High energy, freight and fixed costs will see Secos close its traditional plastic film production plant in Melbourne, and switch operations to the company’s production facilities in Malaysia.

Secos is currently going through a strategic review of its operations, and says preliminary findings from the review have confirmed the Board’s expectation that the company can achieve significant operating and overhead cost savings, to the tune of $1m a year, by switching production offshore.

Chairman Richard Tegoni, said: “The Strategic Review has identified material cost savings that will flow straight to the company’s bottom line, with a rapid return on the investment required to realise those savings.

"The consolidation of the company’s traditional plastic films operations will better use existing capacity in our Malaysian operations and is consistent with the company’s primary strategic focus on our rapidly growing, higher margin bioplastic sales. The changes will support our ambition of becoming a world leader in bioplastics.”

The Sustainable and eco-friendly bioplastics developer is currently raising $4m through a private share placement, $1m of which it will use to fund the closure of film manufacturing in Australia ..

The funds will be also be used to drive resins growth, with a sevenfold growth target by this time next year, as well as for working capital purposes to expand manufacturing facilities in Malaysia, and to manage inventory and receivables in USA.

The company has so far received commitments in relation to a private placement to sophisticated and professional investors of just over 15,000,000 shares at an issue price of $0.062 per share raising approximately $1.2m. The company anticipates completing the placement and issuing the placement shares on Friday.

In addition, the Company will seek shareholder approval to make placement of 4,500,000 shares to directors of the company, of which 1,600,000 will be issued to Chocolate Investments, an entity associated with chairman Richard Tegoni at a price of $0.062 per share; and 2,900,000 will be issued to Donald Haller Jr also at a price of $0.062 per share. The issue price of the placement and director placement represents a 7 per cent discount to the volume weighted average price in the prior 15 trading days of $0.066.

Secos says it has gained the strong support of its major shareholder Belgravia Strategic Equities in the placement, with Belgravia indicating its intention to take up its existing entitlement under the Rights Issue in full.

Richard Tegoni, said: “The funds raised will enable further consolidation of the Secos traditional plastic film operations. This one-off exercise will boost utilisation of Secos capacity in its Malaysian operations, and take material cost savings to the company’s bottom line of the order of $1m per annum.

“These changes will tighten the Company’s primary strategic focus on its rapidly growing, higher-margin bioplastic resin business. The Company’s outlook for this segment is strongly positive: we expect to increase bioplastic resin sales sevenfold, from the current annual revenue run-rate of $1m to more than $7m by June 2019 in this segment.

“This focus supports Secos ambition of becoming a world leader in bioplastics, a market with attractive demand dynamics driven by consumers increasingly requesting environmentally sustainable products, legislative change with several countries having banned single-use plastics, and rising pressure on Australian landfill sites from China’s ban on plastic waste.

“These new funds will empower the Company to aggressively boost revenue in its target markets, not just for FY19 but for longer-term growth in FY20 and FY21.”

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