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Why shares in this ASX environmental company have soared 9% today

The Phoslock Environmental Technologies Ltd (ASX: PET) share price is up 9.5% at the time of writing following an update to the market earlier this morning on its operations in China, as well as the announcement of a new project in Brazil.

What does Phoslock do?

Phoslock is an international environmental company specialising in engineering solutions and water treatment products to remediate polluted lakes, rivers, canals and drinking water reservoirs. Phoslock has its headquarters in Sydney with offices in Brisbane, Beijing and Changxing, China, and Manchester, UK.

In 2017, Phoslock (Beijing) was formed to help remediate the massive Chinese algae and water pollution problem. Phoslock owns the patent for Phoslock, a water treatment product that inhibits the growth of harmful algal blooms (HAB) that lead to detrimental effects to both aquatic and human life. Phoslock (the product) is certified to be used in drinking water in North America, Europe, UK, Brazil, Australia and China.

The Phoslock share price has increased by over 100% during the past 12 months, peaking last August at a high of $1.52. It has since retreated, and has recently come under pressure due to coronavirus concerns. Phoslock shares are currently sitting at $0.81 with today’s gains.

China update

Phoslock announced that its Beijing office is now back at work, with government approval to re-start its factory. It anticipates that production should ramp up over the next month. It noted that it has inventory held outside China to last until mid-year.

Phoslock has no treatments in China planned until late March to April and no delays are expected. It also notes there is no effect on FY2020 sales guidance.

Details of new Brazil project

Phoslock also announced that through its Brazilian licensee, Phoslock has received a contract from CEDEA to treat one of Rio de Janeiro city’s main drinking reservoirs. The application has already commenced and will continue for the next 3 months, with an estimated value of over $2 million.

The company commented that this is a further instance of a growing number of local and government authorities in a range of countries having full confidence in using Phoslock in human drinking water reservoirs.

Phoslock further commented that Rio de Janeiro’s high profile has generated substantial media coverage of this problem both in Brazil and internationally. Consequently, it believes that the application of Phoslock to this reservoir is likely to lead to similar applications elsewhere in Brazil and in other countries, as this particular problem is widespread.

Chair Laurence Freedman AM commented: “With each successful application of Phoslock in lakes, dams and reservoirs, our ability to dramatically transform heavily polluted waterbodies – even those suffering from eutrophication – adds to increasing global acceptance and demand for our services.”

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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