Close the Loop Reports 2% Revenue Rise but EBITDA Drops 23% in 1H26

• Revenue up 2% to $92.3 million despite operational headwinds
• Underlying EBITDA down 23%, NPATA plunges 61%
• Impairment charge of $23.2 million on intangible assets
• Packaging division delivers double-digit growth amid resilient demand
• Net debt rises 12% to $56.98 million following covenant reset

Financial Snapshot and Operational Challenges

Close the Loop Limited (ASX: CLG), a leader in the circular economy sector, released its half-year results for the period ending 31 December 2025, revealing a mixed performance. While revenue edged up 2% to $92.3 million, underlying earnings took a hit with EBITDA falling 23% and net profit after tax and amortisation (NPATA) plunging 61% compared to the prior corresponding period.

The Resource Recovery segment bore the brunt of the downturn, impacted by lower processing volumes and a shift in product mix, particularly within the North American Information Technology Asset Disposition (ITAD) business. Operational difficulties were compounded by a significant $23.2 million impairment charge on intangible assets related to ISP Tek Services, reflecting a reassessment of asset values amid challenging conditions.

Packaging Division Shines Amidst Broader Pressures

Contrasting the Resource Recovery struggles, the Packaging division delivered a robust performance, achieving double-digit growth in both revenue and EBITDA. This resilience was driven by strong demand from domestic and international customers, notably in South Africa and Australia, and expansion within existing Tier-one accounts alongside new corporate client acquisitions.

Management’s strategic review led to the divestment of non-core businesses, including Alliance Paper Pty Ltd and O F Flexo Pty Ltd, with sales completed during the half. These moves aim to sharpen the company’s focus on cash-generative, strategically aligned operations.

Geographic Performance and Strategic Outlook

Geographically, Close the Loop experienced varied conditions. The United States market remained subdued amid tariff uncertainties and economic caution, affecting cartridge take-back and plastic recycling volumes. However, new engagements with original equipment manufacturers (OEMs) provided some offset. Europe saw expansion of its multi-vendor collection program, with promising contract wins expected to contribute fully in FY27. South Africa continued to grow efficiently, adding new customers without significant cost increases, highlighting operational scalability.

Following a prior covenant breach, the company successfully reset its banking covenants, with net debt rising 12% to $56.98 million due to weaker operating cash flow. The loan facility has been reclassified as non-current, reflecting improved compliance.

Management’s Path Forward

CEO Kesh Nair emphasised that 1H26 was a period of stabilisation and decisive action, focusing on portfolio rationalisation, operational restructuring, and strengthening financial discipline. The company aims to emerge with a simplified portfolio, improved resilience, and a clearer growth trajectory. While the overall financial performance fell short of expectations, the Packaging division’s strength offers a foundation for future stability.

Looking ahead, Close the Loop is prioritising debt reduction and operational improvements to support sustainable growth in a competitive and evolving circular economy landscape.

Bottom Line?

Close the Loop’s strategic refocus and operational reset set the stage for a potentially stronger second half and beyond.

Questions in the middle?

• How will the impairment charge impact long-term asset valuation and investment capacity?
• What are the prospects for volume recovery in the North American ITAD segment amid tariff uncertainties?
• How quickly can debt reduction and operational improvements translate into improved profitability?