Scoring relatively high on the pre 4C fluff scale I think the important information was:

SES quarterly revenue up 3.9% over same quarter last year at $8.2 million (excuse is supply chain disruptions bumping sales to next quarter, who knows? could be true)

Good growth last 12 months in Biopolymer sales across all lines.

Negative $2.6 million cash flow in last 6 months with ~7Mil left.

Some supply chain disruption ongoing --> building inventory to help offset

Negative cashflow combination of ongoing Capex and new R&D initiatives + inventory build

Flagged significant uptick in sales expected next six months due to increased capacity now online.

Thoughts:

Tracking along nicely with the thesis, doing what they said they would do (winning new business in the bio segments) . Happy that they keep running down the cash balance if it is being invested like it is currently.

Report can be found here

$7.0 million sales revenue (up 23%) from last year; (7.9 in receipts)

Net operating cash outflow of $0.9 mil

$0.7 million invested in plant expansion and new Research and Development Centre;

Covid-19 disruptions continued throughout the first quarter, however growth expectations for the second half (as previously communicated) remain on track;

Expansion of the new Malaysian biopolymer plant continuing to plan with 50% of new film lines installed;

$9.6 million in cash and no debt.

Few delays and disruptions related to covid having some impact.

Essentially all the bio-compostable product lines are growing exponentially I expect that this will continue due to strong demand being unlikely to subside. Trying not to overthink this one as I think there is a good chance it looks optically expensive but growth exceeds expectations.

Report here.

Record quarterly cash receipts of $8.9 million, up 24% on previous quarter

Net operating cash outflow was $0.9 million

Achieved record quarterly sales of $8.8 million with full year sales exceeding $30 million (unaudited) – year on year growth of 45%

Growth in compostable product sales continues with a 14.5% increase quarter on quarter and a 120% increase over the prior corresponding quarter

SECOS expects to report a significant improvement in its full year profit compared to FY20.

The company continues to invest in building new manufacturing capacity in Malaysia having completed the doubling of China compostable bag capacity in January 2021

The Balance Sheet remains strong with $11.3 million in cash and no debt

With a current annualized sales run rate of over $35 million (based on the June 21 quarter results of $8.8m) the Directors and Management expect the trend to continue into FY22

Thoughts: I actually think that SES's revenue next year has a good chance of being higher than the annulised figure due to new product capacity coming online. Cashflow may remain negative to even as they invest for growth something I agree with given the rate of growth that they are seeing. Remains hard to value but happy to ride the sector tailwinds unless things get too crazy.

Woolworths increases SECOS’ certified compostable bin liners from initial 88 stores to 203 stores

The initial rollout to 88 Eco Stores has performed above expectations resulting in SECOS being awarded an additional 115 stores within Woolworths’ retail network

Further validation that this is a product and solution that people want. I remain very optimistic about Secos' future.

Full announcment here.

SECOS is continuing to see strong growth in demand across its range of bio-based compostable products, driven by the global trend of consumers, regulators and brands to replace single use plastics.

Recent increases in demand include an increase in the minimum annual offtake under its contract with Jewett-Cameron (ASX announcement 10 August 2020) for compostable pet waste bags for the US market by 30% to 5 million AUD p.a. Together with additional volumes from other existing and new customers is anticipated to be over 6.5 million AUD p.a. for compostable products.

To accommodate growing demand, SECOS has committed to an expansion of its biopolymer resin product production in Malaysia by 200% from 1800 to 5400 tonnes p.a. This increase in capacity follows the expansion of its Nanjing, China facility in December 2020 which increased output by over 100% to 2040 tonnes p.a.

They have flagged $2mil for this expansion.

Thoughts: 

Continuing strong demand supports the thesis. I expect they will be able to sell everything they produce at a decent margin.

Consumers want this solution. They want the ease of use of plastic but don't want to pollute with plastic. 

SES is a developer and manufacturer of sustainable packaging materials, supplying patented compostable and biodegradable resins and packaging products to domestic and international customers. SES also manufactures a range of traditional plastic film, which are used in medical applications (e.g. medical gowns) and the hygiene market (nappy liners/femcare products). They are looking to divest away from the traditional business and grow the sustainable packaging business rapidly.

The plan is that as the transition to compostable bioplastics accelerates the company’s revenue with grow quickly accompanied by increasing margin on this revenue as bioplastics are able to be sold at a higher margin. This should happen over the next 3-5 years but I imagine that we will be using more and more bioplastics over the next ten years. Margin expansion on top of rapid sales growth is generally a great combination to be invested in.

In 2020 the company is basically breakeven currently with $21 million in revenue and $17 million cash (thanks to a recent $15mil capital raising). No debt.

They are looking to go through a cashflow inflection point sometime in the next 12 months.

Investing with a tailwind is very forgiving if you enter at the right price because even if you are wrong the rising tide can still lift your boat limiting the downside risk.

Key to this thesis is the rapid growth of the sustainable product lines and ongoing margin expansion it will be key to monitor these as while the transition to sustainable packaging is happening there is likely to be lots of competition.