Close The Loop Ltd. Faces a Stark Mid‑Year Performance Dilemma
The latest half‑year report, released on 23 February 2026, paints a bleak picture for the Australian‑based battery‑recycling specialist. While revenue rose marginally by 2 % to AUD 92.3 million, the company’s profitability collapsed across every key metric. Underlying EBITDA slipped 23 % to AUD 9.3 million, and the negative earnings‑per‑share indicator worsened, with the P/E ratio now at ‑0.962—a clear sign that the business is no longer generating the cash needed to sustain its operations or justify its market valuation.
Revenue Growth Is Insufficient
The company’s top line appears to have been buoyed by a resilient packaging segment, which benefited from strong demand in South Africa and Australia. Yet this isolated success is insufficient: revenue growth of 2 % is negligible when compared to the industry’s double‑digit expansion rates. Moreover, the revenue increase is heavily contingent on a narrow product mix that has shifted toward Information Technology Asset Disposition (ITAD) in North America—a segment that is more price‑sensitive and susceptible to cyclical downturns.
Profitability is Vanishing
Underlying EBITDA’s 23 % decline is a direct consequence of falling processing volumes and a shift toward lower‑margin products. The company’s net profit margin turned sharply negative, reporting a loss of AUD 27.1 million on ordinary activities. Net debt, meanwhile, rose by 12 % to AUD 56.98 million, compounding the firm’s financial fragility. Cash flow from operations turned negative, falling from a modest AUD 2.5 million in the previous period to AUD ‑4.9 million this half. These figures illustrate a cash‑burning business that is rapidly depleting its liquidity reserves.
The Debt Burden Is Mounting
The escalation in net debt is a red flag. While the company has historically relied on debt financing to fund expansion into new geographic markets—Australia, Europe, South Africa, and the United States—its current leverage ratio has surpassed the industry average for circular‑economy providers. With no dividends paid and no dividend‑reinvestment plan in place, the company’s capital structure appears unsustainable, especially given its declining earnings.
Strategic Implications
Operational Reassessment – The stark decline in underlying EBITDA and net profit indicates that the current operational model is no longer viable. A rigorous cost‑control initiative, coupled with a strategic review of the ITAD and packaging portfolios, is essential.
Debt Management – The rising net debt necessitates immediate refinancing or deleveraging. Failure to address the debt burden could trigger covenant breaches or, worse, insolvency proceedings.
Investor Confidence – The market cap of AUD 17 million reflects a steep discount from the company’s historic valuation. If the company fails to reverse its negative trajectory, shareholders will likely demand a corrective action—whether through a capital call, asset divestiture, or a strategic partnership.
Geographic Focus – The packaging segment’s resilience in South Africa and Australia suggests a potential pivot back to these regions. Diversifying away from the more volatile North American ITAD market could stabilize revenue streams.
Conclusion
Close The Loop Ltd.’s recent half‑year results expose a business under strain. Revenue growth is superficial; profitability is eroding; and debt is rising. Without decisive action—both operationally and financially—the company risks further erosion of shareholder value and potential insolvency. Investors and stakeholders must demand a comprehensive turnaround plan that addresses the root causes of the decline and aligns the company’s strategy with the realities of a rapidly evolving circular‑economy landscape.
