Arq on track with new carbon production facility

GREENWOOD VILLAGE, Colo. - Arq, Inc. (NASDAQ: ARQ), a $263.5 million market cap company known for producing activated carbon and other carbon products, has announced that its Granular Activated Carbon (GAC) production facility is on schedule, with initial production expected to begin in the first quarter of 2025. The company’s stock has shown remarkable strength, delivering a 102.9% return over the past year, according to InvestingPro data, though analysts note the stock is currently trading above its Fair Value. The company anticipates a ramp-up period leading to a full production capacity of 25 million pounds annually by the second half of 2025.

The GAC project at the Red River facility is progressing as planned, with Arq focusing on diversifying its customer base across various industries, including those involved in PFAS (per- and polyfluoroalkyl substances) remediation and biogas production. Despite posting 16.4% revenue growth in the last twelve months, InvestingPro analysis reveals the company is quickly burning through cash, though it maintains a healthy current ratio of 2.89, indicating strong short-term liquidity. The company is holding back on additional contract commitments to prioritize profitability over volume and align sales with the production ramp-up timeline.

Arq reported capital expenditures for the GAC expansion at Red River were slightly above expectations in the fourth quarter of 2024, totaling approximately $80 million for the year. The overruns were attributed to additional professional services, increased small-bore piping needs, and a commitment to maintaining project timelines. However, the company does not anticipate similar cost overruns in future phases of development, given the experience gained from the initial construction phase.

In a separate development, Arq has commenced legal proceedings against its design firm for the GAC expansion project, alleging negligence and breach of contract, which led to increased costs and time delays. The company seeks damages for these additional expenses but maintains that the legal action will not impact the product performance or the scheduled start of GAC production.

Arq will release its fourth quarter and full-year 2024 financial results on March 5, 2025, and will provide details on its earnings conference call and participation in investor conferences in due course. InvestingPro subscribers have access to 8 additional exclusive tips about ARQ’s financial health and growth prospects, with analysts currently maintaining a strong buy consensus on the stock with a $10 price target.

This update is based on a press release statement and contains forward-looking statements about the company’s anticipated production capacities, commercial opportunities, and cost optimization efforts. These statements are subject to risks and uncertainties, and actual results could differ materially from those discussed.

In other recent news, Arq Inc., a North American producer of activated carbon, has secured a $30 million credit facility from MidCap Financial. This move is intended to refinance existing debt, support capital expenditures, and meet working capital needs for corporate growth initiatives. The CEO, Bob Rasmus, stated that the financial arrangement would enhance the company’s financial flexibility and reduce capital costs. MidCap Financial, managed by Apollo Capital Management, sees this partnership as a strategic move to support Arq’s expansion plans.

In parallel developments, Arq Inc. received a Buy rating from Canaccord Genuity, which initiated coverage on the company’s stock. The firm’s analysis is based on Arq’s involvement in the activated carbon market, which is expected to grow significantly in North America. This growth is anticipated due to the recent implementation of the U.S. national drinking water standard aimed at eliminating toxic PFAS substances. Canaccord Genuity’s positive outlook on Arq is underpinned by the expected strong demand in the activated carbon market and the strategic steps the company is taking to position itself within this growing industry.

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