Danimer Scientific, Inc. (DNMR) Q4 2021 Earnings Call Transcript

Danimer Scientific, Inc.  (NYSE: DNMR) Q4 2021 earnings call dated Feb. 28, 2022

Corporate Participants:

Russ Zukowski — Vice President, Corporate Finance

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

John Dowdy III — Chief Financial Officer

Michael A. Hajost — Chief Financial Officer Elect

Analysts:

Laurence Alexander — Jefferies LLC — Analyst

Jon Tanwanteng — CJS Securities — Analyst

Thomas Boyes — Cowen — Analyst

Presentation:

Operator

Greetings, and welcome to Danimer Scientific Fourth quarter and Full-Year 2021 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Russ Zukowski, Vice President of Corporate Finance. Thank you. You may begin.

Russ Zukowski — Vice President, Corporate Finance

Thank you, operator, and thank you, everyone, for joining us today for our fourth quarter and full-year 2021 Earnings Call. Hosting the call today are, Danimer’s CEO, Steve Croskrey and CFO, Jad Dowdy; Mike Hajost will also be joining us for Q&A. During our discussion today, we will be referring to our earnings presentation which is available on the Investor Relations section of our website at danimerscientific.com.

On Slide 2, please note that we may discuss forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include among other things, future results of operations, capacity, production and demand levels that could differ in a material way from those expressed or implied in the forward-looking statements. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as required by law.

Today’s presentation also includes references to non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures can be found in the earnings presentation.

I will now turn the call over to Steve.

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Thank you, Russ. Good afternoon, everyone. Thanks for joining. I am proud of the focused execution by our team and our many accomplishments during 2021 as we conclude our first year as a public company. In 2021, we progressed further on our journey to profitably deliver leading biodegradable packaging solutions and products as we’ve dramatically increased customer deliveries to generate record fourth quarter and full-year 2021 revenue.

As we look back at our achievements for the year, I would like to note that every initiative we have undertaken, as well as all of our current initiatives aligns with our strategic priorities. As shown on Slide 3, these priorities drive us to; Number one, expand our capacity to achieve substantial economies of scale, which is not just about increasing organic production capacity in Kentucky, Bainbridge and beyond, but we are also evaluating third-party manufacturing and licensing agreements, reserve our available capital for key strategic allocations. A good example is the potential partnership between us and Kemira developing solutions for aqueous coatings that our customers clearly want without us having to invest all the capital needed to drive this growth initiative. Another example of executing against this strategic priority is our recently announced an Hyundai Oilbank collaboration, which could be a capital-light approach.

Number 2, lead with innovation to address a broad range of customer needs, which means leveraging our core competency around formulation and application development. This will be done through our proprietary technology and experienced team of researchers and scientists and includes the pursuit of new R&D development and licensing agreements with customers.

Number 3, grow customer partnerships and product volume commitments as we continue to negotiate development and supply agreements with global blue-chip customers to secure future demand for our increasing capacity. We have several exciting discussions underway, which could give us orders fully in line with our ambitious long-term growth objectives.

Number 4, secure, cost-effective inputs, while canola remains the most attractive route today, and we are engaged in managing the price of our contracts, we also continue to explore the viability of lower cost alternative feedstocks. The Total Corbion collaboration will provide us with enough cost-effective PLA inputs for our PHA formulations as the business scales.

Number 5, attain favorable unit economics to enhance margins, first through increased capacity utilization, then ramping up production of renewable following our Novomer November acquisition. Separately, we are continually working to reduce utility costs and chemical usage, and our Chevron Phillips collaboration could represent a step-change for renewable manufacturing costs.

And finally, Number 6, enhancing team capabilities to support growth. It is imperative that we increase the knowledge and capabilities of our leadership team as we grow in size and complexity. This includes increasing the overall experience levels in manufacturing, business development, R&D, information technology and finance as well as other areas to support global growth. Examples include the additions of Deborah McRonald, as Chief Corporate Development Officer;Keith Edwards, as Vice President of Business Development; Brad Rogers as Vice President of Technology Development, R&D, and Mike Hajost, who will be our CFO upon the filing of our Annual Report on Form 10-K, and who is with us on the call today.

Everything we have worked on and communicated during the last year, and everything, we are focused on going forward can be connected to one or more of these strategic priorities. We hope this provides you with a clear view of our strategic vision as we move into 2022. Danimer is dedicated to creating a highly profitable business that supplies the growing unmet need for biodegradable polymers and addresses the global issue of plastic waste.

Moving to Slide 4, looking at our facility expansions, we remain well-positioned to substantially scale production of Nodax in 2002, and Phase 1 of our Kentucky facility, we made significant progress in scaling up production levels as the year progressed. Most of our step-functions in downstream processing continue to operate on average at nearly twice the speed required. And in the first half of December, we were able to meet our goal of testing Phase 1 operations at full capacity.

In the second half of December, we had a small fire, which did not impact our ability to supply customer needs. The incident had the silver lining of leading us to perform additional safety evaluations and make some process improvements, which we will benefit from in all of our facilities. Having tested the plant at near-maximum operating rates both in December and February, we are now comfortable we can run this plant at full capacity on a go-forward basis. Recent operations suggests that we may be able to operate above 100% of nameplate capacity at some point in 2022.

Looking at Kentucky Phase 2, we are excited to report that construction progress remains ahead of schedule. And as you can see from the pictures on the bottom of the slide, exterior construction is nearly complete. We continue to expect Kentucky Phase 2 to come online in just a few months. As we have discussed in the past, the completion of both phases will collectively bring our annual nameplate finished product capacity to an expected 65 million pounds, which as a reminder, is PHA plus other compounded degradable materials. The completion of this expansion will be an exciting milestone for our company, and we expect a year one benefit to our operating results. For the full year 2022, we expect the Kentucky facility have a favorable impact to adjusted EBITDA as we increase capacity and drive operational efficiencies at the expanded facility.

Turning to Slide 5. We are showing a schematic of the site of our new state-of-the-art Greenfield facility in Bainbridge, Georgia. As we discussed with you last quarter, we accelerated our groundbreaking to occur last November in order to retain the contractor team they did such a great job on our Kentucky expansion. We also acted prudently in the current inflationary environment to order several key pieces of equipment and materials in advance of expected price increases. Having taken these prudent initial steps, we still face uncertainty with respect to key equipment delivery delays and inflationary pressures. For these reasons, we remain committed to putting in place this critical capacity for growth, but we plan to remain nimble and flexible as to the pace of capital spending on this project.

Our current intention is to moderate spending until we are comfortable that I’d say factors won’t cause us delayed start up, thus preserving cash. This can also provide us with the opportunity to capture and better apply learnings from the Kentucky expansion and the pilot plant. In addition, it can allow for further value engineering to maximize the efficiency of the plant and potentially reduce project costs. We will also look to develop a plan to quicken the spending as supply chain issues dissipate and customer contracts allow us to pass-through enough cost to justify accelerated spending.

The diagram we have provided on Slide 6, provides a view of the opportunity from all of the capacity expansions we currently have underway. Upon completion of Kentucky Phase 2 and the Greenfield facility, we expect to have overall PHA finished product nameplate capacity of approximately 190 million pounds. Our acquisition of Novomer was a prime example of our ability to identify attractive opportunities that are expected to drive down production cost over the long term, help us achieve scale and provide further unique product offerings.

As shown on Slide 7, when including the impact from a future renewable plant sized to produce 168 million pounds of Rinnovo, we have line of sight to 330 million pounds of PHA-based resin out of our Kentucky and Georgia facilities, which represents a nearly 75% increase in this product along with 60 million pounds of standalone Rinnovo.

As it relates to our plans for Rinnovo plant, we are in discussions with several major ethylene oxylene producers in the U.S. Gulf Coast for an EO off-take agreement, a site co-location agreement and other ancillary agreements related to the manufacturing of renewable products. While we are focused on building out our capacity and operations to serve the increasing demand for PHA, our ambition also includes partnering with others going to commit their capital rather than ours to build out capacity that would be mutually beneficial. In January of 2022, we announced our collaboration with Hyundai Oilbank to up drive global growth of PHA. This represents a future opportunity to partner with a major player in Asia who will bring their own capital to the table and speed up market entry in the region. We are grateful for their partnership and support on this initiative.

Now turning to our customer and business development updates, I will speak to Slide 8. We are expanding our market share by developing biodegradable products that leverage our unmatched application development expertise, and we have increasingly found that customers are looking for complete biodegradable systems as alternatives to the traditional plastic products they sell. I would also like to note that while customer product launch timelines are always subject to change, we continue to focus on the factors that are in our control to serve customers in a timely manner. The team at Mars Wrigley reports that they are happy with the progress and our partnership to develop an innovative home-compostable skills bag and are exploring several other applications for conversion.

We also continue to make progress with our developmental partners like PepsiCo, Bacardi and numerous others. We are very excited to confirm that Starbucks has launched Nodax-based straws nationwide to supply biodegradable straws in their stores across the United States as of September 2021. As you can imagine, this is a significant milestone for us and the industry as a whole. Additionally, our converter partner Genpak plans to launch Nodax-based home-compostable takeout containers this year. A

Lso major big box retailer, Target has initiated sales of biodegradable phade straws sold through our converter partner WinCup. Phade straws have also been supported by Yellowstone National Park and the National Football League and other professional sports associations. In fact, SoFi Stadium, the host of Super Bowl LVI has been using phade straws since September. Mercedes-Benz Stadium, home of the Atlanta Falcons, the Patriots Gillette Stadium in New England. TPC Sawgrass and the 2021 PGA Championship in Kiawah Island, South Carolina, have also all utilized phade straws as an alternative to traditional plastics. You can also find our Nodax straws made by WinCup in retailers and restaurants, such as CBS, Walmart, Burgerville, Bonefish Grill, Tropical Smoothie Cafe, Dunkin’ Donuts and numerous other restaurants across the country. Our partnership with WinCup has been a great success thus far.

We have also made exciting advancements with products sold through our converter partner Columbia Packaging Group. Columbia Packaging is currently supplying Nodax-based e-commerce mailers and shopping bags for the fashion brand House of LR&C owned by Russell Wilson And Ciara. CPG is also a sustainability partner of the Kansas City Major League Soccer Team Sporting KC to supply PHA shopping bags, apparel bags and straws.

Looking at Slide 9, I would like to draw your attention to our inaugural ESG report, which we published in February. Our stakeholders are well aware of our mission to develop sustainable alternatives to traditional plastic, and this report provides additional details on our ESG efforts across Danimer from supplier and customer partnerships to hiring initiatives. Overall, we expected our ongoing ESG initiatives and reporting are another important way to align our interests with those of our customers and shareholders that will contribute to maximizing long-term shareholder value.

Before I turn the call over, I’d like to take a moment to discuss our previously announced CFO transition. Michael Hajost, joined us in February and will be named Chief Financial Officer upon the filing of our Annual Report on Form 10-K. Mike brings considerable experience in managing global growth and profitability having led the Finance and Investor Relations functions of several large companies across a variety of industries. His skills and perspectives will be instrumental in helping us maintain our leading position as a bio-plastics manufacturer during this period of industry growth, and I’m thrilled to welcome him to Danimer.

I would like to thank Jad for his invaluable guidance throughout Danimer’s journey from a startup to a public company. Jad has worn many hats over the years and has helped us build Danimer into what it is today. I am grateful to have his continued support as we execute our growth initiatives. He will continue to serve as a valued member of our team and will move into the role of Senior Vice President of Financial Planning and Analysis next month.

With that, let me turn the call over to Jad for an update on our financial results.

John Dowdy III — Chief Financial Officer

Thank you, Steve. I’ll speak to Slide 10. We closed out the fourth quarter of the year with PHA representing a growing share of our revenue, given that we remain in the early stages of our long-term trajectory, I’ll focus my comments today on our full-year 2021 results with fourth quarter context as applicable.

Revenues for the full-year 2021 grew 24% percent to a record $58.7 million compared to $47.3 million in the prior year. This increase was driven by higher sales of PHA-based resins as we scaled our production of Phase 1 at our Kentucky facility this year. Revenues for the fourth quarter of 2021 grew 47% to a fourth quarter record of $17.7 million compared to $12 million in the fourth quarter last year. In 2021, we derived 36% of our revenues from sales of PHA-based resins, a significant increase compared to 10% in 2020. In the fourth quarter, PHA-based resins climbed to 50% of sales reflecting our expanded production capabilities.

We produced full year gross profit of approximately $900,000 compared to gross profit of $11.5 million in the prior year. Full year adjusted gross profit was $11 million compared to $16.6 million in the prior year. On a margin basis, adjusted gross profit was 18.6% compared to 35.1% in the prior year, primarily, the result of elevated fixed cost absorption as production continue to scale at the Kentucky facility. As we have mentioned previously, we expect our average cost per unit at our existing facilities to improve as production scales.

For the full-year, R&D and SG&A expenses, excluding depreciation and amortization, stock-based compensation, rent and one-time items was $31 million compared to $16.2 million in the prior year, mainly attributable to an increase in headcount and salaries to support R&D efforts and our future expansion plans as well as increases in costs associated with having a larger asset base such as property and liability insurance. Public company expenses added approximately $4.6 million of incremental cost for the full year of 2021, which we did not incur last year, and include items such as D&O insurance, increased public company auditing and accounting costs and SOX readiness fees. In addition, we incurred approximately $1.9 million of R&D and operating expenses as a result of consolidating Novomer in our full-year financial results, which we did not incur in the prior year.

The adjusted EBITDA loss for the full-year was $22.6 million compared to a loss of $3.2 million in the prior year, primarily due to the factors I discussed in our gross profit, SG&A and R&D results. Adjusted EBITDA excludes stock comp and other income and other add backs as reconciled in the appendix. Full-year adjusted EBITDAR was a loss of $20.1 million in 2021 compared to a gain of approximately $400,000 in 2020. We add back our rent expense because it is primarily related to a sale leaseback agreement associated with the Kentucky facility, and is thus essentially a replacement of depreciation and interest expenses.

Our total long-term debt was approximately $261.3 million at year-end and includes $21 million of low interest new market tax credit loans that we expect will be forgiven in 2026. Our cash position continues to support our planned capacity expansions in 2022.

Looking at our outlook for the full-year of 2022. As Steve mentioned, we expect the Kentucky facility to turn adjusted EBITDA positive as we increase capacity and drive operational efficiencies at the expanded facility. Before I turn the call over to Steve, I wanted to briefly comment on our plans to file an extension for the 10-K and our material control weaknesses as mentioned in our press release. During the annual reporting cycle for fiscal year 2021, we were required to comply with Section 404(b) of the Sarbanes-Oxley Act and accelerated 10-K filing deadline for large accelerated filers for the first time.

During our control evaluation process, we identified certain material weaknesses that we will be disclosing in the 10-K. Any misstatements identified related to these issues have been corrected prior to releasing our results. I have full confidence that we will make significant progress towards remediation over the course of 2022 in eliminating these internal control matters going forward. We are working through these issues with our auditors and are confident that we will file the 10-K prior to the extended deadline.

Now, I’ll turn the call back to Steve for closing remarks on Slide 11.

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Thanks, Jad. In summary, we are pleased with our capacity expansion progress and record revenue in 2021. Growing commercial scale production of PHA remains the core focus of our business, and I am confident we are on the right path to profitably execute our strategic priorities and capture a growing share of PHA demand in the years ahead. We have a large addressable market to serve and we are working as quickly as possible to expand our production capacity further in 2022.

Thank you for your time today, and we look forward to update you on our progress next quarter. We will now open up the line for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Laurence Alexander with Jefferies. Please limit yourself to one question and one follow-up question, so we may get to everyone’s questions and then you may queue for additional questions. Laurence Alexander, your line is live.

Laurence Alexander — Jefferies LLC — Analyst

Good afternoon. Can you unpack the comment about getting to your positive EBITDA contributions this year, do you see either of the 2 facilities in the current raw material environment having a path to the original 30% plus return on capital that was being discussed before this inflationary period started? And can you talk a little bit about what you’re seeing in terms of conversion costs relative to what you had expected before construction began?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

So Laurence, thanks for the question. As far as conversion costs, I assume you’re talking about conversion of canola oil into PHA.

Laurence Alexander — Jefferies LLC — Analyst

Right.

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Yeah, our costs have run about $0.10 higher per pound than what we had modeled. But we think we’ve got that taken out now and that we should be on plan. And so at scale, we still expect those kinds of returns. We anticipate, as I mentioned earlier that the Kentucky facility will be positive on an adjusted EBITDA basis before the end of the year and then after that, it’s just a matter of continuing to increase sales to cover our corporate overheads. And as a reminder, our current opex spend we can cover our current capex spend without bringing on any additional capacity. Of course, that’s not our plan. We strategically added expense mostly in the form of people to support our future growth, which includes both completing the Greenfield facility in Georgia and the renewable facility in the Gulf. But in this environment of tight bio-polymer supply, anybody that can bring on capacity is going to win. And we expect to win.

Laurence Alexander — Jefferies LLC — Analyst

Okay, great. And then an unfair question perhaps, but given that Mike’s in the room. Could you, Mike, if would remind us speaking a bit about your perspective on Danimer and the challenges or the opportunities to where you want to focus first and what your priorities are?

Michael A. Hajost — Chief Financial Officer Elect

Yeah. I’m thrilled to be here with the group for the first call here, I look forward to future discussions with all of you. But on the first call here, I think Lawrence, really want to kind of start out and say why did I joined this company and what did I see? And truthfully I couldn’t be more excited to be part of this exceptionally talented team. They are truly making our planet cleaner. And I decided to join the team as a CFO for several reasons. To start, I was impressed with the strength and conviction of the leadership team and the Board. It also became clear to me that Danimer has leading technology position and a near-term sizable commercial opportunity that’s well ahead of its competitors. This position is further enhanced by strong industry tailwinds as the brands and the manufacturers are prioritizing sustainability initiatives.

And finally, I feel this is a great fit with my 30 years of broad financial leadership experience and skills. A little problem here in the first 3 weeks in the role has been nothing but confirmed my reasons for joining this terrific team and this company. So as I came and started, again I just kind of finished off my first 3 weeks, but my initial focus areas are going to be to get out of the facilities meet with the team learn the business, and I think this give me an opportunity to re-frame what our guidance should be to you. Also, I want to improve our communication with investors, so their actions can be clearly tied to our 6-prong strategy that Steve laid out. And lastly, continue to strength the finance and information technology teams to provide effective analysis and insights to our business leaders while ensuring appropriate controls. So again, I appreciate the question. Thanks.

Laurence Alexander — Jefferies LLC — Analyst

Yeah. Thanks. I’ll hop back in queue.

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Excellent.

Operator

Our next question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your question.

Jon Tanwanteng — CJS Securities — Analyst

Hey, guys. Thank you for taking my questions. My first one is just about the Greenfield and the potential changes you might be thinking about. Is this something that made the latest start date, just tell me the scale and kind of the details on what you’re thinking about doing or delaying that inflation effective decision making?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Yeah Jon, thanks for the question. We are very focused on managing and preserving our cash in this uncertain environment that we’re in. And I should point out that the environment is even more uncertain now than it was even a week ago. We have developed a plan that allows us to maximize the flexibility to do that until we have more clarity moving forward. So we can speed up or slow down as we deem necessary. In the meantime, we’ll continue to build-out the Greenfield facility and work with customers on product development and off-take agreements. Customer interest is still as strong as ever, but in these uncertain times, it’s incumbent upon us to be careful stewards of our resources. My best guess at this point in time, if everything continues to go well through this year, is that we could still have that plant up and running by the end of 2023. But obviously if we slow down further, it will go, it will bleed over into 2024.

Jon Tanwanteng — CJS Securities — Analyst

Got it. Thank you. And then, as it pertains to this year, can you give us a sense of how you expect sell-through to trend? Your sales of PHA products, as you bring online your capacity, as your customers programs launch, states reopen, and we all deal with the continuing headache of supply chain inflation issues that are still out?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Jon, the first part of the question, didn’t come through clearly, could you repeat it?

Jon Tanwanteng — CJS Securities — Analyst

Yeah, I was just trying to get a sense of what your expectations for PHA sales are going to be like this year and kind of what are the puts and takes to it?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Well, obviously we expect them to continue to grow. And I guess, from a put and take standpoint is, we always have the issue of customer timing. So as the capacity comes online, it’s not a commodity that you’re going to be able to sell on a spot market. So you have to be coordinated with customer launches and conversions. And other than that, I think I will defer to Mike’s comment, when he mentioned that he is going to be working on developing a plan for what guidance we’re going to give going forward. So we’ll wait for that to come out before I give you more specific guidance.

Jon Tanwanteng — CJS Securities — Analyst

Okay, great, thanks. I’ll jump back in queue.

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Thanks, Jon.

Operator

Our next question comes from the line of Thomas Boyes with Cowen and Company. Please proceed with your question.

Thomas Boyes — Cowen — Analyst

Thanks. Appreciate you taking the questions. Just following the recent convert offering, you obviously made some meaningful progress towards funding the Greenfield facility. I just wonder if you could talk about the capital allocation approach going forward. If you could just touch by potential there for the DOE loan could that be a 2022 event? And then maybe anything having to do with a potential anchor tenant for the Greenfield facility?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Sure. Thanks, Thomas. So as you identified, we have plenty of cash on hand now, and I just would like to point out that we control how fast we spend it as I’ve mentioned with respect to our Greenfield construction plan. So we believe that our focus right now should be on demonstrating capability in Kentucky. We want to get that scaled up and show that we can produce a quality product profitably. And then, we will continue to focus on our negotiations to secure that anchor tenant for the Greenfield. And we think that the combination of those 2 things will help us secure any financing that we need going forward.

With respect to the DOE, we’re still very optimistic that we will get accepted in Phase 1, but there is no guarantee of that, and we expect to hear back from them within the next couple of months at the latest.

Thomas Boyes — Cowen — Analyst

Excellent. I appreciate it. And then just as a follow-up on the capex plan for the Greenfield facility, I think I saw that it was between $500 million and $612 million, was that down from the $600 million to $700 million before, I wasn’t sure maybe that included Phase 2 construction in it or Rinnovo piece, just with the change in kind of how your build-out is, break down the dynamic for me?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Yeah, a good question. That original $700 million top in estimate included the Rinnovo plant, so that is updated guidance on the Greenfield facility. We got our plus or minus 10% estimate in and move the midpoint up, but the top end didn’t go up as far because the previous estimate was plus or minus 20%. So we’re still somewhere close to that $700 million, and we’re at the top end of that, I think that was an estimate from about 6 months ago, if I remember, we’re still close to that range around the top end of it.

Thomas Boyes — Cowen — Analyst

Got it. I appreciate it. I’ll hop back in the queue.

Operator

Our next question is a follow-up question from the line of Laurence Alexander. Please proceed with your question.

Laurence Alexander — Jefferies LLC — Analyst

Hi, could you describe — discuss a little bit where you are on building customer acceptance of Rinnovo, how much trialing or how much volume do you need to have out for trialing or just how much time do they need for that to be comparable and acceptances where Nodax is?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Sure. We’re working diligently to increase the capacity of the pilot plant in Rochester, which will facilitate the speed of customer adoption and that product development work. So we’re still working at this point with fairly limited quantities of material, but we are also having great results. And so our confidence is even higher in terms of what we might be able to do with that product. We also, just to remind you that some of the potential outputs of that plant involve acrylic, and acrylic acid and other derivatives of acrylic, and those products in this example, are really commodities unlike Rinnovo or Nodax which are value-added highly engineered applications, the acrylic that could come out of this plant could be sold on the spot market. And so that’s something we are actively discussing with several potential customers that are interested in ultimately a renewable acrylic solution.

Laurence Alexander — Jefferies LLC — Analyst

And then can you discuss a little bit more sort of with the Kemira, what milestones need to be reached for that to become a material opportunity?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

We are really in the process of papering that up at this point. So in terms of having the agreement come together we are very close. And then, as far as having success in the marketplace, it’s really just a matter of customer adoption. But we’ve always been very bullish on this product, and obviously, Kemira is as well, where they wouldn’t be proceeding with this, but some of the customers we have been in trials with are super excited about the product. The main application that we see at this point would be coating paperboard for cups. As you heard me mentioned before, we are really excited that some of our straw customers are very focused on having a complete biodegradable system which would include lids and cups. And using our aqueous coating as a coating for cups has the kind of the double benefit of allowing those cups and to be repulpable, and so that that paper can be reused which you can’t do now with a polyethylene coating. So as far as milestones, I guess the first would be, get the agreement signed, and then the second will be some potential customer announcements as soon as those come through.

Laurence Alexander — Jefferies LLC — Analyst

And I just wanted to one last one is the, can you talk a little bit about the trend in ASPs and mix, and your sort of obviously lots of gives and takes in the supply chain, but maybe just what was happening towards the end of last quarter and how the backlog of orders looks for this quarter?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

I’m sorry, it was really broken up at the beginning, we couldn’t hear you?

Laurence Alexander — Jefferies LLC — Analyst

Sorry if you can just touch on ASPs and mix, and how realized prices have trended over in Q4 and maybe what the backlog of orders looks like for Q1?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Yeah. Laurence, I’m going to punt on that one to Mike again on this work he is going to do on kind of figuring out what guidance we’re going to provide going forward. But that’s a — a major initiative appears up here is, he is going to be prioritizing here, so I’ll delay answering that question until we’ve figured out how we’re going to do it going forward.

Laurence Alexander — Jefferies LLC — Analyst

Thank you.

Operator

Our next question is a follow-up question from the line of Jon Tanwanteng. Please proceed with your question.

Jon Tanwanteng — CJS Securities — Analyst

Hey guys, thanks for the follow-up. Could you talk a little bit more about the deal with Hyundai Oilbank, what are the interests in doing and at what scale, and how committed are they at this point to actually bring their own capital to the table to bring your product to Asia?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

We’re very happy with this development and we hope it will form the basis for a long-term collaboration which presents both parties with a compelling opportunity to meet the demand in Asia. We will initially be focusing on providing Nodax to commercial customers in South Korea and other Asian regions for more sustainable packaging. All forms of potential investment collaboration and joint projects will be considered under this partnership, including establishing production facilities in Asia and we will provide more updates on that in the future. But my concept of how these types of partnerships should work are that we are bringing the technology, and quite often the product application know-how and in fact even customer contracts, and so we’re looking for partners who are willing to invest capital in the business to grow the business going forward.

Jon Tanwanteng — CJS Securities — Analyst

Okay. Great. Thanks. And then I just wanted to come back to the prior comment about the return on the facilities, were you just referring to the Kentucky facilities or the Greenfield as well, just that in terms of your target return and maybe related to that, as you talk to customers trying to find an anchor tenant for the Greenfield, are you talking about the increase in prices and trying to pass them on as you try to get a contract signed, how are they responding to that if that’s what you’re talking about?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Yeah. We have already passed on pricing for this year based on the current increases that we’ve received, so that’s already been done. I’m sorry, what was the first part of your question, Jon? Yeah, sorry. Okay. I got you, yeah. So I was referring specifically to Kentucky, when we were talking about the production cost there, but going back to your question about the Greenfield tenant, yes those, the new pricing is baked in to all of the discussions and nobody’s ever happy to get a price increase, that I know of, but so far, we haven’t had any trouble getting those increases passed on.

Jon Tanwanteng — CJS Securities — Analyst

Okay. Great. Got it. Thank you.

Operator

Our next question is a follow-up question from the line of Thomas Boyes. Please proceed with your question.

Thomas Boyes — Cowen — Analyst

Excellent. Yeah, just a quick follow-up here. I know you longer term working on alternative feedstocks, soybean penny cress. I was just trying to get a sense of what you’re seeing on the supply side for the canola market? I think last quarter you had mentioned maybe there was some additional supply that was coming online longer term. Is that still the case? Do you think that the $0.80 is kind of a high watermark there or what kind of cost we would be thinking about for canola per pound basis?

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Sure. Thanks, Thomas. Our average price for canola oil in Q4 was about $0.56 a pound. We’ve locked in Q1 at $0.59 a pound. But, Q2 is locked in at $0.07 per pound. The futures prices have been coming down, as you recall from our last call, actually into the low 70s, but then there was a weather event that affected crops in North America and now the word Ukraine is putting some pressure on prices, but we still expect them to moderate in the long run as that additional capacity comes online. But going out into the future now I think low 80s is kind of the trend line, but there is a current spike in Q3 that’s even in the 90s, but we have not completed our — we’re still working on locking in Q3 in forward prices.

Thomas Boyes — Cowen — Analyst

Thank you.

Operator

There are no further questions in the queue, I’d like to hand the call back to Mr. Croskrey for closing remarks.

Stephen E. Croskrey — Chief Executive Officer and Chairman, Board of Directors

Thank you, again, to everyone for joining us today. We are encouraged by our progress and remain excited about our business prospects as we move into 2022. I’d like to thank you for your continued interest in Danimer Scientific and your time on this call. We look forward to updating you on our progress in the future. Thank you.

Operator

[Operator Closing Remarks]