Bond check: Leef Blattwerk – producer of sustainable tableware and packaging made from palm leaves offers 9.00%

Leef Blattwerk GmbH, Potsdam, is issuing a five-year bond with a volume of up to 5 million euros and a coupon of 9.00% pa. Leef produces sustainable disposable tableware and packaging made from palm leaves. The funds from the bond issue will primarily be used to expand production.

Pursue
The issuer is a pioneer in the development, processing and distribution of palm leaf products. She is currently using the leaves of the areca palm, which are waste products in betel nut production and are usually burned.

The issuer has set up structures in India since its founding in 2014 and has established a long-term partnership with a selected supplier, which is currently being converted into an investment. The production conditions there have been improved over the years and implemented into the process chains in order to finally be able to meet the relevant international certification standards.

The leaves are already washed, pressed into shape, cut and packaged in India. There is no further processing, no coating is required and the entire process is chemical-free. The principle can also be extended to other types of leaves in the future. The areca leaf is cut-resistant, highly insulating, oven-safe, microwave-proof, waterproof, stable and compostable (industrial and in the garden).

This makes it attractive for food applications, and the possible applications go far beyond that. The issuer currently sells tableware for outdoor catering as well as for festivals and events of all kinds. The portfolio is currently being expanded to include food packaging for take-away and delivery services as well as applications for sealing palm leaf containers with a compostable film. Various lid solutions made from 100% marine plastic (the entire chain from collection to pellet production to the product is certified) or recycled paper are available in modular form depending on customer requirements. Furthermore, the issuer is currently building up additional product categories in the non-food segment as part of a diversification strategy.

As of December 31, 2022, the equity was zero euros. Since the end of 2022, the company’s equity has increased through two capital increases totaling EUR 0.86 million and subordinated loans replacing equity totaling EUR 0.75 million.

Use of funds
The proceeds from the issue will be used to purchase stakes in producers in India in order to expand production capacities. The capital is needed to set up production facilities (2.5 million euros), plus pre-financing of goods (1.4 million euros). The additional capacities are essential to meet increasing demand. Furthermore, working capital is required at the issuer to strengthen the areas of product development, sales, production controlling and controlling (0.6 million euros).

In addition to the capital to be acquired from the bond issue, the issuer needs additional capital to establish and expand its business activities.

business development
From 2021 to 2022, the issuer was able to increase its sales revenue by around 64% to 1.3 million euros; this does not yet include the new packaging lines, which will only generate their first sales revenue towards the end of 2023. The result after taxes was almost -1.3 million euros.

Strengthen:
– Leef produces sustainable and high-quality products
– Company has extensive certifications and patents
– high market potential

Weaknesses:
– Weak balance sheet structure, very low sales to date despite almost 10 years of history
– The issuer will need additional equity capital in order to possibly heal over-indebtedness

Conclusion:
Leef Blattwerk GmbH offers sustainable and high-quality packaging solutions that are primarily used in the food sector, including outdoor catering and take-away. But other applications are also conceivable. Sales are currently still relatively low and the balance sheet structure screams more like equity than a bond. The funds from the bond issue will be used, among other things, to expand production. According to its own statements, the company is currently negotiating with customers who could significantly advance the company’s sales (see interview, new issues section).

Robert Steininger, www.green-bonds.com
Photo: © Leef Blattwerk

Key details of the Leef Blattwerk bond