Majestic Corporation (MCJ ), a specialist precious metals and non-ferrous metals recycler, announced final results for the year ended 31 December 2022. Gross profit increased 24% to US$1.83m and gross profit margins strengthened to 7.8% from 5% last year. After-tax net profit was down 61% to US$289k due to one-off IPO costs in the period of US$371k, and revenues decreased 21% to US$23.4m, largely due to a material drop in global metals prices. Inventory increased 37% to US$8.4m from US$6.1m last year.
Operationally, Majestic continued its expansion strategy across its three main segments - PCB refining, catalytic converters, and ingot processing while expanding relationships with smelters. Majestic opened a new facility in Deeside, UK with partner TeleCycle Europe, expected to reach capacity by end of 2023, and with a view of acquiring a larger facility next. Majestic's capital allocation remains focused on building partnerships and investing in equipment to increase yields and efficiency in procuring inventory.
Despite difficult macroeconomic and market conditions affecting PGM prices, Majestic managed to remain profitable in FY22 and continued its growth strategy. The company also paid down its loans yet retained a comfortable cash position at year-end of US$1.8m, relative to its market cap of c. US$8m. As supply chains normalise and China continues reopening in FY23, we expect Majestic to return to positive net profit growth. In its half-year results in September 2022, the company reported a net profit increase of 26%.
Fundamentally, we see Majestic's business model as sustainable and profitable long-term. Amid higher energy costs, environmental concerns, supply issues, and metal shortages, metals recycling is becoming increasingly economical. As an example, using recycled material to produce copper currently consumes 85% of the energy over producing it from raw materials.
The metal recycling industry was worth US$229.6bn in 2021, and is expected to grow at a CAGR of 6% a year to US$384bn by 2030 as the battle for mineral resources intensifies in the wake of the Ukraine conflict and environmental regulation is further tightened. Since listing on AQSE a year ago, Majestic has successfully tapped into this growing trend, especially PGM metals recycling from auto catalysts, a market traditionally dominated by Russia, and electronic goods covered under WEEE regulations.
Majestic's cash position should enable it to continue its expansion strategy, with the abovementioned new processing facility in the UK expected to reach capacity by end of 2023, and further plans for setting up similar facilities in Europe and the US. Majestic currently operates two procurement sites in the US and UK supplied by partners in Mexico, Lithuania, Australia and Italy, and a facility in Malaysia capable of processing 20,000 tonnes a year.
As a metals recycler, Majestic should also appeal to ESG-minded investors. The company published its first ESG report at the end of 2022. It uses the UN's Sustainable Development Goals (SDGs) as a framework for its ESG efforts and maintains ISO and R2 certifications.
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