Cardia has released the results of the strategic review of its manufacturing operations that began following the announcement of its proposed merger with Stellar Films Group.
Cardia Bioplastics and Stellar Films Group announced that they had taken the first steps towards a merger, in November last year. They completed due diligence, and the transaction document for the merger of Cardia Bioplastics and Stellar Films Group was executed in late January.
The key strategic benefit of Cardia and Stellar Films becoming one is additional production capacity enabling Cardia to deliver on the growing demand for its Biohybrid hygiene films without extensive investment into new capital equipment.
Cardia also has the opportunity to increase its blown film extrusion and bag making capacity through limited capital investment into Cardia's Chinese and Stellar's Malaysian production plants.
By threading the two group's operations together, the new company will deliver innovative, cost effective and environmentally preferred packaging solutions to its global customers. The group benefits from the pull-through of Cardia Compostable and Biohybrid resins for the manufacture of cast films at Stellar's manufacturing plants. These environmentally friendly, high quality and cost competitive films are tailored for the global personal care, hygiene products, pet care and medical packaging industries.
Adding to the benefits is the Akronn Joint Venture. Akronn's Malaysian operation will silicone coat Biohybrid cast films and convert them to film release liners for the personal care and hygiene industries. Biohybrid film release liners deliver soft touch, non-noisy and discreet environmentally friendly feminine hygiene pouch packaging. Already integrated in the product packaging is non-stick functionality that makes the requirement of additional paper release liners obsolete.
The merged group will benefit from the complimentary geographic presence of both Cardia and Stellar operations. With its three manufacturing plants located in Australia, China and Malaysia, the group is well positioned to supply the growing demand of its expanding Asia Pacific customers. Asia Pacific is the fastest growing market of the $72 billion absorbent hygiene products industry.
The group will prioritise its financial resources to ensure production output is optimised in the fact growing Asia Pacific to make the most of its opportunity to increase market share in the region. The existing Stellar Films operations are well established. So high quality Bioplastics film products are ensured. Product approval processes have already commenced with key target customers. Cardia's ability to deliver the highest quality product in a timely manner will underpin the continued growth of sales to these strategic global customers.
The need to act quickly and implement the realignment of the group's production assets and resources is a key priority. The merged business will prioritise its resources to target higher value growth opportunities for sustainable resins and finished products. Cardia has therefore taken the strategic decision to discontinue funding of its Brazilian film and bag making operations. The Brazilian operation continues to require significant investment into equipment and working capital to deliver on existing sales opportunities for finished products such as retail carrier bags.
Despite this, Cardia will remain committed to the Brazilian market place. The company will maintain its Brazilian market presence and continue its focus on the supply and distribution of its proprietary compostable and Biohybrid resins.
Governmental regulation will be the key to ensuring market success of bioplastics in Brazil. On 5 February 2015, the City of São Paulo took its first steps to support bioplastics by issuing the inter-secretarial city ordinance 01/2015 that prohibits the distribution or sale of plastic bags to consumers in all shops in São Paulo. Only reusable bioplastic bags will be regulated for use by traders after a 60 day transition period. Exact bag specifications are currently being finalised by São Paulo’s Municipal Urban Cleaning Authority.
This ordinance by the City of São Paulo mandates the use of renewable and lower carbon footprint plastics. Cardia expects Brazilian bag makers to place resin orders as Cardia resins, technology and specifications deliver on the mandate.
