Spinnova updated its strategy for the coming years and progressed in unwinding the Suzano collaboration

Translation: Original published in Finnish on 6/11/2025 at 7:40 am EEST.

Spinnova continues to commercialize its technology on its own, which we believe was quite expected. Overall, Spinnova's hefty release package yesterday left us with a fairly neutral picture and did not materially change the share's risk/reward ratio.  

The key focus this year and next is to reduce the cost of production of technology

Yesterday, Spinnova announced its new strategy, issued a profit warning due to write-downs related to the associated company Woodspin, and announced that it would buy Suzano out of Woodspin and Suzano Finland, which operated Woodspin's MFC production, for a nominal sum. Spinnova started the strategy work at the end of February, when Suzano, the company's exclusive partner for wood pulp material, decided not to invest in Spinnova fiber production (comment here).

In the new strategy defined for 2025-2026, Spinnova's main goal is to improve the cost efficiency of the production process. This was expected, as the excessively high investment and production costs of fiber production have slowed down and even prevented the commercialization of the technology so far, even though the company has succeeded in demonstrating that the fiber is technically viable in the textile industry value chain. In our view, MFC grinding, which was previously in cooperation on Suzano's site, plays a key role in improving production efficiency. In addition, in 2025-2026, Spinnova aims to develop fiber properties for value chains other than the textile industry and to promote the commercialization of fiber based on leather waste in Respin, which it co-owns with ECCO. To accelerate scaling, Spinnova aims to form an international business consortium.

Thus, Spinnova remains a technology company and continues its efforts to commercialize its technology largely on its own, which was broadly in line with our expectations. A key element of the strategy is to reduce the investment and production costs of fiber production, which the company must effectively achieve in order for technology-based investments to offer potential investors a sufficiently attractive business opportunity and return expectation. In our view, solving the problems requires changes, especially in the early stages of the process, and the company has continued to address the problems on a laboratory scale. However, no schedules were given, so it is still very difficult to estimate the date when the technology will be ready for investment.   

In our view, the company cannot afford production investments, so we estimate that the corporate consortium the company is aiming for, or part of it, should take responsibility for implementing the investments. We estimate that the company will find a consortium of partners spanning the entire value chain around the technology, but in our view, the key challenge and uncertainty lies in finding players interested in investments. The situation may be slightly alleviated by the fact that it may be possible in the future to plan smaller, less risky investments targeting niche segments, whereas Suzano immediately wanted larger investments costing hundreds of millions of euros in all scenarios (the company's exclusive rights to wood pulp material also blocked other options). We note, however, that managing the consortium and driving it in one direction may not be without problems, and the company's negotiating position against other players is very unclear.

Spinnova did not provide financial targets in connection with the strategy update. This was a disappointment, although we understand that after a major change of direction, it is still difficult for the company itself to draw up a roadmap. The lack of targets, however, makes it very challenging to weigh the risks and opportunities of the stock at this stage. It is also difficult to assess the adequacy of the company's financing, although we strongly suspect that the company will need additional financing to implement its strategy during this decade, considering Spinnova's own expenses and investments in the coming years, as well as those of Woodspin and Suzano Finland, and Suzano's investments in Woodspin and Suzano Finland. Spinnova had a net cash position of 41 MEUR at the end of H2’24.   

Spinnova plans to acquire full ownership of Woodspin demo plant and will be released from Suzano's exclusivity for wood-based material

Spinnova also announced yesterday that the company and Suzano have signed a non-binding agreement, according to which Spinnova will buy out Suzano's stake in Woodspin, which is 50% owned by Suzano's companies, for one euro. Woodspin owns the demo plant in Jyväskylä that produces Spinnova fiber with a capacity of 1,000 tons. With the termination of the Woodspin joint venture agreement, Suzano's exclusive rights as the sole partner for wood-based Spinnova fiber would end, and Spinnova would be free to license its technology to a partner of its choice.  According to the same agreement, Spinnova will also buy Suzano Finland, which operated the MFC manufacturing process at the demo plant, and its assets from Suzano for one euro. In addition, the agreement includes that Spinnova and Suzano will continue to capitalize Woodspin until the end of the current year as previously agreed, and Suzano will capitalize Woodspin and Suzano Finland with 5 MEUR. The agreements are expected to be finalized by the end of August. We expect Spinnova and Suzano to be able to turn the non-binding agreements into binding ones within the schedule.  

In addition, Spinnova announced that the change negotiations at Woodspin had resulted in the temporary layoff of almost the entire staff, i.e., 27 employees. Spinnova is looking for alternatives to continue Woodspin's operations, and for the time being, its operations are suspended.    

In our view, Spinnova needs the Jyväskylä plant for the development of wood pulp-based textile fiber, so the asset, which cost tens of millions of euros, is strategically very important for the company. In addition, we believe that the termination of Suzano's exclusive rights is absolutely critical for the further development of the wood pulp-based material that is furthest along in development. Therefore, we believe that the entirety of the non-binding agreement, i.e., the purchase of critical assets at a nominal price and the termination of exclusivity, are good solutions for Spinnova. This whole is further improved by Suzano's continued financing of Woodspin and a 5 MEUR investment in Woodspin or Suzano Finland, which saves the company's own cash assets.

Although Spinnova needs the Jyväskylä plant for its development work, we note that the transfer of the plant to Spinnova will increase the company's cost structure. In our view, this will have a limited impact in the short term as Woodspin's operations are wound down. However, Spinnova will eventually need the factory for its development work, which could be potentially expensive on Spinnova's scale, creating pressure on cash sufficiency. The Jyväskylä plant has a small capacity, so in our view, making its operations cash-positive in production use will continue to be quite difficult.  

We will include Woodspin and Suzano Finland in the company's forecasts if the arrangements are implemented.

As expected, Spinnova is writing down its Woodspin investments from its balance sheet

Spinnova announced yesterday that if the purchase of Woodspin's demo plant is completed, the company will write down its investment in Woodspin in accordance with IFRS standards. The value of Woodspin investments on Spinnova's balance sheet was 19.4 MEUR at the end of 2024. The write-down would have no impact on Spinnova's cash flow.

The write-down was not at all surprising, considering Spinnova's and Suzano's differing strategic interests related to Woodspin and the cash flow negativity of the operations. For these reasons, we already wrote down the Woodspin investments from our Spinnova balance sheet forecasts in our previous update. We will specify the timing of the write-down forecast if necessary, at the latest in our Spinnova H1 preview. In practice, however, we believe that the impact of the likely write-down on Spinnova is quite minor.

The overall picture seems twofold

Overall, Spinnova's hefty release package left us with a neutral impression. In our view, the most positive aspect of the update was the solutions related to the termination of the Suzano cooperation, as 1) the Suzano exclusivity is being terminated, 2) Spinnova will acquire strategically important assets at a nominal price, and 3) Suzano will invest an estimated 6-7 MEUR in the companies transferred to Spinnova. Similarly, in terms of the commercial progress, development delays, financing needs and targets/potential of Spinnova's own strategy, we believe that the update raises at least as many questions as it answers. Therefore, the range of scenarios related to the share remains very wide. In our view, our forecasts for Spinnova's very low revenue in 2025-2026 and a slightly reduced, but still significant, operating loss due to savings from last year are in the right direction.