Alexium International Group (ASX:AJX, OTCQX:AXXIY) could further increase sales of its fire retardant (FR) products under an extended agreement with Pakistan textile trader iTextile to co-brand joint products for the workwear market.
This market is estimated to be worth over $500 million in Europe alone at the wholesale garment level.
Co-branding will also build Alexium’s brand image given that iTextiles is a leading textile trading company in Pakistan with gross annual revenues in excess of $13 billion.
The agreement follows strong initial sales for iTextiles of Alexium’s fire retardant (FR) products in the Middle East and Pakistan under the existing distribution agreement.
“This further validates Alexium’s FR products and will lead to a recognisable brand in Europe, the Middle East and Pakistan synonymous with quality, performance, and a reputation for being environmentally friendly,” chief executive officer Nicholas Clark said.
“This agreement secures our future relationship with iTextiles, a company that has significant ties in the markets we are pursuing.”
iTextiles chief executive officer Mujeebullah Khan said the company was excited to be part of the alliance to co-brand and promote future generations of sustainable, durable, comfortable and affordable FR fabrics.
Co-Branding
The new fabrics will be used primarily in the workwear market, which in Europe is estimated at over $500 million at the wholesale garment level.
Currently both Alexium and iTextile are finalising the co-brand name, developing market materials and identifying initial FR treated products.
The two companies will also jointly exhibit at textile tradeshows that will be attended by industry leaders across the globe.
The new branded products will be distributed throughout Europe and the Middle East.
Co-branding will also enable Alexium to build its brand image in conjunction with an established and successful leader in the textile field with strong relationships to mills and finishing companies.
Recent Activity
Alexium recently received an order of its FR chemistry from a major U.S. automotive interiors group for a commercial production run at their facilities.
This group is one of the world’s largest providers of automotive body cloth, whose customers include Ford, GM, Chrysler, Nissan, Honda, Toyota and Volkswagen, giving it a 35% market share in the U.S. alone.
The company is also continuing development work in the area of FR additives for polymers and plastics for industrial use including building materials and bromine FR replacement technologies.
It recently received a US$250,000 grant under the South Carolina Israel R&D Program for a joint project in the FR area with Israel Chemicals Ltd.
Israel Chemicals is a world leading producer of elemental bromine and a major player in the FR industry, both through its manufacture and sale of bromine-based FRs and its world-leading production of organophosphorus-based fire retardants.
Its 2012 sales totalled $6.5 billion, half of which were derived from products manufactured outside Israel.
The U.S. Air Force has conducted trials of its Cleanshell CB® treatment using live nerve agents that produced outstanding results for chemical protection.
Field trials by the U.S. Marines also provided evidence that Alexium’s FR Nycolon treatment has additional quick drying benefits while the company has demonstrated Nycolon can withstand 50 commercial launderings for the defence sector.
Alexium has also entered into more chemical toll production agreements in the U.S. to meet future customer needs with an ability to vary production size to meet individual customer timetables.
UK partner Euroflam has completed a successful large-scale run of its chemistry and is currently sampling fabric (treated with both Polytron™ and Omnitron™) to their key customers.
Analysis
With strong initial sales already, Proactive Investors believes that Alexium’s agreement with iTextiles to co-brand joint products will further improved sales of its FR products.
Highlighting the potential market size, the targeted workwear market is worth over $500 million in Europe alone.
Co-branding with an established company like iTextiles, which has gross annual revenues of $13 billion, will also increase brand recognition for Alexium and drive further sales of its products to other partners.
In the near-term, Alexium is focused on extending its environmentally-friendly FR solutions, which represent the largest commercial opportunity, to address market needs and generate revenue.
To this end, it has made a dedicated approach in the commercial sector in home furnishing upholsteries and the automotive market while continuing its focus on workwear.
Proactive Investors has initiated a share price target for Alexium of $0.25 to $0.30 based on momentum from further expected sales revenues over the next 9-12 months.
Share price kickers ahead include announcing further commercial relationships in the months ahead.
Alexium had $4.2 million in cash at hand as at 30 June 2014.
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