Why Did Close the Loop’s Losses Triple Despite Revenue Holding Steady?

Financial Performance and Operational Challenges

Close the Loop Limited has released its annual results for the year ended 30 June 2025, revealing a challenging period marked by a 7% decrease in revenue to $195.1 million and a sharp increase in net losses to $21.9 million, a 296% rise compared to the prior year. The company’s underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) dropped by 59% to $18.4 million, reflecting operational headwinds and significant one-off costs totaling approximately $7.6 million.

The financial results were impacted notably by the closure of the O F Resource Recovery business in Melbourne, which ceased operations in November 2024. This discontinuation, alongside soft trading in the resource recovery division and underperformance in smaller packaging units, contributed to the overall profit decline. Asset impairments and restructuring costs further weighed on the bottom line.

Strategic Business Segments and Geographic Performance

Geographically, North America remains the largest revenue contributor, accounting for 50% of total sales and 86% of EBITDA. However, the North American refurbishment and IT asset disposition (ITAD) operations faced production challenges and inefficiencies, leading to reduced sales and profitability. The company has responded by appointing Matthew Zimmer as the new CEO for North America to stabilize and grow this critical segment.

In Australia, revenue declined slightly by 3%, with EBITDA falling sharply due to poor performance in non-core packaging businesses and the exit from the cardboard recycling facility in Melbourne. The South African operations bucked the trend, delivering a 33% revenue increase and a 35% rise in EBITDA despite a tough macroeconomic environment, signaling strength in that market.

European operations showed a 41% revenue increase, driven by the expansion of the Circular Planet take-back program, which supports OEMs in meeting sustainability and electronic waste reduction targets. The program’s profitability is expected to improve as collection volumes grow and more OEMs join.

Financial Position and Banking Covenants

Close the Loop breached its banking covenants during the year but successfully negotiated amended terms with its lenders, including PGIM Inc., ensuring compliance at year-end. The company’s debt facilities extend through to 2029, providing a runway for strategic initiatives. However, due to accounting standards, all bank debt was classified as current at 30 June 2025, temporarily impacting the balance sheet presentation. The company maintains a strong cash position of $32 million to support ongoing operations and growth.

Leadership Changes and Future Outlook

Significant leadership changes occurred post-year-end, with the appointment of Kesh Nair as Executive Director and CEO for Australia and South Africa, and Matthew Zimmer as CEO for North America. These appointments aim to drive operational improvements and growth in key regions. Meanwhile, Lawrence Jaffe transitioned to Chief Commercial Officer following his resignation as interim CEO.

The company is actively reviewing its portfolio, identifying non-core business units for potential divestment to sharpen focus on scalable, profitable segments. Investments continue in IT asset refurbishment capabilities and geographic expansion, particularly in North America and Europe, aligning with Close the Loop’s commitment to sustainability and circular economy principles.

Investor Returns and Remuneration

No dividends were declared or paid during FY25, reflecting the company’s focus on stabilizing its financial position. The remuneration report highlights a zero payout for short-term incentives due to the disappointing financial results, with deferred payments contingent on future performance improvements. Long-term incentives remain aligned with shareholder value creation through performance rights subject to share price hurdles.