Plastic-Bag Ban Spurs ‘Exploding’ Sales for Cereplast
Cereplast Inc. (CERP), the U.S. maker of plant-derived resins, said it may be profitable by the end of the year because of “exploding” European demand for environmentally friendly shopping bags.
The company will meet its forecast for sales rising to as much as $34 million this year, from $6.3 million in 2010, Chief Executive Officer Frederic Scheer said today in a telephone interview. Revenue may climb to $100 million next year, he said.
Cereplast, based in El Segundo, California, will be profitable at an annual sales rate of $35 million and with a 25 percent gross margin, which should occur in December or early in 2012, he said. Cereplast rose as much as 9.5 percent in Nasdaq Stock Market trading, the most since Dec. 17.
About 85 percent of sales are in Europe, where Italy’s ban on plastic shopping bags and legislation in other countries favor renewable plastics, Scheer said. A third line at Cereplast’s Seymour, Indiana, plant will start up on Sept. 1, boosting resin output to 80 million pounds a year. Seymour will be sold out by mid-2012 and a 220 million-pound capacity plant in Cannara, Italy, will begin production at the end of 2012.
“The European market is really exploding,” said Scheer, who is also Cereplast’s chairman and largest shareholder. “After 20 years of struggling in this industry, all of a sudden we see the industry taking off.”
Cereplast rose 35 cents, or 7.9 percent, to $4.79 at 4 p.m. New York time. The shares have gained 16 percent this year.
The Italian plant will cut shipping times to key customers to a few days from as much as six weeks currently, improving margins, Scheer said. Purchasing the facility and getting it ready for bio-resin production will require as much as 12 million euros ($17.4 million) of project financing, he said. Cereplast qualifies for subsidies and reduced loans under Italian law, he said.
“There is a tremendous amount of legislation which is going our way in Europe and the rest of the world,” Scheer said. “India, Brazil and even in Africa you have regulations that are pushing the use of biodegradable and compostable products.”
PepsiCo Inc. and Coca-Cola Co.’s development of bottles made from renewable materials is putting pressure on other companies to meet consumer demand for environmentally friendly packaging, regardless of legislation, he said.
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