Highcon installs Beam 2 systems at WestRock and Eurographic for folding carton production

Highcon customers in all segments report a record-setting 2023 with digitally finished jobs up 29% through the end of Q3 2023

Yavne, Israel October 23, 2023 – Highcon Systems Ltd (TASE: HICN), today announced a commitment by existing and new investors to make a new equity investment in the Company, a restructuring of its bank loans and credit lines and the receipt of orders for two units of the Highcon Beam 2C worth $~4M.  Building on these important achievements, the Company has built a new business plan to reach positive cash flow and toward operational profitability in 2024.  In addition, Highcon is announcing the installation of two units of the Beam 2 digital die cutting system in Europe for folding carton and together with BHS Corrugated Maschinen (BHS) today jointly announced a Strategic Partnership expected to have far-reaching implications for the digitalization of the corrugated packaging market.

Strategic Partnership

BHS Corrugated is the leading provider of solutions for the corrugated industry. BHS Corrugated and Highcon recognized that Highcon’s unique technology is starting to serve an important role in the core market of BHS Corrugated. Moreover, BHS Corrugated is convinced that the incorporation of Highcon’s digital die cutting equipment into its Box Plant 2025 strategy can well serve the industry’s needs as it moves towards greater automation and digitalization. Therefore, BHS will support Highcon with customer leads to acquire market potential and access.

Equity Investment and Financing Package

Highcon’s three leading investors, Landa Ventures, Jerusalem Venture Partners and LR Group have committed to jointly invest several million dollars to provide the Company with its financing needs.  Hamsehabev, a leading Israeli turnkey contract manufacturer and longtime strategic manufacturing partner of Highcon, is also joining as an investor in Highcon for the first time.   Additionally, SEE (formerly Sealed Air), whose convertible loan to Highcon was announced in December 2022, is enlarging its convertible loan.  The total value of the actual investment will only be finalized in November following the procedural steps required to complete the fund-raising, but will not be less than $2.5M.

“The macroeconomic and investment environment have left Highcon no choice but to slow down its investments in the future and to focus on short term business goals.  I am confident that this “back to basics” approach will well-position Highcon to later re-focus on its future product road map” said Alon Bar-Shany, Highcon Chairman.

Benny Landa, digital printing pioneer and long-time Highcon investor and Board member added:  “My fellow shareholders and I are totally committed to Highcon and its strategic vision.  We are proud to be associated with this important and innovative company.”

“These are clearly difficult and challenging times” said Hanoch Sternlicht of Hameshabev.  “I continue to believe in Highcon and am proud to turn that belief into action by participating in this funding round.”

Based on the investors’ commitments and the joint announcement with BHS, the Company was able to secure a restructuring of its debts and credit facility with Bank Mizrahi Tefahot.

Together with two new orders for the Beam 2C, the total effective injection to Highcon will be around $10M.

“SEE looks forward to continue partnering with Highcon to deploy their technology in our operations” said Sergio Pupkin, SVP of SEE.

Restructuring and Newly Focused Business Plan

Highcon’s Board of Directors has approved a new business plan for the remainder of 2023 and for 2024, with the goal of bringing Highcon to positive cash flow and towards operating profitability in 2024.  Integral to this plan is a major restructuring and downsizing, reducing the Company’s burn rate and suspending investment in long-term projects for the next 12 months while retaining the ability to resume them in the future.  Following the restructuring, Highcon’s cash burn will be reduced by $6-7M annually.

Shlomo Nimrodi, Highcon CEO comments: “It hurts to release dedicated and professional coworkers.  We don’t do it lightly – but, unfortunately, it is a necessary step in securing the long-term success of the Company at such a challenging time.  Our customer-facing functions will not be impacted in any significant way to assure continuity in our customer support as well as supporting expected new installations in the next 6-12 months; our commitment to customers’ success is unwavering.”

Setting new records

Highcon’s customers are having a record-setting 2023.  The number of jobs produced on Highcon equipment was up 29% for the first three quarters of 2023 relative to the same period in 2022.  This is the strongest growth seen by the Company’s customers since Highcon narrowed its focus to Folding Carton and Corrugated in mid-2019.

Jobs per system are up 15%, indicating that the growth is both organic and driven by new installations.  This strength is a strong indicator that Highcon’s systems address acute market needs.  Several customers’ systems are reaching full capacity indicating the opportunity to install additional systems at these sites.

“Our Beam 2 system has become a key element in our offering.  In the most recent quarter, we produced 999 Highcon jobs – the largest number for a quarter. This quarter we have already produced 5)% of the entire production volume of Q4 last year,”  observed Charles Linney, Director at W & J Linney.  “We are currently reviewing a second machine as although the Beam 2 is extremely reliable, we like to have spare capacity on our kit to make sure we can accommodate our clients’ requirements if needed and a backup plan just in case of any unexpected issues.”

 Highcon’s customers includes leading converters –WestRock with a third system 

Highcon’s customer base includes some of the most prominent converters globally, some of whom have multiple units.  “I view customers who invest in multiple Highcon systems as being the best proof point of the value that we can deliver” said Nimrodi.  “I am proud that WestRock is a long-term customer who recently installed a third Highcon unit, the first in Europe. This unit will be focusing on Health and Beauty Folding Carton applications. The other two previous installations are in both folding carton, in Mexico, and corrugated in the U.S.”

First Highcon Beam 2 in Poland

Eurographic, a printing and packaging company located in Sweden, Denmark and Poland, has purchased a Highcon Beam 2 digital die cutting system for its Polish operation.  Highcon worked with its Polish partner, Digiprint, on this transaction.  The system will be used amongst other things for digital web-to-pack folding carton contract as part of a complete digital workflow.  With this installation, Poland will be the first country in Europe with both Beam 2 and Beam 2C, the latter installed at UDS.

“Highcon’s Beam 2 system perfectly meets our need for high quality, small batch carton production” said Bartosz Nowakowski, Poland Country Manager with the Eurographic Group.  “With its short setup time and tool-free production, the Beam 2 will help us meet the demanding service levels that we have committed to our customers.”

Looking ahead to drupa 2024

With the important developments announced today, Highcon can focus on the execution of its business plan.  The road to drupa will include important announcements focusing on the strategic adoption of Highcon technology by influential users as well as extensive market activities to share the Highcon vision and solutions with target customers.  Highcon will be exhibiting in Hall 9 at drupa 2024 where it will be focusing on Folding Carton.

“Undoubtedly, the Folding Carton market has been slower than other packaging markets in adopting digital technologies” said Simon Lewis, Highcon’s SVP of Marketing & Business Development.  “But this is changing.  Due to our technology’s ability to unlock unparalleled efficiencies, savings and sustainability as well as opening up profit-driving new services for short-run digitally finished carton jobs, digital adoption is starting to accelerate.  In addition to the two newly announced installations, it’s this trend that has excited our strategic investors and provided the continued confidence to support us on the next phase of our journey – making digital finishing a mainstream technology.”