EcoSynthetix (TSE:ECO) reported a 38% drop in third-quarter sales as lower volumes at its two largest customers offset progress in expanding the market for its bio-based products.
Sales fell to $3.6 million in the quarter ended September 30, down $2.2 million from a year earlier. Adjusted EBITDA was $39,000, compared with $200,000 in the prior-year quarter.
CEO Jeff MacDonald said the two strategic accounts—a global pulp producer and an international retailer integrated into wood panel production—together accounted for more than 100% of the year-over-year decline in quarterly sales. He said the company does not expect the market conditions affecting those customers to change immediately.
“The current results are not acceptable to us either,” MacDonald said, adding that EcoSynthetix is focusing on product innovation and commercialization to restore growth.
Customer Pressures Weigh on Sales
MacDonald said the retailer has increased its focus on cost reductions and operational simplicity. Running two glue systems adds complexity and expense, he said, while EcoSynthetix’s DuraBind products can be marginally more expensive and carry changeover costs.
The customer continues to use DuraBind at regular intervals, but at lower volumes. It plans to test an enhanced formulation designed to reduce costs, and has invested in an upgrade to a large production line to better support the bio-based glue system, MacDonald said.
At the pulp customer, an unusually narrow price spread between hardwood and softwood pulp has reduced the economic incentive for enhanced-strength hardwood pulp made using EcoSynthetix’s SurfLock products. MacDonald said the customer continues to manufacture and sell enhanced pulp using biopolymers purchased in late 2025.
MacDonald said both the customer and industry experts expect more typical pricing dynamics to return, but the timing remains uncertain. He cited industry data showing a historical spread of more than $200 per ton.
Expansion Efforts and Trial Activity
EcoSynthetix is developing variations of SurfLock for pulp, tissue, paper and packaging applications, with the first entering commercial trials, MacDonald said. The company has also signed new distribution partners in South America and is pursuing potential relationships in Asia, the United States and Canada.
One distributor helped commercialize SurfLock with a top-five global tissue producer in Europe. During the question-and-answer session, MacDonald said trials began in January and the customer started placing continuous commercial orders for one line in August. Additional lines are under trial, he said.
MacDonald estimated that a tissue mill generally represents an opportunity of about $200,000 to $300,000 for SurfLock, though individual operations vary in size. He said the tissue producer has more than 30 lines overall, without identifying the customer.
Asked by TD analyst Jeff Schacter why more trials had not converted into visible sales, MacDonald said the company has more trial activity than before as a result of adding distributors. He also said unfavorable pulp-market conditions were dampening activity and that initial tissue wins were at low volumes.
In North America, EcoSynthetix has completed three trials at a tissue mill and established a technical proof point, although the program is not yet commercial. MacDonald said he expects a few North American opportunities, particularly in tissue, could become commercial in 2027, while describing the pulp opportunity as less certain.
The company also expects its personal care partner Dow to launch another MaizeCare product next spring, MacDonald said.
Margins and Cash Position
CFO Rob Haire said gross profit, excluding manufacturing depreciation, was 37.8% of sales, up from 34.2% a year earlier, primarily because of a higher average selling price resulting from product mix. Total gross profit fell 36% to $1.1 million as volumes declined.
Selling, general and administrative expenses fell to $1.4 million from $1.8 million, primarily because of lower variable compensation. Research and development expenses declined to $270,000 from $390,000, reflecting lower variable compensation and higher refundable government tax credits.
Cash and term deposits stood at $29.4 million at September 30, compared with $29.6 million at the end of 2025. The company spent $33,000 to purchase and retire 23,000 shares during the quarter, and $766,000 on 329,000 shares year to date.
Haire said the board has committed up to CAD 500,000 for share purchases in the fourth quarter and will review the allocation quarterly. With sales below expectations and the timing of recovery uncertain, he said measured repurchases would preserve capital for development and commercialization.
About EcoSynthetix (TSE:ECO)
EcoSynthetix offers a range of sustainable engineered biopolymers that allow customers to reduce their use of harmful materials, such as formaldehyde and styrene-based chemicals. The Company’s flagship products, DuraBind¿, Surflock¿, Bioform¿ and EcoSphere®, are used to manufacture wood composites, personal care, paper, tissue and packaging products, and enable performance improvements, economic benefits and carbon footprint reduction. The Company is publicly traded on the Toronto Stock Exchange (T:ECO).
