Biopolymer producer SECOS Group Limited (ASX: SES) has committed to an expansion of its bio- polymer resin product production in Malaysia by 200% from 1800 to 5400 tonnes p.a. on the back of a surge in interest in its products.
SECOS has told shareholders that it is continuing to see strong growth in demand across its range of bio-based compostable products, driven by the global trend of consumers, regulators and brands to replace single use plastics.
The proposed increase in capacity in Malaysia follows the expansion of its Nanjing, China facility in December 2020 which increased output by over 100% to 2040 tonnes p.a.
CEO, Ian Stacey, said the recent increases in demand include an increase in the minimum annual offtake under its contract with Jewett-Cameron for compostable pet waste bags for the US market by 30% to A$5 million p.a. Together with additional volumes from other existing and new customers is anticipated to be over A$6.5 million p.a. for compostable products.
Mr Stacey said this strong and consistent growth is being driven by global industry tailwinds, in particular as single use plastics are banned in more jurisdictions around the world. Consumers, regulators and leading brands are reinforcing the pressure to replace single use plastics with compostable bio-based alternatives.
Incremental capacity from the new plants in Malaysia will support an additional A$25 million AUD in sales once at full production. Products including compostable resin, film, bin liners, kitchen caddies, and dog waste bags produced in the new plant are targeted for sale and supply both locally and internationally via Jewett-Cameron to ‘Big Box’ retailers and other newly acquired customers.
We are excited about our phase two expansion plans which will allow us to meet the rapidly growing demand for our biobased product range, expand our manufacturing capabilities outside of China, while at the same time provide manufacturing redundancies and improve the effectiveness of our supply chain,” Mr Stacey said.