Information on the Target

ETW is a pioneering company co-founded by brothers Tomáš and Petr Louda, specializing in transforming heavily contaminated plastic waste into recycled materials as a substitute for oil. Despite that only 30% of sorted plastics are recycled for further production, ETW focuses on the most contaminated polyethylene waste, which, as a global standard, ends up in landfills or incineration 90% of the time. Their innovative technology allows them to clean and recycle various types of plastic waste, producing a plastic regranulate that can be utilized in the production of stretch films, water tanks, pipes, and even grocery bags.

ETW’s customer base includes notable companies such as the food conglomerate Orkla, which owns brands like Vitana, Hamé, and Otma. They assist Orkla with recycling various waste films, including spice packaging and logistics waste. Additionally, they provide recycling services for Zalando, a German e-commerce platform, where they recycle bubble mailers used for shipping clothing to customers. The market for their services is vast and currently underexplored, especially regarding the use of post-consumer materials as alternatives to petrochemical components in plastic packaging.

Industry Overview in the Target’s Specific Country

The recycling industry in the Czech Republic is growing rapidly in response to increasing environmental awareness and legislative changes aimed at promoting sustainability. With rising concerns about plastic pollution, local businesses and consumers are seeking eco-friendly alternatives, making it an opportune time for companies like ETW. According to recent statistics, around 20 million tons of waste polyethylene need to be processed in Europe annually, indicating a significant demand that ETW is well-positioned to meet.

Moreover, the European Union is pushing for stricter regulations regarding waste management, particularly concerning the mandatory inclusion of recyclates in newly produced plastic packaging by 2030. This shift in legislation is creating a favorable landscape for recycling businesses. The ban on landfilling is forcing companies to find innovative solutions for dealing with waste, further cementing the need for effective recycling methods.

The motivation for recycling initiatives also comes from consumers, particularly the younger generation, who are increasingly interested in the sustainability practices of brands. This shift in consumer sentiment is compelling companies to adopt greener practices, and they face pressure to comply with eco-friendly standards. As a result, demand for recycled materials is expected to soar, creating a lucrative market for recycling firms.

Given these trends and legislative pressures, the Czech Republic's recycling industry is on the brink of significant growth, providing momentum for innovative companies like ETW that are pioneering advancements in recycling technology.

The Rationale Behind the Deal

The investment in ETW, which secured major funding from Prime Fund and SFG Holding, is primarily driven by the company’s unique technological capabilities and the burgeoning demand for sustainable materials. The new funding, amounting to several tens of millions of koruna, is aimed at scaling up production capabilities, allowing ETW to meet the excess demand for recycled materials that currently exceeds its capacity. As an innovative leader in the recycling sector with a strong business model based on circular economy principles, ETW is well-positioned for substantial growth.

The investor’s confidence in ETW is further bolstered by the anticipated increase in the company's turnover, projected to rise by at least 100% in 2023. With a solid customer base already established, alongside the promising future market dynamics surrounding sustainability and recycling, the rationale for investing in ETW appears compelling.

Information About the Investor

Prime Fund and SFG Holding are significant players in the investment landscape, bringing not only financial resources but also strategic expertise to their portfolio companies. Prime Fund comprises two branches: Prime Fund Lab, which focuses on assisting startup projects, and Prime Fund Sicav, which supports the growth of established brands. Through their investment in ETW, Prime Fund aims to leverage growth capital to facilitate the company’s expansion and capacity enhancements.

Dusan Moskaliev and Jan Svoboda from Prime Fund have emphasized a hands-on approach to this investment, indicating their commitment to help ETW manage its growth strategically while allowing the founders to concentrate on product and market development. This depth of operational support significantly enhances the potential success of their investment in ETW.

View of Dealert

The investment in ETW is viewed favorably, as the company is at the forefront of an urgent industrial shift towards sustainability and responsible waste management. With an innovative technology that encompasses a broad range of applications, ETW has the potential to capitalize on a rapidly expanding market that is being driven by legislative change and increasing consumer demand for eco-friendly solutions. This positions the firm as a key player in the recycling landscape, especially given its ability to recycle what few companies can manage.

Furthermore, the proactive step of scaling production facilities aligns perfectly with market expectations and the projected growth in demand for recycled materials. The anticipated turnover exceeding one billion koruna in the next three years demonstrates not only confidence in ETW’s business model but also the strategic vision held by the investors.

Additionally, the investors’ approach to providing ongoing operational support and focusing on financial management enables ETW to concentrate on enhancing its core operations, thereby fostering a conducive environment for innovative advancements. It will further consolidate its market position, which could lead to a competitive edge in a rapidly evolving industry.

In conclusion, the investment in ETW is not only timely but also strategically sound, as the company is tackling one of the pressing challenges of our time. With its commitment to sustainable practices and robust growth outlook, it represents a compelling investment opportunity poised for success in the growing recycling market.

View Original Article