Water-free PET recycler Eco2 Plastics Inc. has laid off more than 80 employees, or 70 percent of its workforce.
But Chief Executive Officer Rod Rougelot said the second-generation equipment installed at its Riverbank, Calif., plant should give the company ``a positive cash flow'' in the first quarter of 2009.
The greater efficiency of the new equipment, which is still being ramped up, prompted the company to shut down its less-efficient batch processing line, triggering the Nov. 13 layoffs and reducing its workforce to around 35, Rougelot said in a telephone interview.
He said ``probably no more than 50'' of those workers could be recalled, possibly starting in December. Fewer workers are needed for the new generation of equipment.
The company uses a proprietary technology to reprocess PET without using water.
Rougelot called the layoffs a ``calculated move'' to lower production and sales in the fourth quarter a tactic that will ``conserve cash.''
``We will see a more consistent production flow in the first quarter of next year,'' with the new line capable of processing 30 million pounds of PET annually.
The San Francisco-based company has lost $99.7 million in its first four-plus years of business, including $19.1 million in the first three quarters of this year, according to a report filed with the Securities and Exchange Commission.
However, in the three quarters ended Sept. 30, sales were $5.4 million, up significantly from $1.9 million in the same 2007 period. For the year, Eco2 anticipates sales of $8 million, nearly doubling its 2007 sales but a figure well below the $26 million to $30 million the firm initially had expected.
U.S. Army requirements held up the installation of the new equipment for six months. The Army owns the Eco2 building, Rougelot said.
``We are not where we expected to be, but we are optimistic we can turn a profit in 2009,'' he said. ``The new equipment will dramatically change the processing landscape for us'' by reducing energy costs by 50 percent, labor input by 80 percent and carbon dioxide consumption by 90 percent.
The company also is optimistic about having received a letter of nonobjection from the Food and Drug Administration for nine of its 10 food-contact applications, which will allow it to sell its recycled PET resin at higher prices, it said Nov. 25.
``Having achieved the highest level of approval clearly demonstrates the effectiveness of our proprietary process,'' Rougelot said.
The FDA letter said the recycled PET from Eco2 is ``of a purity suitable for use'' by manufacturers at levels of up to 100 percent content for food-contact applications in frozen and refrigerated containers, and for containers with ready-prepared foods that are reheated. The FDA said products made from Eco2's recycled PET can be used for baking and browning at temperatures of more than 250° F. It was not approved for irradiation.
Rougelot said he is upbeat about the future because ``all the trends are headed in the right direction in terms of minimizing operating costs. We have significant book losses, but cash flow has improved quarter by quarter.''
According to its SEC filing, Eco2 had $1.1 million in cash and cash equivalents as of Sept. 30, compared with $101,000 at the end of 2007, and a working capital deficit of $2.3 million compared with $18.6 million at the end of 2007. In addition, Eco2 lost just $3.8 million in the third quarter of 2008, compared with an $8.1 million loss a year ago.
What's more, the company received $3.9 million from new and existing investors in the third quarter, on the heels of $6.5 million in venture capital obtained in June from several investors, including Trident Capital and Thompson Hutton LLC.
Rougelot said Eco2 plans to open a second plant in California. It is currently narrowing down the potential sites.
He also said the company will begin processing automotive shredder residue in 2009 and high density polyethylene in 2010 ``if everything moves forward successfully.''
Eco2 immerses its shredded PET bottles in ethyl lactate, a biodegradable solvent made from beets and corn, and then blasts the material with liquid carbon dioxide to remove the solvent. Both solvent and liquid carbon dioxide are captured and reused.
Rougelot is a plastics recycling veteran. More than 20 years ago, he founded Resource Recycling LLC, which is now part of Tomra Pacific Inc.