As Governments around the world continue pledging commitments to outlaw single-use plastic bags, envirotech company SECOS Group (ASX: SES) has seen rising demand for its compostable eco-friendly bags and have secured a new manufacturing facility to accommodate this growth.
The facility has been secured in Malaysia (where the other SECOS products are produced), under a 6-year lease agreement. Once online and operating at full capacity, SECOS forecasts that their bag manufacturing capacity in Malaysia will triple from 1,800 tonnes per annum to 5,400.
This Malaysian expansion comes just three months after SECOS confirmed expansion plans for their manufacturing facility in Nanjing, China to enable the plant to produce a separate 2,040 tonnes per annum of bags.
“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,” said SECOS CEO, Ian Stacey.
In order to bring the new Malaysian facility to operating standard, SECOS expects to deploy $2 million on purchase and installation of bag making machines which are expected to commence production by June 2021. This increased capacity is tipped to drive an additional $25m in annual revenue for SECOS across compostable resin, film, bin liners, kitchen caddies, and dog waste bags.
The global shift towards single-used plastic bag alternatives has been highlighted by core offtake customer Jewett-Cameron confirming they would increase their annual SECOS orders by 30%. This has been driven by unexpected uptake in the United States of SECOS’ pet waste bags which Jewett-Cameron distributes to US retailers, with the increase sending their contract beyond $5m per annum.
For the Half-Year ending 31 December 2020, SECOS Group reported a 30.5% year-on-year increase in revenue to $13.8m. Notably, the period also saw the Company enter profitability with $576k EBITDA and $66k net profit after tax.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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