Shares of Origin Materials slump after pivot to biofuels, Origin 2 project delays
10/08/2023 14:10
Aug 10 (Reuters) - Shares of bio-based plastics firm
Origin Materials ORGN.O fell 56% in premarket trade on
Thursday, after the company announced a pivot into the biofuel
market the previous day and said it was delaying its Origin 2
project.
The Origin 2 project, the company's second commercial-scale
plant, is now divided into two phases, with the first expected
to be completed in 2027 and the second in 2028. It had
previously penciled in 2025 for completion of the project.
Origin also raised the capital expense estimate, with the
first and second phases expected to cost $400 million and $1.2
billion, respectively. The original budget for the entire
project was $1.1 billion.
The company also flagged that the project requires
engineering re-work due to increased cost of labor, materials,
process inputs and metallurgy.
Abandoning bio-based plastics as a focus area, Origin said
it has decided to diversify into advanced biofuels.
"The pivot to biofuels had never before been discussed as a
management priority," said Pavel Molchanov, an analyst at
Raymond James.
"The abrupt pivot into the biofuel market is jarring for
investors who had been accustomed to looking at Origin as a
specialty biomaterials story," added Molchanov.
The West Sacramento, California-based company posted
second-quarter revenue of $6.9 million, missing average
analysts' expectation of $7.03 million, according to data from
Refinitiv.
(Reporting by Arshreet Singh in Bengaluru; Editing by Krishna
Chandra Eluri)
((Arshreet.Singh@thomsonreuters.com; Twitter: https://twitter.com/Arshreets;))