Phoslock Faces Production Delays and US Tariff Risks Amid Q2 Cashflow Deficit
Phoslock Environmental Technologies reported a $474,000 cashflow deficit in Q2 2025, with sales impacted by deferred European projects and ongoing US tariff uncertainties. Factory refurbishment delays push production restart to early 2026.
- Q2 operating cashflow deficit of $474,000, improved from prior quarter
- Sales volume halved to 197 tonnes due to deferred European projects
- Changxing factory refurbishment delayed, production restart now expected by March 2026
- US import tariffs on Chinese goods remain volatile, with a pause ending in August
- Ongoing legal challenges and ASX share suspension discussions continue
Quarterly Financial Performance
Phoslock Environmental Technologies Limited (ASX – PET) disclosed a cashflow deficit of approximately $474,000 for the June 2025 quarter. While this represents a slight increase from the $391,000 deficit recorded in the same quarter last year, it is a notable improvement from the $963,000 deficit in the March 2025 quarter. The company’s cash position stood at $6.2 million at quarter-end, down $652,000 from the previous quarter.
Customer receipts totaled $823,000, with sales geographically diversified – Brazil accounted for 38%, the USA 35%, and Europe 25%. Despite this, overall sales volume dropped sharply to 197 tonnes from 382 tonnes in the prior quarter, primarily due to deferred projects in Europe.
Operational Challenges and Production Delays
The June quarter’s sales shortfall was largely attributed to postponed European projects, which are now expected to resume in the second half of the year. Europe remains the largest regional market, representing 47% of sales for the half-year, with growing opportunities in wastewater treatment alongside traditional lake remediation.
Phoslock’s factory refurbishment in Changxing, China, is nearing completion but has been delayed until August. This pushes the likely resumption of production to the March quarter of 2026, later than initially anticipated. Inventory levels remain elevated globally at 1,806 tonnes, with China holding nearly half.
Research and Development Progress
On the innovation front, Phoslock continues its R&D efforts in China, experimenting with new products containing 10% lanthanum. Early laboratory results on phosphorus-binding efficacy and environmental safety are promising, though commercial viability will take several more months to confirm.
Trade Tariff Uncertainties Impact US Market
US import tariffs on Chinese goods, including Phoslock’s products, remain a significant concern. After a series of tariff hikes since 2018, the effective duty reached 145% in April 2025, threatening profitability. A temporary 90-day pause reduced tariffs back to 35%, but this reprieve ends on 19 August. The company is proactively shipping inventory to its Savannah warehouse to mitigate potential disruptions.
Corporate and Legal Matters
Phoslock is actively engaged in discussions with the ASX regarding the lifting of its share suspension. Meanwhile, legacy legal issues persist, including a class action filed by the Banton Group on behalf of shareholders. The company remains committed to regulatory compliance and robustly defending its interests.
Bottom Line?
Phoslock’s near-term outlook hinges on navigating tariff volatility, completing production ramp-up, and resolving legal uncertainties.
Questions in the middle?
- Will the US tariff regime stabilize after the August 19 deadline, and how will that affect US sales?
- Can Phoslock accelerate production restart at Changxing to meet growing European demand?
- What is the potential impact of ongoing legal proceedings on the company’s financial health and share suspension status?
