January 23, 2025, ST. PETERSBURG, FL – Water Tower Research (www.watertowerresearch.com) has published an Initiation of Coverage Report on Arq, Inc. (NASDAQ: ARQ) titled, “Tightening Activated Carbon Market and Fully Integrated Low-Cost Brownfield Expansion Enable 81% EBITDA CAGR (24E-28E)”. The report can be accessed here.
Arq, Inc. (ARQ) is an environmental technology company producing activated carbon (AC) products that reduce or reverse environmental liabilities. These include, for example removing per- and polyfluoroalkyl substances (PFAS) or “forever chemicals” from public drinking water and impurities from renewable natural gas (RNG), both of which are leading to a significant demand growth outlook for granular activated (GAC). Overall, ARQ aims to be the safest, lowest-cost, and sustainably most profitable company in the AC industry.
In its current form, ARQ is the result of a February 2023 merger when US-based Advanced Emissions Solutions (ADES) acquired 100% of the equity in subsidiaries of the UK-based Arq, Ltd. ADES was a lignite-based powder activated carbon (PAC) producer with a strong business foundation, including its Red River, Louisiana production facility, large customer base, and top three market share in the US. Meanwhile, Arq, Ltd. housed the technology for production of bituminous waste-based GAC and a bituminous waste feedstock recovery and purification plant in Corbin, Kentucky.
With the GAC market expected to enter a period of supply shortage, ARQ is initiating a low- cost, high-return brownfield expansion. Our forecast period includes two new 25-million- pound GAC production lines starting up in 1Q25 and 2Q27, respectively. Altogether, ARQ has identified the potential for up to five phases totaling 125 million pounds GAC capacity. We expect GAC to command stronger prices and margins, which supports our forecast for EBTIDA to grow at an 81% CAGR (24E to 28E). ARQ had $57.4 million cash on its balance sheet in 3Q24 and is well capitalized.
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