Raising capital remains a concern for many businesses. But Rod Rougelot, CEO of Eco2 Plastics Inc., said he expects the water-free PET recycler to begin commercial-scale production at its plant in Riverbank, Calif., by the beginning of June.
Rougelot said he also believes the firm will begin generating a positive cash flow this quarter.
If we are correct in our projections, a portion of the second quarter will have positive cash flow and there will positive cash flow for the entire third quarter, Rougelot said in an April 16 telephone interview. We see profitability coming in the short term if we execute properly.
In November, San Francisco-based Eco2 laid off 70 percent of its staff 85 of 120 workers and shut down its batch processing line to switch to the next-generation, continuous-flow, water-free PET washing process.
We have lowered our costs of operations from somewhere north of 20 cents per pound to the 10 cent-per-pound range and with the new equipment, we should be at 3-4 cents per pound, he said.
The company is still producing less volume of recycled PET than in November, said Rougelot. He expects all the equipment needed to produce commercial quantities to be ready within the next six weeks, so the company can begin producing food-grade recycled PET at a rate of 40 million pounds annually.
In the last five years, Eco2 has lost $104.6 million. In 2008 its sales rose 50 percent to $6.7 million, and its net loss dropped from $32.9 million to $24 million.
At the end of 2008, Eco2 had cash and cash equivalents of about $1.6 million, compared with $101,000 at the end of 2007. Its working-capital deficit declined from $18.6 million to $3.3 million. It had total stockholder equity of $4.6 million, compared to a deficit of $11.8 million at the end of 2007.
In 2008, Eco2 received investments in excess of $15 million from Trident Capital Management and Peninsula Packaging Co. in Exeter, Calif., a food container thermoformer. Peninsula entered a three-year pact in December to buy 1.5 million pounds of recycled PET per month from Eco2.
Short-term, Eco2 must continue to raise money, Rougelot said. We are hoping what we raise will be sufficient to get us across the finish line. We believe that the company will be stabilized from a financing standpoint by the time we start generating positive cash flow, he said.
Eco2 received $100,000 in cash this month and expects to receive another $200,000 this month, according to its annual report.
Rougelot said Eco2 has been able to maintain the 30 cent-per-pound spread between its raw material costs and the selling price of its recycled PET flake. But he expects the spread to narrow to 20-25 cents as the recycling market gets more competitive. Also, Eco2 has incurred costs to dispose of unneeded plastics that it had been able to sell for 2-4 cents per pound.
Rougelot said when Eco2's water-free system is operating at continuous flow, it will lower energy costs 25 percent, labor costs 85 percent and use of liquid carbon dioxide by 90 percent, and will require 60 percent less floor space than the batch process. Eco2 is rehiring some workers and will employ about 90 when it gets up to scale, he said.
The company still plans to choose a location for a second plant in California this year. But its plan to begin processing auto shredder residue is not on the near-term horizon, though still on the radar, he said. Testing by the auto industry's Vehicle Recycling Partnership has taken longer than we hoped.
Eco2 immerses shredded PET bottles in ethyl lactate, a biodegradable solvent made from beets and corn, then blasts the material with liquid carbon dioxide to remove the solvent. The solvent and liquid CO2 are reused.