Cereplast Forecasts First Profit Making Resins for Compostable Plastics

Cereplast Inc., the U.S. maker of resins for compostable plastic bags, said it will be profitable starting in the second half of 2011 as demand for plant-based products pushes output to capacity at its only factory.

Sales will triple to more than $5 million in the current quarter from $1.51 million in the previous three months as new supply contracts boost output to 25 percent of capacity, Chief Executive Officer Frederic Scheer said yesterday in an interview at Bloomberg’s headquarters in New York. Annual sales will quadruple in 2011 as the plant reaches capacity, leading to a profitable third quarter, he said.

Scheer, 56, is betting that newly enacted bans on petroleum-based plastic shopping bags in countries such as Italy and in cities in California will boost demand for plant-based compostable resins. Contracts with companies such as Mozzate, Italy-based bag maker RI.ME. Masterbatch Srl should boost output next year at Cereplast’s plant in Seymour, Indiana, to its capacity of 80 million pounds a year, he said.

“We need to demonstrate a critical mass of demand,” Scheer said. “That is exactly what will happen with these contracts.”

Cereplast, based in El Segundo, California, rose 25 cents, or 8.3 percent, to $3.28 at 3:59 p.m. in Nasdaq Stock Market composite trading, the biggest gain since Aug. 26. The shares have declined 15 percent this year.

Revenue Rising

Sales, which totaled $2.45 million in the first nine months of 2010, will reach $80 million to $100 million a year by mid- 2012, he said. Cereplast may sell more shares in late 2011 to fund construction for a plant in Europe as soon as 2012, Scheer said.

Cereplast essentially bakes treated corn and tapioca starches and soy proteins along with ingredients such as citric acid and castor oil to form resins that customers can convert into products such as bags and food containers, the CEO said. The resins biodegrade in a compost facility in weeks or months, depending on the product, Scheer said.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

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