Cereplast tightens European credit

In the renewable chemicals and bioplastic sectors, Europe has always been seen as the forefront of market commercialization given the region’s strict regulatory efforts that opens the way for more carbon emission-reducing chemicals and materials.


However, the growing Eurozone crisis, heightened business uncertainty and inventory trimming in Europe might lessen enthusiasm for any renewable chemical investments and commercialization in the region. In fact, US bioplastic company Cereplast stated on Tuesday that it has already tightened customer credit terms  amid a worsening economic outlook in Europe.

While Cereplast CEO Frederic Scheer stated that it remains confident it will be able to collect all outstanding receivables, it has halted all shipments to customers with outstanding invoices over 150 days. The company is also implementing new payment terms such as requiring advanced payments, letters of credit or bank guarantees.

Scheer said it has personally met with senior level executives of all of its customers with overdue invoices over the last two months. In its quarterly filing, Cereplast disclosed that it has one large European customer that accounted for 36% (or $7.6m) of the company’s outstanding receivables, and another large European customer accounted for 29% (or $6.1m) of their receivables.

This is not good news for a company who is still trying to establish its business worldwide. But compared to other renewable chemical companies out there, at least Cereplast has revenues (the green blog always has silver linings somewhere..).

Cereplast management said it expects to be paid between December 2011 and February 2012.

“While Europe’s macroeconomic conditions can be blamed for much of what we experienced, we had to adjust our payment terms to customers which will reduce the risk of outstanding balances becoming extended past our normal acceptable period.” – Scheer

The chemical industry in general has been very worried about Europe and economists at American Chemistry Council (ACC) even repeatedly warned that the situation in the Eurozone poses a big risk for the US economic recovery (Disclaimer: I stole this information from subscription-based ICIS News).

European chemical trade group Cefic also warned that year-on-year growth in European chemicals output in 2012 will be weaker at 1.5% compared to 2% in 2011. Cefic economists initially estimated 2011 year-on-year growth at 4.5% last June. Forecasters now expect 2012 EU GDP growth at 1% compared to initial prediction of 1.8% in June.

Cefic President Giorgio Squinzi said: “The continuing debt crises in the eurozone and high US government debt level have undermined macroeconomic sentiment since the summer. 

“Companies are hoarding cash. The uptrend in oil prices has halted, reducing the incentive to buy ahead. Added to this is increased business uncertainty, which is encouraging reductions in inventories. Lower output growth is the inevitable result.”

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