By: Steve Toloken
February 18, 2014
Australian firm Cardia Bioplastics Ltd. is doubling capacity at its manufacturing plant in China, as the company said it has secured orders to supply an expansion of the organic waste diversion program in the city of Nanjing.
Cardia said Feb. 14 it will add three film extruders and bag making machines at its factory in Nanjing, Jiangsu province, with plans for an additional three production lines there by the end of the June.
The Melbourne-based company maintains its sole manufacturing plant globally in Nanjing, where it said the government has been steadily expanding its organic waste diversion efforts.
The new investment comes, however, as the company replaced its chairman and restructured in the second half of 2013, with the goal of turning around losses.
While it faces that difficult fiscal position, Cardia said its capacity expansion is needed because of increasing demand for compostable and reduced carbon footprint packaging from global brands and local governments.
“The market dynamics are shifting,” said Frank Glatz, Cardia’s managing director, in a statement. “Over the past few years brand owners, retailers and packaging companies have commenced using bioplastic resins, films and packaging to replace conventional plastics.”
Local governments are also increasing their efforts to divert organic waste from households and industry to composting, increasing demand for compostable bags, the company said.
Each production line in Nanjing will add 1.5 million bags per month capacity.
The company said the new contract with the Nanjing city government will be worth A$250,000 for the first quarter, with a forecast of A$1 million a year, representing about five percent of the households in the city of 6 million.
The contract, which is with the Jianye District in Nanjing, is to supply the company’s garbage bins and kitchen waste bags with its “Biohybrid” resins.
Cardia said Jianye is the first district to have a full commercial roll-out of organic waste diversion but it said other district governments in Nanjing are “expected to progress to full-scale implementation.”
It also said it has a contract, worth about A$1.2 million annually, to supply about 20 percent of the households in Shanghai’s PuDong district with its bags and products.
The company also announced new business last week with the Ricoy supermarket chain in Brazil. Several states in Brazil have recently banned standard plastic carrier bags, accelerating demand for its products, Cardia said.
In its most recent filings to the Australian Stock Exchange, the company said sales in the fourth quarter were up 35 percent, to A$1.22 million, compared with the previous quarter.
But it also noted that its profit margins had declined in its fiscal 2013 and it lost money, as it was forced to outsource production to meet additional demand in China. It said it expected the Nanjing capacity expansion to help improve margins.
The Feb. 14 announcement of the investment in Nanjing comes after the company last year shook up its board, appointing a new chairman, Richard Tegoni, with the goal of bringing the company to profitability.
“The company has a clear priority which is to achieve breakeven and become a sustainable business,” Tegoni said in a statement in November. “Bioplastics is an emerging market and although this represents an extraordinary opportunity we must understand the challenges facing us and how to navigate the path ahead so that the journey to profitability becomes a reality.”