Close the Loop Posts $125.6 Million Revenue with $105.3 Million Net Loss in FY26

Strategic Reset Drives Large Loss Despite Revenue Growth

Close the Loop Limited (ASX:CLG) has delivered a mixed FY26 result, reporting a 6% rise in revenue to $125.6 million, buoyed by solid performance in its packaging division. However, the headline figure was overshadowed by a substantial net loss of $105.3 million, primarily stemming from the sale of non-core assets and one-off restructuring charges. The disposals included ISP Tek Services, Alliance Paper, and O F Flexo, marking a decisive portfolio reshaping aimed at focusing on higher-margin operations.

The company’s EBITDA from continuing operations stood at $12.4 million, a 33% decline from the prior period’s underlying EBITDA, reflecting the impact of restructuring costs and asset write-downs. Adjusted NPATA swung to a modest $1.4 million profit from a prior loss of $5.4 million, indicating some underlying operational recovery.

Debt Reduction and Covenant Management

Close the Loop’s balance sheet has been materially strengthened following the strategic divestments. The sale of ISP Tek Services for US$10 million, combined with existing cash reserves, enabled the repayment of approximately US$16 million in debt during the year. Net debt was reduced by 29% to $38.1 million at 30 June 2026, with a further 52% reduction to $18.3 million achieved post-year-end following the settlement of convertible notes. Despite breaching banking covenants during the year, the company secured waivers and amended covenants, maintaining lender support with facilities expiring in 2029.

Division Performance Highlights

The packaging division emerged as the standout performer, delivering 16% revenue growth and a 48% increase in EBITDA. This was driven by strong demand for recyclable-ready packaging and recycled content products, particularly in South Africa where revenue grew 38% and EBITDA by 42%. The division also benefited from increased share of wallet from existing customers and new tier-one clients.

Conversely, the resource recovery division faced challenges, posting $55.4 million in revenue but an EBITDA loss of $2.8 million. This underperformance was linked to the restructuring of the plastics recycling business in North America, including the consolidation of operations from three sites to one profitable facility. The division is now focused on rebuilding margins from a leaner base following the exit from lower-margin volume processes.

Management Changes and Incentive Framework

The company’s Board underwent significant renewal, with five directors resigning and three new appointments during FY26, reflecting a refreshed governance approach. Close the Loop also implemented a revised remuneration framework aligning executive incentives with company performance, including short-term cash bonuses and long-term performance rights tied to share price targets and continued employment. Notably, the CEO Kesh Nair, appointed in July 2025, highlighted the transition from reset to execution as the company’s strategic focus.

Outlook and Operational Efficiency Initiatives

Looking ahead, Close the Loop has reaffirmed FY27 EBITDA guidance of $14 million to $16 million, implying growth of 13% to 30% over FY26. The company plans to leverage AI, automation, and technology-enabled process improvements to boost productivity and reduce costs across its operations. Management also aims to expand OEM relationships and improve cash conversion while continuing to reduce debt through refinancing efforts and disciplined capital management.

With a streamlined portfolio and a significantly improved financial position, Close the Loop is positioning itself to capitalise on sustainability and circular economy trends. However, execution risk remains as the company navigates the transition from restructuring to growth, with environmental, social, and governance factors continuing to influence operational and financial outcomes.