05 February 2010 17:54 [Source: ICB]
Cereplast sees a stronger 2010 after a major facelift. Will demand for its bio-resins catch on?
MOLDING A successful bioplastic company in the middle of a recession is not an easy task, but Cereplast CEO Frederic Scheer is confident that 2010 will see a higher revenue stream for the company.
"Because the bioplastic industry is still in its infancy, bioplastic resins are still generally expensive compared to traditional resins," he says. "So when the economy is shrinking, environment is not the top priority anymore as everybody is just thinking about survival."
Cereplast started selling its 100% renewable-based Compostable Resins in November 2006 and its Hybrid Resins at the end of 2007. The compostable resins target single-use disposables and packaging applications, while the hybrid resins can replace up to 50% of petroleum content in conventional plastics with plant-based resins.
In June 2009, Cereplast also introduced its new bio-based foamable resin under its Compostable Resins line to compete with Styrofoam and other foamable petroleum-based resins.
As of September 2009, Scheer says 30 customers have already commercialized and introduced 95 different bioplastic products using the Cereplast resins. The largest contract they have finalized was with US paper and packaging company Georgia-Pacific last year. Cereplast expects Georgia-Pacific products containing its resins to hit the retail shelves in this quarter.
"We expect several more customers worldwide to start commercializing our products with our resins in the second quarter," says Scheer.
"With the cost-shaving from our restructuring program that started in May last year, and product commercialization from our customers, we expect to be close to break-even by mid-year."
Cereplast was also successful last year in raising funds from private shareholders. Cereplast raised $20m in January, $1.3m in July and $2.3m in December. The company also intends to up-list its shares from over-the-counter to a US-based senior securities exchange such as the American Stock Exchange or NASDAQ.
"Our institutional investors, all from Europe, interestingly enough, are long-term believers of what we are doing. The funding and the restructuring program are helping us not only to survive but to do things that are critical for our business," says Scheer.
The majority of Cereplast's restructuring focuses on moving its manufacturing and research and development (R&D) facility to Seymour, Indiana, from Hawthorne, California, as well as contracting a third-party US-based compounder to produce most of its resins.
Details about the US compounder, which Scheer says is one of the largest in the country, will be announced as soon as Cereplast finalizes terms of the contract by the end of the first quarter. Scheer also expects the restructuring program to be completed during the same period.
"The Indiana plant will allow us to drastically reduce our costs compared to California in terms of real estate, utilities and even cost of living for our employees," says Scheer. Cereplast cut its staff last year from 70 to 25 employees. But it plans to maintain its headquarters in California through a small office space in El Segundo.
"We will begin utilizing the Indiana facility for R&D operations and the manufacturing of our bio-resins as early as February. It made sense for us to reduce our leased space in California to improve cash flow and allow us to focus our strength in developing and marketing our resin worldwide," he adds.
Another goal for the company is to be more aggressive in sales and marketing, says Scheer. Cereplast expanded its European distribution in January with a new deal with US-based plastic compounds supplier A. Schulman. Schulman has been distributing Cereplast's resins to converters and manufacturers in France, Spain, the Netherlands, Belgium and Luxembourg since January 2009. The new agreement will encompass all of Europe.
Cereplast also plans to expand sales in Latin America and Asia, particularly China. In Brazil, Cereplast's resins are already being applied in margarine tubs produced by local agribusiness and food company Bunge Alimentos, a subsidiary of US-based Bunge; and in cutlery, cups, plates and carry-out bags produced by Cereplast's Brazilian distributor IraPlast-Krest.
"We had good success in Brazil last year and we expect to even grow larger in South America in 2010," says Scheer. "We have a couple of developments going on in Chile and Argentina as well, and we expect to add more partnerships in the coming months."
He adds: "South America seems to fully embrace the concept of environment and sustainability, and is willing to spend to get it done."
"We expect to be close to break-even by mid-year"
Frederic Scheer, CEO, Cereplast
Cereplast is seeking a bigger presence in Asia as well. Its clients, representing up to 25% of Cereplast's US sales, are already shipping their bio-resins primarily to China. "China is clearly becoming the manufacture center of the world and having a presence there makes a lot of sense. There is no question that demand there is growing," says Scheer.
Cereplast expects the US bioplastics market to reach $10bn in sales by 2020. Scheer notes that it had already reached $1bn in sales as of 2007.
Algae-based resins are expected to contribute in opening up a broad range of new bioplastic applications. Cereplast is developing monomers using algae biomass.
"Our plan is to use the biomass waste after companies extract the oil they need from algae," says Scheer. "Algae companies right now plan to sell the biomass to the cattle industry but we believe there is more value to obtain."
Scheer says the company is already able to incorporate the treated biomass into some of its resins, although still at low levels. The challenge, he says, is to find suppliers that can consistently supply the biomass that it needs.
Cereplast plans to develop the algae resin with a partner and expects the technology to become commercial before the end of 2010 or early 2011. The company is also looking at other biomass materials, such as wood chips and sugarcane waste as potential feedstocks.
"It makes sense to consider the availability of local feedstock wherever our resins are being manufactured. One key thing for us is to make sure we can adapt to the raw materials that will have the lowest environmental footprint," adds Scheer.
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