Spinnova's and Suzano's joint venture, Woodspin, assesses conditions for continuing its operations

Translation: Original published in Finnish on 04/03/2025 at 07:00 am EEST

The news follows Suzano's decision in February to withdraw from the planned investments in Spinnova's fiber production. The situation with Woodspin is difficult, as Suzano is unlikely to have an interest in the company, while we believe Spinnova cannot finance the loss-making Woodspin without partners. We expect Spinnova's strategy and the situation with Woodspin to become clearer before the summer holidays. Due to the ongoing review, the risk profile of Spinnova's stock is currently very high, as the uncertainty related to the strategic direction is significant and the company has to resolve very difficult questions. 

All options are on the table in the change negotiations

Spinnova announced yesterday that Woodspin, the joint venture owned by Spinnova and Suzano, 50% each, will assess conditions for continuing its operations and alternatively for closing them down.  The change negotiations initiated by Woodspin cover the entire staff working at Woodspin, a total of 33 employees. An alternative in the change negotiations is also a possible termination of the employment contracts of the entire personnel.

Woodspin has a heavy cost structure and a loss-making business. Turning the operations viable would likely require significant investments, for which obtaining sufficient funding is uncertain. In 2024, Woodspin made a loss of 6.7 MEUR, of which Spinnova's share was half. At the end of 2024, Woodspin's book value on Spinnova's balance sheet was 19.4 MEUR.

Decisions regarding potential personnel impacts at Woodspin will be made after the conclusion of the change negotiations, lasting at least 6 weeks. According to Spinnova's current estimate, the decisions made after the change negotiations will be implemented as soon as possible after the decision-making or at the latest by the end of this year. 

On February 28, 2025, Spinnova launched a strategic review, covering all of its joint ventures, and is planning future actions. Spinnova expects the strategic review to be completed in the coming months.

The news follows Suzano's withdrawal decision in February

The news follows Suzano's decision in late February not to invest in the industrial-scale production of Spinnova fiber. Our previous update explaining the background to Suzano's decision and its consequences for Spinnova is available here. With its strategic choice, Suzano is unlikely to have much interest in further developing and financing Woodspin, which has a factory in Jyväskylä with a small capacity of 1,000 tons on a pre-industrial scale for product and technology development and very small-scale production. We also believe Woodspin has been and will continue to be dependent on additional financing from its owners, and we do not expect that Woodspin in its current form can be turned profitable in the coming years. Similarly, we suspect Spinnova does not have the capacity to finance Woodspin on its own, next to its own operations. Thus, the situation is problematic and the owners’ interests in Woodspin may differ. So, the situation is quite complex. 

Due to the prudence principle, we have fully written down the Woodspin holding from Spinnova's balance sheet in our H1'25 estimates. The write-down has no cash impact. According to the financial statements, Spinnova also had a 0.4 MEUR absolute suretyship for the lease agreement of Woodspin's premises at the end of 2024. In addition, Spinnova's financial statements mention that Spinnova and Suzano committed in February 2025 to continue financing Woodspin until the end of the financial year 2025, but presumably, it is possible to deviate from this, at least by mutual agreement.

We expect answers from Spinnova to the strategic challenges before the summer holidays 

We also expect the Woodspin situation to be resolved as part of Spinnova's strategic review, which we believe will be completed before the summer holidays. We believe that there are significant uncertainties related to Spinnova's strategic direction, and the company does not have obvious or easy development paths for its technology at a fast enough pace after Suzano's withdrawal decision. Therefore, the risk level of the stock from the investors' viewpoint is currently remarkably high, although a lot of bad news has already been priced into the stock due to the EV falling to a negative level even with the 2025 estimate. In our opinion, Spinnova's unique technology also has some value due to the relatively advanced technological development despite the company's difficult situation.