Taking Stock of Danimer Scientific’s Risk Factors

Shares of bioplastics company Danimer Scientific (DNMR) went up 20% in August. The company is focused on developing and producing biodegradable materials, holding over 390 granted patents and patent applications in over 20 countries for manufacturing processes and biopolymer formulations.

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Let’s take a look at its financial performance, as well as what has changed in its key risk factors that investors should be aware of. (See DNMR stock charts on TipRanks)

Driven by the scaling up of PHA (polyhydroxyalkanoate) production at Danimer’s Kentucky facility, Q2 revenue rose 22% year-over-year to $14.5 million, beating consensus by $2.7 million. PHA-based products now contribute 29% to Danimer’s top line, compared to 7% a year ago.

In August, Danimer completed the acquisition of Novomer Inc. Stephen E. Croskrey, CEO of Danimer remarked, “We believe this transaction will accelerate our ability to deliver our proprietary packaging products to leading consumer product clients and is a milestone transaction for Danimer.

“It will also enable us to increase the expected overall volume of finished product we will be able to deliver, all while significantly lowering our production costs and capital expenditure per pound produced.”

Looking ahead, Danimer estimates continued acceleration in investments in headcount and technology, geared to support its production capacity expansion and sales growth. It sees full-year capital expenditures landing between $125 million and $150 million.

Recently, Jefferies analyst Laurence Alexander reiterated a Buy rating on the stock, with a price target of $42, implying 115% upside.

Alexander commented, “With the Novomer acquisition, Danimer will combine catalytic and fermentation production of PHA, improve its cost advantage, energy efficiency and GHG profile, bolster its market relevance, widen its competitive moat, reduce its capital intensity, forestall a potential competitor, and open up significant new optionality.”

Risk Factors

According to the new TipRanks Risk Factors tool, Danimer’s main risk categories are Finance & Corporate, and Legal & Regulatory, accounting for 49% and 18% respectively, of the total 51 risks identified. Since June, the company has added one key risk factor.

Under the Finance & Corporate risk category, Danimer acknowledges that it may not be successful in integrating acquisitions. The company may face challenges in this process including, elimination of redundancies, coordinating personnel and retaining key employees, managing varying corporate cultures, and achieving cost reduction and cross-selling opportunities. Danimer noted that it may not be able to meet these potential challenges.

The sector average Finance & Corporate risk factor is 38%.