Why Did Close the Loop’s EBITDA Halve Despite Steady Revenue?

Financial Performance Snapshot

Close the Loop Limited, a leader in the circular economy sector, has released a business update for the second half of its 2025 financial year, revealing a mixed performance. While revenue held steady at around $99 million, mirroring the first half, the company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) are expected to plunge by roughly 50%. This stark decline signals operational headwinds despite stable top-line figures.

North American Challenges and Operational Setbacks

The primary drag on profitability stems from the refurbishment and IT asset disposition (ITAD) operations in North America. These segments have struggled with a series of setbacks, including a disruptive software virus in April 2025 that caused significant processing delays and inefficiencies. Although management classifies this event as non-recurring and has implemented new controls to prevent recurrence, the impact has been severe enough to materially reduce sales and operational throughput.

Adding to the complexity, the transition into a broader ITAD market has increased labour intensity and required substantial upskilling of staff, compounding short-term inefficiencies. The Mexicali plant, which had faced delays in commencing operations, is now fully functional. Early production metrics from Mexicali are encouraging and align with management’s expectations, offering a glimmer of operational recovery.

Leadership and Strategic Adjustments

In response to these challenges, Close the Loop is appointing a new Chief Executive Officer for its North American refurbishment and ITAD operations, effective July 1, 2025. This leadership change is designed to stabilise performance and spearhead growth in a region the company still views as strategically vital. Meanwhile, the company is reviewing its portfolio, having shut down the cardboard recycling facility in Melbourne to focus on more profitable and scalable business units.

Packaging and Other Business Segments

On a more positive note, the packaging businesses in Australia and South Africa have delivered solid operational results and are on track to achieve single-digit earnings growth. These divisions continue to demonstrate margin stability and operational execution, providing a counterbalance to the North American difficulties.

However, Close the Loop has decided not to proceed with constructing new TonerPlas plants in New South Wales and Queensland, opting instead to return government grants previously received for these projects. The company will maintain its TonerPlas operations in Victoria, continuing to supply post-consumer soft plastic materials to meet national demand.

Looking Ahead

Despite the current setbacks, Close the Loop remains optimistic about long-term growth opportunities in the refurbishment and ITAD markets, particularly in North America. The company’s strategic moves, including leadership changes, operational ramp-ups, and portfolio optimisation, signal a commitment to overcoming short-term hurdles and positioning for sustainable expansion in the circular economy space.