Components from the facility on display during a tour of the Li-Cycle battery recycling facility in Kingston, Ontario on Friday May 26, 2023.Lars Hagberg/The Globe and Mail
Li-Cycle Holdings Corp.’s LICY-N stock has hit a new record low after the company announced it is cutting jobs, pausing operations at its facility in Kingston, Ont., and halting expansion initiatives in Europe, as it looks for new financing arrangements in response to falling cash levels.
The Toronto-based battery recycling company’s share price plunged 55 per cent on Tuesday, falling to US$0.66 in New York. On Monday, Li-Cycle reported its third-quarter financial results, which showed a steeper loss and rising operating expenses.
The stock’s decline is a particularly stark example within the struggling cleantech and renewables sector. Such companies are positioned to benefit from the transition to cleaner sources of energy – in Li-Cycle’s case, battery electric vehicles – but have been floundering over the past year, as they deal with the ripple effects of high borrowing costs and construction delays.
Many of Li-Cycle’s current challenges stem from cost overruns related to a new plant located in Rochester, N.Y., where batteries will be recycled into component minerals, including cobalt and nickel sulphates.
In October, the company paused construction work on the project – known as a “hub,” which is separate from “spokes” that handle less refined recycling duties elsewhere. It now expects that the budget for this hub will be between US$850-million and US$1-billion, up at least 50 per cent from its previous estimate of US$560-million.
Apart from pausing operations at its Kingston plant, the company has put off construction of what was supposed to be a more modern facility to replace the existing, older-generation one.
For the third quarter, ended Sept. 30, the company reported a wider loss of US$130.5-million, compared with a loss of US$20.6-million in the same period last year. Operating expenses increased to US$144.8-million, up from US$41.9-million.
“The company is undergoing a comprehensive review for bringing on additional spoke and hub capacity in the near term. Until the go-forward strategy work is completed, the company will be slowing operations at its North American spokes,” said Ajay Kochhar, chief executive officer of Li-Cycling, during a call with analysts on Monday evening.
Cash holdings declined to US$137.4-million at the end of the quarter, down from US$517.9-million at the end of December. By Nov. 10, these holdings had declined further, to about US$100-million, and the company announced unspecified job cuts during its quarterly call.
In an interview, Mr. Kochhar added that Li-Cycle’s existing customer base – mostly automakers – has been supportive of the company’s “speed bump” and described these relationships as an “underpinning fundamental.”
“We’ll curtail a lot of the extra non-essential spend,” he said. “But as long as we have that, we can work out the path forward.”
Still, the retrenchment is a setback to the company’s ambitions of positioning itself as a leading global cleantech player at a time when recycling needs are rising. Strong growth in the production of battery electric vehicles should lead to rising recycling demands as these batteries age.
Li-Cycle went public two years ago through a special purpose acquisition company (SPAC) and has attracted combined financial backing of US$350-million from Koch Strategic Platforms, LG Chem Ltd., LG Energy Solution Ltd. and Glencore PLC. It has also received a US$375-million conditional loan from the U.S. Department of Energy.
It has now engaged investment bank Moelis & Company LLC to help evaluate financing and strategic alternatives.
Li-Cycle’s shares are down 95 per cent from a high above US$14 in 2021, before soaring inflation and rising interest rates weighed on the valuations of many promising growth companies.
The stock’s downward direction is not unusual, though. The iShares Global Clean Energy ETF, an exchange-traded fund that gives investors one-stop access to companies such as First Solar Inc. and wind-energy developer Orsted A/S, is down more than 30 per cent this year.
Plug Power Inc. issued a going concern warning last week, as the hydrogen producer and fuel-cell maker said that it needed additional cash to stay alive. The shares are down 67 per cent this year.
With a report from Adam Radwanski
David Berman