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Cereplast banks on Italy as losses mount

By: Frank Esposito

February 7, 2013

EL SEGUNDO, CALIF. -- Bioplastics maker Cereplast Inc. has added about $800,000 in new sales since Dec. 1, but will continue to take "aggressive cost-cutting measures" in response to ongoing losses and sales declines.

In a recent news release, Cereplast officials said the in El Segundo, Calif.-based firm had received numerous new orders for its compostable resins in food-service applications, as well as from existing clients in India, where it opened a sales office last year.

More new sales have come from Italy, where that country's parliament recently approved a decree discontinuing the use of traditional plastic bags in favor of bioplastic or other alternatives. The decree is expected to receive full passage by midyear. Cereplast officials said Italy could become the world's largest market for bio­­plastic film applications in 2013.

"We anticipate demand from this key region to approach similar sales volumes that we experienced in 2011," Chairman and CEO Frederic Scheer said in a news release. "We are encouraged by the sales data we are analyzing, which is pointing to a strong 2013."

But Cereplast officials also confirmed the firm missed interest payments due on June 1 and Dec. 1. Repayment plans have been arranged, and Cereplast has received about $1 million in short-term debt and equity financing. The firm also has cut its global work force to 17 employees.

In September, Cereplast reacquired 22 containers of unsold bioresin inventory from customers — valued at about $2 million. The firm will try to recover additional unsold inventory from customers throughout Europe.

Through the first nine months of 2012, Cerplast's sales tumbled 96 percent vs. the year-ago period to less than $800,000. The firm posted a loss of almost $16.3 million during that period after losing almost $7.8 million in the first nine months of 2012.

Officials said the decrease in nine-month sales was a result of moving significant resources and efforts toward recovery of past-due accounts receivables from customers. They added that current-period sales "were primarily prepaid shipments of sample materials and nominal shipments to established existing customers with low-risk credit limits."

In a Feb. 6 phone interview, Scheer said that in 2012 Cereplast struggled with nonpayment or late payment from customers ranging from "younger, green companies" to older, established firms.

He added that Cereplast's 80 million-pound-capacity plant in Seymour, Ind. — its only global production site — now is being run only when the firm has orders to fill. Two of its three production lines were in use the week of Feb. 4, but only one is expected to be in use during the week of Feb. 11. The plant's workforce also has been reduced from a peak of 45 to its current level of 12.

But recent sales have Cereplast officials believing the firm will return to 24-hour production six days a week during the second quarter of 2013, Scheer said.

Cereplast also had bought a 120,000-square-foot building in Assisi, Italy, in 2011, with the intention of making it a bioresin production plant in 2012. The firm's struggles have delayed those plans for the building, which is being used as a warehouse. Scheer said if sales recover, the site could be used for bioresin production sometime during 2014.

In December, Cereplast voluntarily delisted its stock from the Nasdaq exchange and began trading it in over-the-counter markets. The firm's per-share stock price was above $1 in early 2012, but soon began to fall, and was at five cents in late trading Feb. 6.

But Cereplast officials were upbeat in a recent news release, saying management "believes there is tremendous unlocked value within the intellectual property portfolio of the company."

They added that "as the [bioplastics] industry continues to evolve, management believes that large conglomerates will begin to make further investments."

During 2012, Cereplast commercialized its first algae-based bioplastics in the form of an injection molding grade with 20 percent post-industrial algae biomatter. The firm's bioresins also were used in the beverage market's first disposable tea infuser, which is being sold by The Tea Spot, a tea-making firm in Boulder, Colo.

Also in 2012, Cereplast struck a distribution deal with German resin distributor Albis Plastic GmbH and received a $5 million equity investment from Ironridge Technology Co. of San Francisco.