Phoslock Environmental Technologies reported a $952,000 operating cashflow deficit in Q3 2025 amid rising legal and logistics expenses, while sales volumes improved and production is set to resume in early 2026.
- Cash position declined to $5.2 million by September 30
- Operating cashflow deficit nearly doubled from previous quarter
- Sales increased to 251 tonnes, led by Brazil and USA markets
- Production restart anticipated in March 2026 after inventory buildup
- Ongoing legal challenges including deferred class action mediation
Financial Overview
Phoslock Environmental Technologies Limited (ASX, PET) closed the September 2025 quarter with a cash balance of $5.2 million, down by $1 million from the previous quarter. The company’s operating cashflow deficit widened to approximately $952,000, nearly double the $475,000 recorded in the June quarter, driven primarily by elevated legal expenses and logistics costs associated with inventory repositioning.
Legal and insurance payments accounted for $340,000 of the quarterly outflows, bringing the year-to-date total to $1.1 million. Additionally, the company incurred higher-than-usual logistics expenses as it shipped significant inventory from its Chinese facility to other regions, a cost expected to moderate in the coming quarter.
Sales and Operational Performance
Sales volumes rose to 251 tonnes in the September quarter, up from 197 tonnes in the prior period, with Brazil contributing 67% of sales, the USA 22%, and Australia 8%. Year-to-date sales reached 830 tonnes. Early indications for the December quarter are positive, with an additional 190 tonnes of sales and purchase orders recorded in the first two weeks of October.
Inventory levels stood at 1,555 tonnes at quarter-end, with China holding 531 tonnes. The company anticipates resuming production in its Changxing, China facility in the March quarter of 2026, following a period of inventory buildup and operational adjustments.
Research and Development Progress
Phoslock’s R&D team in China continues to explore new product formulations, focusing on experimental lanthanum-modified bentonite variants containing 10% lanthanum. These laboratory-scale products are undergoing evaluation for their phosphorus-binding efficacy and safety. While initial results are encouraging, commercial viability remains several months away.
Legal and Corporate Matters
The company’s shares resumed trading on the ASX in mid-August after a suspension. However, Phoslock remains engaged in legacy legal issues, including a potential class action initiated by the Banton Group on behalf of certain shareholders. Mediation originally scheduled for early September was deferred, leaving the outcome uncertain. The company has reiterated its commitment to regulatory compliance and vigorous defense of its interests.
Payments to related parties during the quarter were limited to non-executive directors’ fees, reflecting prudent corporate governance amid financial pressures. No new financing activities were reported during the quarter.
Bottom Line?
Phoslock’s path forward hinges on resolving legal uncertainties and successfully restarting production to stabilize cash flow.
Questions in the middle?
- What is the expected timeline and outcome for the deferred class action mediation?
- How will Phoslock manage cash flow if legal costs and operating deficits persist?
- Will the new lanthanum-based products progress beyond laboratory testing to commercial launch?