Investor Presentation November 2019 (ASX: SES) Company overview - - PowerPoint PPT Presentation

(ASX: SES)

Investor Presentation

November 2019

Changing the World of Packaging

Company overview

A leading global producer of eco-friendly bioplastics from its patented bio-based resin technology

SECOS is Australia’s leading provider of renewable biopolymer resin, film and bags

Biopolymer (Compostable & BioHybrid™) Resin Biopolymer & Traditional Film & Bags

Snapshot

• Australian Company - listed on Australian Stock Exchange
• SECOS saw significant growth in Bio-Polymer sales year on year =>

market is changing rapidly, Brands are evaluating Compostable Technology in their offering

• New and emerging sales opportunities in USA, Mexico, Australia,

South Africa, New Zealand, China, Malaysia, India, many countries given ‘plastic’ concerns.

• SECOS has production plants in Malaysia (2) and China (1)
• Sales offices in Melbourne, Malaysia, China and USA servicing 14

Countries worldwide

• Management and staff own >25% of company
• New Resin Grades and Film & Bag Applications have been developed

and launched

2

Changing Regulatory Environment

3

• Indian Government move to ban (yet to be implemented) single use plastics has driven demand in

compostable resin & bags. Some Indian states have mandated compostable/biodegradable replacements

• Mexico close to banning single use plastic bags; compostables are being touted as a suitable alternative
• Europe issued damning report on oxo-biodegradable suggesting that they are not a solution.
• Increased interest from Diaper & medical film producers to establish compostable alternatives =>

compostable diaper film sales underway ex-SECOS

• Major brand engagement is demonstrating a high interest to reduce plastic use
• New compostable markets are emerging which 12-18 months ago were embryonic – i.e., Courier bags;

Food bags i.e., Grape bags & Box liners

Market Drivers

4

Each year approx. 80 million tons of soft plastics is used in packaging (food & consumer) or the production of bags and

• pouches. Ellen MacArther foundation describes the end-use of this

plastic packaging as follows:

• 32% of plastic packaging* ends up as unsightly waste in
• ur marine & land environment
• 40% of plastic packaging* ends up in Council/City land-fill
• nly a small portion is recycled

Changing regulation towards traditional plastics is being driven by graphic evidence of plastic build-up on land & in sea. This has led regulatory changes in Countries, States & Towns:

• Banning or partial banning of single use plastics
• This is turn is driving branded retailers to reduce plastic use in

their packaging & branded bags

*Ellen MacArthur Foundation

Options to reduce plastic use

5

Increase use of recycle plastic (rPE) in packaging:

• Most converters can purchase and use recycle plastic (rPE) in

packaging production, however recycle solutions at end of life for plastic packaging remains challenging.

• End of life soft plastic recycling is limited, for reasons such as :
• Soft plastic recycle streams of consistent quality are hard

to obtain => leads to variability in mechanical properties.

• So many recycled sources leads to possible contamination
• f plastic
• Use of recycled plastics lacks legislation & guidelines
• The difficulty to recycle soft plastics has meant a lot is going to

costly landfill, which is against Circular Economy principals.

• Conclusion: Compostable plastics are highly attractive where

recycling limitations exist.

Options to reduce plastic use

6

Oxo-Biodegradable – EU report recommends

• ‘Oxo-degradable plastics are not a solution for the environment and that oxo-

degradable plastic is not suited for long-term use, recycling or composting’’.

Paper alternatives

• Production of paper produces 6 times the green house gas emissions vs

Compostable film alternative (RMIT University)

Non-plastic replacements

• Rope baskets, non-flexible solutions - potentially expensive

 Compostable polymers are a viable alternative to reduce plastic use.

• Offer barrier properties not offered by Paper
• Are Suitable for use in Food Applications
• Can be diverted to Organic Waste Streams
• Adoption to reduce plastic use does offer a good news story to customers
• f brands

SECOS Group – Product Development

7

SECOS Product Pipeline:

• Development of new biopolymer resin

formulations (e.g. Home Compostable; Higher Mechanical Strength formulations).

• Development of new film

applications/bags/pouches to utilize cast & blown film assets (e.g. Compostable hygiene film for protective gowns & diapers; Courier Bags and other new applications).

• No. of

Resin formulations/ Applications

SECOS Group – Capabilities

• SECOS Asian-based production assets have easy access to key biopolymer supply lines & significant Asian

based markets.

• SECOS is integrated between biopolymer resin and film, which offers advantages for packaging companies

wishing to develop new film/bag opportunities.

• IP – Formulation Patents and know-how which will engender new application developments.
• Film competencies & knowhow => hygiene; medical; cast line & substantial blown-line experience
• Extensive sales footprint extending (India, Sir Lanka, Japan, UK, Thailand, South Africa, Mexico, USA,

Australia, New Zealand, & other countries)

8

SECOS – Biopolymer Resin Sales Development

9

Resin Sales:

• Product Extension has broadened the

application opportunities for resin sales to converters:

• Home Compostable (food grade)
• Higher Mechanical Properties
• Extension of sales territories via

appointment of new sales agents

• More consistent Council sales

SECOS – Biopolymer Film Sales Development

10

SECOS Group:

• Pick up in compostable film interest for

hygiene & medical applications

• New blown line installed in China to cater to

narrow-width hygiene and medical film applications and other applications.

• Intention is to increase compostable film

production via utilization of existing Cast line capacity in Malaysia; following more development & trial work

SECOS – Biopolymer Bag Sales Development

11

SECOS Group:

• Recycle crisis & cost of land fill has driven the

adoption of food organics & garden organic (FOGO) initiatives which often utilize compostable bags to divert food waste to

• rganic treatment stations.
• Compostable bags adoption in pet-waste

market continues

• As single use ultra thin plastic bags are banned,
• pportunities present themselves with retail

brands searching for replacements to traditional carry bags, produce bags and food packaging.

SECOS – Traditional Film Sales Development

12

Traditional Film sales of Stellar Malaysia Plant is increasing profitability:

• Improving sales volumes from

acquisition of new customers

• Transfer of Stellar Film Australia

customers to Malaysian sales following Stellar Films Australia closure

9,000 9,500 10,000 10,500 11,000 11,500 12,000

2016 2017 2018 2019

Sales $'000

Financial Year

Traditional Film Sales

Traditional plastic sales growing when adjusted to reflect closure of the

Company Capitalization

13

SECOS Group:

• Company valuation improving
• Focus on new product development &

delivering new grades is adding to new

• pportunities we seeing in the market
• Recycle Crisis; anti-plastic thematic driving

interest

• 12 month share price high
• Company capitalization AU$37mil.

SECOS Group: Company Financials

14

• Company debt substantially down
• Reduction in Convertible Notes on issue
• Reduction in funding earlier payment of

receipts

SECOS Group: Company Financials

15

• Operating cash outflow reducing with sales
• Disciplined approach to capex investment

and overheads.

• Improvement in margins:
• Cost down on raw materials as scale

improves

• Output enhancements through low-

cost debottlenecking activities

• 500

1,000 1,500 2,000 2,500 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19

$'000 Quarter Ended

Operating Cash Outflow

Sep-18 Dec-18 Mar-19 Jun-19 Sep-19

Margin %

QTR Contribution Margin % excl Stellar Aust

Board & Executive

16

• Joined SECOS in Oct. 2018; brings 15 years

polymer experience, and significant turnaround experience.

• Previously CEO of Australian of Hoechst SA &

TOTAL Petrochemicals subsidiaries.

• GM of TOTAL Polystyrene Asia, based in China.

Ian Stacey

Chief Executive Officer

• Joined Board in Dec-2012
• Chairman since Oct-2013
• Executive and Director positions with various
• rganisations and industries including Financial

Services, Telecoms, Publishing and Arts

Richard Tegoni

Executive Chairman

• 30+ years plastics and packaging experience

including executive position with Orica

• Successfully transformed Stellar Film out of

Orica and later merged with SECOS

Stephen Walters

Executive Director

• Joined Board in Sep-2016
• Former partner of Ernst & Young USA

Donald Haller Jnr

Non-Executive Director

• Joined Board in Jul-2018
• Former Vice President Finance of ICI
• Former CFO of Securency

David Wake

Non-Executive Director

• Joined Board in Nov-2018
• Chairman of GMHBA Ltd
• Non-Executive Director of AG Coombs Group

Pty Ltd

• Chairman KM Property Funds Ltd.

Jim Walsh

Non-Executive Director

• Directors all hold shares & are issued shares in lieu of salary
• Key executives have solid industry experience

Company Outlook

17

• Significant increase in the number of Australian Councils adopting Food Organics and Garden Organics (“FOGO”)

initiatives which incorporate compostable bag roll out will contribute to increase in compostable bags sales.

• SECOS’ compostable and traditional film business continues to see strong demand as branded companies
• perating in changing packaging regulatory environments searching for solutions to comply with circular economy

principals.

• SECOS to complete trial running Compostable Resin through cast film lines to enable better production scale

versus that available from blown-line production.

• SECOS is progressing negotiations which will enhance sales demand and plant capacity utilisation for the

production of compostable courier bags.

• SECOS’ R&D team will continue to develop new Biopolymer formulations in response to changing customer

needs, evolution of new applications and changing requirements for compostable resin certification, which are expected to lead to new sales opportunities in the medium term.