics that have been degraded by the sun and salt.

Loop depolymerizes these plastics to its base building blocks, which are called monomers. The monomers are then filtered, purified and polymerized to create virgin-quality Loop-branded PET plastic resin and polyester fiber suitable to be used in good-grade packaging. This depolymerization technology uses low heat and no added pressure. What’s more, this process of breaking down the PET polymers, purifying, and recombining and resulting monomers can be repeated infinitely with no degradation of purity or quality.

Loop sells their PET plastic resin and polyester fiber to consumer goods companies, which helps them meet their sustainability objectives.

Loop’s patented technology has been demonstrated in their Terrebonne, Quebec. Loop and its partner companies are in the planning and construction stages of additional manufacturing facilities in Quebec, Europe, and South Carolina to begin producing Loop’s PET resin at scale.

As of mid-2021, Loop has not generated revenue.

LOOP: What We Like

First and foremost, we’re excited about Loop’s commitment to a circular economy, primarily through its business model of using their technology to manufacture infinitely recyclable plastic resin and polyester fibers, but also signaled through its adherence to flagship initiatives for sustainability:

<::marker> Loop industries is a signatory of the Ellen MacArthur Foundation’s New Plastics Economy Global Commitment since 2018 and is committed to increase the available supply of PET plastic and polyester fiber made from 100% recycled content for use by consumer goods companies by 2025.
<::marker> Loop adheres to the United Nations Sustainable Development Goals

On a more practical level, we commend Loop for their strategic partnerships with various firms to accelerate the construction of their facilities and the innovation and commercialization process:

<::marker> Suez Group and Loop (p. 9) announced their partnership in September 2020 to build the first Loop manufacturing facility in Europe. They’re targeting final site selection in the summer of 2021
<::marker> Also in September 2020, Loop entered into a know-how and engineering agreement with Chemtext Global Corporation and INVISTA (p. 8). These agreements will leverage Chemtext’s PET resin and polyester fiber manufacturing know-how and INVISTA’s expertise in the polymerization of dimethyl terephthalate (DMT) and Monoethylene Glycol (MEG), both monomers used in the production of PET

Loop also has an engineering partner, Worley (p. 8), a leading global engineering, procurement and construction company. Through this partnership Loop is progressing on the engineering of their full-scale commercial facilities.

What We Want to See Improve

Achieve Profitability

Loop has incurred net losses (p. 13) and has never generated revenue since its founding in 2010. They have so far relied on sales of common stock and debt to finance their R&D and operations. We are eager for Loop and their partners to finish building their facilities, begin expanding their sales and achieve profitability as soon as possible.

Resolve Legal Proceedings

In 2020 and 2021, Loop has been the defendant in several lawsuits (p. 22-23). In most of these lawsuits, the plaintiffs alleged that Loop has made false claims or withheld material adverse facts about their business, operations, and prospects. Fortunately, an independent audit in December 2020 absolved Loop of some of these accusations. While lawsuits can be largely outside of Loop's control, we encourage Loop to maintain their transparency to investors to avoid any miscommunication, and to resolve any future legal disputes swiftly.

Track Sustainability Metrics

Aside from several headline statistics about the sustainability of Loop’s planned facility and proprietary technology, Loop doesn’t report the sustainability metrics of their R&D and manufacturing operations. Once they have sufficient financial and personnel resources, we urge Loop to report key sustainability metrics like direct and indirect GHG emissions and energy usage, which can be used as springboard for future emissions reductions commitments.

Related Metal Recycling Stocks in the Climate Index

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Allocated	Company	Description
1.02%	LKQ Corp (LKQ)	LKQ recycles thousands of used vehicles into salable parts, tires, fluids and oil - a circular economy model that reduces virgin material use and emissions
0.52%	IAA, Inc. (IAA)	IAA provides a digital marketplace where total-loss, damaged and low-value cars are bought and sold. It’s a valuable industrial recycling service
0.24%	Commercial Metals (CMC)	CMC buys scrap steel and other metals and recycles them into metal products for construction. This reduces virgin material use, energy use and emissions
0.10%	PureCycle Technologies, Inc. (PCT)	PureCycle sells technology that turns polypropylene into virgin-like plastic material. Industrial recycling conserves resources and cuts emissions
0.09%	Harsco Corporation (HSC)	Harsco recycles industrial materials from the metal, railways and energy sectors, which expands the circular economy and reduces virgin materials use
0.05%	Loop Industries (LOOP)	Loop recycles low-value plastics to create high-quality plastics - a circular economy business that reduces virgin material use and emissions
0.02%	Aqua Metals (AQMS)	Aqua Metals turns used lead acid batteries into pure lead and plastic chips. Now that’s a circular economy model