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Secos has been having a few issues recently, closing down plastic film production to concentrate on environmentally friendly film, excess stocks of resin, COVID, etc.
Share price down to $0.045.
However I noticed that Belgravia Strategic Equities have increased their position in Secos from 9.6% to 10.7%.
Belgravia Group, run from Melbourne by Geoff Lord, does many things including sports for children, but is starting Belgravia Investments. I wonder what the connection is.
The Company’s March 2022 Appendix 4C follows.
https://www.asx.com.au/asxpdf/20220427/pdf/458bxpb4jhpkfs.pdf
OUTLOOK
The company is on track to deliver strong growth over the coming quarters however some uncertainty regarding shipping timing and costs remain challenges for the Company.
The Company expects to report a net loss for the full year due to lower margins than the prior year driven by raw material input increases, freight and logistic cost increases, expenses associated with the multiple Covid-19 disruptions, and flooding at the Company’s Malaysian port.
SECOS has been successful in passing through price increases to customers as contracts permit, while still achieving increased sales. The price rises in the quarter were however not sufficient to fully offset rapidly rising raw materials and freight and logistic costs.
The Company supplies packaging materials that are a critical component of many of its customers own supply chain requirements, and the Company expects to be able to pass on further price increases in the near term. Cost pressures will remain a challenge in the short to medium term, however the Company has begun to see initial signs of lower freight and input costs flowing through which are expected to assist with margin improvement in the fourth quarter and coming year.
The Board expects margins to normalize as these input and freight costs reduce and as the continuing growth in bioplastic sales increases capacity utilisation at the new Malaysian plant, reducing the unit cost impact of fixed manufacturing costs. The Company’s outlook and growth will be underpinned by:
• Expanding available biopolymer production in Malaysia which has capacity to produce over 480 million compostable bags plus 3,600 tonnes of compostable resin per annum.
• Increased penetration of the Company’s MyEco retail products, with an emphasis on waste diversion, courier bags and food applications, which is already yielding positive results with the expansion to 970 Woolworths stores.
• Development of new products and resin grades, with particular emphasis on new, high value laminate structures for food packaging applications,
• Supplying sustainable film to evolving hygiene and packaging markets utilizing available capacity in the Company’s Malaysian cast-film manufacturing plant.
• Developing smarter and more effective ways to manage Covid-19 related supply chain disruptions while also maintaining a safe workplace for staff, suppliers, and customers. SECOS has mitigated this uncertainty by increasing stocks and using less congested ports to land goods and transit them to customers. SECOS is establishing warehouse options to provide supply back-up for North and Latin Americas, offering more predictable delivery outcomes at a lower overall delivered cost.
The Company continues to experience a rapidly expanding sales pipeline due to increasing demand for SECOS bioplastic products and technology. The strong demand for certified compostable alternatives continues to be driven by the worldwide shift to environmentally acceptable packaging, legislative and regulatory changes, consumer buying behaviors and knowledge, and the expansion of composting infrastructure and technology.
SECOS has significantly increased their retail network in the US.
Following on from their announcement on November 2021 about their initial entry into the US market via US Veteran Canteen Services’ retail chain, SECOS has announced US United Natural Food Inc as a wholesale distributor of its MyEcoPet products to USA retailers. UNFI will stock three MyEcoPet products initially via 12 of their 58 Countrywide distribution centres.
The Veteran Affairs’ Veteran Canteen Services retail chain represented 97 stores throughout the US. The United Natural Food represents an opportunity of about 6,000 stores across the US (12/58 x 30,000 UNFI conventional grocery stores). This is clearly a step up in exposure.
Following on from a significantly increased manufacturing capacity largely via the newly built biopolymer manufacturing plant in Malaysia, the strengthing of supply chains and the establishment of a new Global Biopolymer Research and Development Centre, SECOS is well positioned for growth.
SECOS continues to grow sales with $7M cash and no debt.
Their newly established Biopolymer plant in Malaysia is now operational.
SECOS continues to expand its product distribution via major retailers and has invested in digital assets to support retail sales development.
SECOS Group Financial and Operational highlights below from their 4C below.
SECOS Group Quarterly Activities and Appendix 4C – December 2021
Financial Highlights
• $8.2 million cash receipts for December 2021 quarter, up 24.8% from the same quarter last year.
• Biopolymer sales grew 51% in the twelve months to 31 December 2021 compared to the prior twelve months ending 31 December 2020.
• $8.2 million sales revenue for December 2021 quarter, up 17.1% on the prior quarter and up 3.9% from the same quarter last year despite over $0.8 million of sales shifted to the third quarter of the fiscal year due to significant freight delays as a result of Covid-19 and major flooding in Malaysia.
• Net operating cash outflow of $1.7 million largely to support working capital for growth with investment in inventories increasing to $8.1 million as of 31 December 2021. SECOS’ strong inventory position will support sales growth in the second half and provide SECOS customers a more reliable supply chain as a counter measure against the disruption being experienced due to Covid-19.
• Capital investment in capacity expansion increased 200% in H1FY22 to $1.2 million compared to the prior corresponding period and new capacity is now online to support expanded growth in sales in the second half.
• The Balance Sheet remains strong with $7.1 million in cash and no debt.
Operational Highlights
• SECOS’ newly established Malaysian biopolymer plant is now operating with first shipments commencing in Q2FY22. Total installed capacity will be capable of supplying an extra 480 mil. compostable bags and 3600mt of bioresin or approximately $25 million in additional sales revenue per annum. The plant’s footprint has the capacity for a further 20% expansion in capacity of bio resin per annum as required to meet further sales demand.
Highlights
Disc: I hold
Financial Highlights
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02344062-3A561828?access_token=83ff96335c2d45a094df02a206a39ff4
DISC: I hold
Financial Highlights
• December quarterly sales of $7.9m were up by 50.1% vs the corresponding December 2019 quarter, and increased 34.2% vs the preceding September 2020 quarter,
• Biopolymer sales were up 71.1% from the September 2020 quarter and now represent over 73.3% of total sales,
• Driven by record biopolymer sales, SECOS expects to report a maiden profit for the first half for FY21,
• SECOS reported a net operating cash outflow of $1.4 million in December 2020 quarter after investing over $2.6 million in new working capital to support increasing sales volumes,
• The Balance Sheet remains strong with $14.3 million in cash and no debt,
• Capex investment continues with additional extrusion and bagging lines in China and Malaysia to support increased demand.
Disc : I hold on Strawman and TRW