Desert Control – Ticker DSRT ( NEW!)
Ticker: DSRT
Listings: Merkur Market Norway
Market Cap: 638 MNOK
Share price: 15,7 NOK
Desert Control offers the solution that can revolutionize the war against desertification which is one of humanity’s greatest challenges since every year millions of people become climate refugees due to infertile lands. The patented product Liquid Natural Clay (LNC) from Desert Control can turn desert sand into fertile soil in less than 7 hours. A process which previously has taken between 7 and 12 years. This is a true game-changer. Desert Controls product offers a strong value proposition for customers with short payback times. Their LNC product reduces water consumption up to 50% and increases crop yields up to 62%. Payback times for customers on water consumption alone is expected between 1-2 years. Changing desert to green land also reduces CO2 emissions by between 15 – 25 tons/hectare annually.
Below you will find an extensive CEO interview with Ole Kristian Sivertsen which took place in the middle of june 2021.
Below you will find an extensive CEO interview with Ole Kristian Sivertsen which took place in August 2021.
ESGFIRE: Hi Ole and Welcome to this interview!
Ole: Thank you!
ESG: Have you secured your production method in a way that makes it a sustainable process? Scalability of the production?
Ole: Yes, we have done, and this is also why we choose to go with distributed approach using mobile factories to produce on site where we are delivering the LNC treatment.
Otherwise, the alternative would have been to build centralized factories with a lot of shipping with negative effects compared to sourcing raw materials locally and create job opportunities in our local markets as is our current business plan. Our current approach gives us a good ESG and circular economy. Everything in our production is produced locally. We aim to create a platform that can scale exponentially on a global level.
ESG: You just took in 200 MNOK for your listing, how far will this money get you?
Ole: It will get us quite far in terms of finalizing our scale up based on the prototypes of mobile factories into commercializing our product into UAE and enter our market presence into the US. We are confident we will reach those objectives.
We have shared a prognosis with the market in which we believe we will become profitable with the funds currently at our hands.
ESG do you see the need for more external funding?
Ole: Our entire fund raising for the Euronext listing was built on 2 by 2 model which means two countries and two segments:
Two segments being the commercial greenery and landscaping market and second more important one is the agriculture market including forestry and elements of food security. Our third market will be eco system restoration which will be added on.
The current business plan focusses on these two markets, and we have sufficient funding for the UAE as a platform for the Middle East, North Africa (MENA) region and then to also enter into USA focused on California, Arizona, and Nevada.
Worth mentioning is that with this plan we are only tapping into a fraction of the total addressable market. When we have more revenues it’s also easier to fund our expansion with green bonds and similar financial instruments.
The Total addressable market is about 110 countries and 3-4 different segments. Our only hindrance to taking on all of these is operational scalability, and if we run into obstacles for raising more funds.
ESGFIRE: Do you have any competitors in this field? What does competition look like?
Ole: I think the biggest competitor is the one I call ignorance and lack of knowledge.
The issues that our products address, topics such as desertification, are happening out of sight for most people. Soil degradation is happening under our feet, and the vital top soli is getting thinner from underneath. Some people become aware by seeing documentaries like «Kiss the Ground» on Netflix.
There are substitute products that could be used as complementary with Desert Control’s products such as biochar, polymer’s, peat moss and other things. The main difference from us is that while we are liquid, they are solid. We could potentially help liquify some of these products to decrease their intrusiveness or use them in combination with our solution.
There are of course other things that compete with us occupying a piece of customers wallets. However, if you look at the global market, the costs of desertification for the global economy is 490 million USD per year. We definitely need competitors because this is a huge market, and we must turn it around to safeguard the future for people and planet.
ESG: Do you have any plans to get a secondary listing perhaps on Nasdaq in the US in the future?
Ole: No plans, but it is possible. The nature of our business is global.
We are currently listed on the Euronext Growth index of the Oslo Stock Exchange in Europe where we are born.
It made sense to have access to capital from our closest market. However, if you look at our global expansion it may at some point make sense to consider other markets to be listed on.
We do already frequently get requests from investors who want to be part of our journey and who say it would be easier if the company was listed on other markets.
ESGFIRE: Patent protection, how comprehensive and how long is your product protected for?
Ole: Our patent is solid it covers the process and the actual binding between clay and sand particles in the soils. I’m not a big believer in building castles and walls and protecting things with patents, we need to focus on being the best at what we do. Our main patent was filed 2007 and approved, so naturally it will last 20 years (2027). We are working on potential additional patents. We have main patents and then we create patents around it. Even before Desert Control was established in 2017 it took 12 years to make it work in a way that it does not bring any harm to nature. Our product is not like software, when you deal with nature you need a full calendar year and then 4-5 natural cycles over time to get it right. It’s a lengthy process for any potential competitor. Further we believe our know-how and understanding about how to formulate our product optimally for each targeted soli type and the unique preferences of different plants and crops will be a good way of adding value for customers and staying ahead of competition at the same time.
If we play our cards right and execute on our official strategy we will maintain our competitive advantage for the unforeseeable future because it’s about how you build a competitive platform before competitors arrive. Our goal is to have a product and knowledge base as a constantly learning and evolving platform. That way, anyone who tries to copy us they will simply copy yesterday’s news.
Our goal is to have a product that’s so scalable and automated that it does not require training because then you cannot scale. Our goal is to create a model that can scale comparably to Starbucks, McDonalds etc. with a mobile soil health kitchen. The mobile soil platform will be the core. The algorithms for soil treatments will be the core IP treatments and will be in the digital cloud and not in the unit.
ESGFIRE: What will be your primary customer focus initially?
Ole: Our primary focus now is the UAE, and next we will expand to the USA. The customer focus is within agriculture, forestry and landscaping. In many ways these segments tie closely together when it comes to for example food security. We even discussed it with on our Board of Directors in terms of core values. When we have powerful innovation why focus on landscaping? Food security is most important. But it ties together as I said. Let me explain.
A country like the UAE have to maintain green landscapes, parks and gardens. The alternative would turn these areas into desert, temperatures would increase, CO2 is released. This would make it uninhabitable. But what if we could reduce the amount of water required to maintain green landscapes? That could free up water to be used to cultivate agricultural land and strengthen food security.
If we can reduce water consumption for landscaping by up to 50 % AND shift that water into agriculture and food security initiatives, we clearly see how it all plays together.
I have met farmers that are only cultivating half of their land because they can’t get enough water. They only have half the water they need. So, if Desert Control can reduce water consumption by 50 % these farmers can double maybe even triple their production.
The revenue split in our initial business plan was something like 60 % landscaping and 40 % agriculture, but it will shift soon. We needed to free up water for agriculture which will likely outgrow landscaping as the biggest market ahead. Future revenue split will likely be 60 % agriculture and 40 % landscaping.
ESGFIRE: Does your LNC product make customers eligible for carbon credits?
Ole:
We have looked at it and we are getting advice from a group specializing in this with Equinor and others. We see a high potential for this. Nature based solutions can offset sufficient CO2 to make up for 57 % of the Paris Agreement’s 2DS target. Soil rehabilitation has a global potential between 5-6 gigaton offsets of Carbon dioxide (CO2) per year and could stop deforestation which represent another 8 gigatons. People cut down trees because they need to make space for agriculture. To avoid that with sustainable farming and restoring soil holds a massive potential.
Getting carbon credits is a lengthy process and getting measurements where you are able to actually able to calculate the net additive effect needs to consider if you are doing anything that is releasing carbon. This is good for us because we have a non-intrusive way to apply our product into the soil in ways ensuring no carbon escaping in the process.
A supplementary product such as biochar is great because it also contains carbon. So, for every tone put in the ground you could imagine getting a ton of carbon credits, but it’s not that easy. Because when tilling and turning soil to work the biochar into the ground, it releases a lot of carbon stored in the soil, this because when carbon is exposed to oxygen the reaction may turn it into carbon dioxide (CO2), and as a result it will be released.
We think it will take about 1-3 years until we are eligible for Carbon Credits.
Luckily, we are not depending on it, but it could help the people who are most dependent on our LNC product that can’t afford it such as people in Africa.
ESGFIRE: You had a project in Egypt a while back how is the progression on this?
Ole: The project in Egypt was part of the 12-year R&D by the inventor and co-founder. During this time there was a lot of testing in the field where the LNC product was tested in Egypt, Pakistan and many different places even in a wind tunnel in China.
At the moment now we have a lot of requests because it’s been tested in Egypt, we naturally also get requests from there. We however are not expanding beyond UAE yet since we focus and momentum before expanding more broadly ahead.
ESGFIRE: Is there any dialogue with foundations and climate NGOs for companies to use Desert Control’s LNC product as a way of CO2 compensation?
Ole:
We have requests, and we may run some pilots with 1-2 of them and see how it works out. We are also discussing with the likes of United nations, UNCCD and also with an organization called ARK 2030 who are dedicated to massive restoration of global ecosystems. It’s a very good idea and we have requests from local companies in Norway looking for this, asking for example if we could create a green oasis in the desert to contribute towards CO2 offsetting and serving as a CSR initiative for the company.
Further I believe it will be important to drive more public engagement. To succeed with this, we need to simplify the message. It’s very visual and easy relating to paying a dollar to plant a tree as an example. In the same way we should make it visual and engaging to donate dollars for turning desert into fertile land producing food.
ESG: Since your product still requires additives such as fertilizer, have you considered teaming up with any regenerative agricultural supplier in the organic fertilizer industry such as for example Earthrenew?
Ole: Correct, our product is not a fertilizer, LNC makes sandy soil capable of retaining water and nutrients. If you thereafter manage the land in regenerative way, you may have lasting impact of the treatment, but the soil still needs nutrients. For this, partners in the organic fertilizer industry can definitely add value. Our product does not require tilling, and we could simply apply liquid fertilizers and other substances such as natural fungi or soil microbes specifically for that area.
ESGFIRE :
Can you tell us more about the cooperation with the United Nations
Ole: Yes, basically we are looking to when we reach scalability with our production to be a part of the so called great green wall initiative, it’s on a high-level ambition to rehabilitate. (hyperlink https://www.greatgreenwall.org/about-great-green-wall)
The green wall project is 8000 kilometers from Senegal to Djibouti it’s about creating a 100 million hectares ecosystem restoration which will offset 250 million tons of carbon a year and create more than 10 million green job in rural areas in Africa.
We were planning before covid to launch a pilot in Senegal study but unfortunately Covid has put slow to this. However, once it’s feasible to operate there again with vaccines we will reengage with the UN team to look at countries where we will cooperate with the local government and the United Nations for a feasibility study. The Great Green Wall has already attracted 17 billion dollars of funding and is making progress.
ESGFIRE: What do you view as main possibilities and risks for Desert Control in the coming years?
Ole: The main possibilities are in the middle east and for us at this stage, and we focus on developing a scalability platform, generate revenue, and expand across the region and enter USA with agriculture as our primary segment supported by landscaping .
The larger opportunities come to play with forestry’s and planting of trees with the shift of the Biden administration in USA. There are supportive programs when it comes to what we do for both agriculture and climate actions. These are programs we can tie into, and they could accelerate our expansion in the US; once we have a solid foundation, we can start attacking the rest of the 110 countries exposed to desertification around the world.
The main risks as I see it is how quickly can we scale up if there are tightened Covid-19 restrictions again?
What will be the financial impact on our customers if we have issues with Covid-19?
However, there will, regardless of Covid-19 still be a big need for local food security driving the need for our product.
ESGFIRE: What do you view as current short-term catalysts?
Ole: I think the potential of the deal and partnership MoU we just announced ( https://newsweb.oslobors.no/message/535373) can be a significant catalyst. If you read about the customer we have signed with, the potential becomes clearer. They manage UAE forests, nature reserves, wildlife and other natural resources. In the PR its mentioned that they maintain 11-13 million trees as an example. If we in partnership are able to demonstrate through the initial pilot, the benefit from LNC and how we can bring it to market in partnership, the potential is ENOURMOUS.
ESGFIRE: What does the financials look like for 10 million trees?
Ole: Let’s make a hypothetical simulated scenario for illustrative purposes .
An average tree needs 100 liters per day and a palm tree in the warmest summer needs 250 liter per day per tree. The bare minimum for survival that I’ve seen is 25 liters per day for one tree.
Let’s say you have 10 million trees that use, very conservatively, 25 liters per day, that’s 250 million liters of water every day. IF we can save 50 %, which we think is possible, we are saving every day 125 million liters. The average selling price with subsidies for farmers in UAE is 1 dollar per cubic liter.
That’s 125 000 dollars per day saved. Close to 3 750 000 dollars saved per month
Just the water saving alone here could be transferred to 1,5 million tomatoes of half a kilo each per day. Per year the savings is 40 million dollars per year saved.
The Saudi prince has said he wants to plant 10 billion trees but obviously he will need water for this. We have the solution.
ESGFIRE is there a backup plan if the UAE deal does not go well?
Ole: We will have deals in other areas to make sure we have plan A, B and C, this (UAE) will be our main priority because its huge and its already bringing us close to half of the revenue we need for this year 2021 in our projections anyway. With some other smaller project, we will reach our revenue target for this year.
We will not be quiet until October (when the results are expected for the UAE project). We are already in this potential partnership starting to develop opportunities for larger deals. We also have other opportunities that our team has developed over time through pilots mentioned in our latest operational update.
ESGFIRE: What does the current situation look like with warrants /options outstanding?
Ole: All is disclosed, the only thing we have is this stock option for employees nothing besides that.
The holdup period for employees is most likely a 4-year restriction.
ESGFIRE: What is the Lockup period for current shareholders?
Ole: Primary insiders are on a 12-month lockup.
ESGFIRE: What does the current burn rate look like? Do you expect to be profitable before needing more money?
Ole: Desert Control is well funded for future development and growth. The nature of the business allows flexibility for investments and cost to be aligned with customer demand and revenue. There are of course risks to all business ventures. For example, if Covid-19 suddenly causes a 4th wave with lockdowns we may suffer delays. However, the flexibility of our business model allows us to be prudent and aggressive at the same time. We are not taking on unnecessary burn rate before passing key milestone as an example.
ESGFIRE What does margins look like for Desert Control:
Ole: Our business plan announced for the IPO targets a gross margin of 40-50% and as the business reaches scale the model targets an EBITDA margin towards 30%. This is still to be proven with real numbers from projects and deliveries, and instead of overinflating expectations, we prefer to deliver and build the business ground up, stone by stone. We don’t have any need to overinflate the share price on the short-term, since we have a rock-solid long-term plan. We prefer to under-promise and over-deliver.
ESG: Thank you for participating in this Interview Ole we are looking forward to following the progress of Desert control!
Ole: Thank you!
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