Bioplastics maker Cereplast Inc. is on the move.
The firm is relocating its research and development and production lines from California to Indiana. Bioplastics also is making a shorter move with its corporate headquarters, which will go from Hawthorne, Calif., to nearby El Segundo.
The moves are part of the firm's efforts to streamline its operations, Chairman and CEO Frederic Scheer said in a Jan. 12 news release.
The Indiana plant will allow us to drastically reduce our costs compared to California, from real estate to utilities, the savings will be across the board, he said.
In a Jan. 12 telephone interview, Scheer added that Cereplast's electricity costs, measured in kilowatts per hour, will drop from 22 cents in California to 6 cents in Indiana a savings of more than 70 percent.
The 105,000-square-foot Indiana plant is located in Seymour. Cereplast had planned to open the site in 2007, before demand for its bioplastic materials decreased. The firm has been using the facility as a distribution center.
Cereplast will continue commercial production at the Seymour plant until it finds a compounder to outsource the work to, or, according to Scheer, finds a compounder willing to run production at the site.
Cereplast had been making its bioplastics in Hawthorne since 2005, operating about 45 million pounds of annual capacity. In mid-2009, officials said it would be more economical to have production done outside the firm.
Manufacturing in California wasn't making any kind of sense, Scheer added. There were a lot of obstacles. He cited the case of Cereplast being unable to use underwater pelletizers it had purchased, because of the exorbitantly high cost of electricity needed to power them.
The first of 40 trucks needed for Cereplast to make the move left earlier this week, Scheer said. Four twin-screw extrusion lines and several other pieces of equipment are included. Several Cereplast employees also are making the move to Seymour, which at first will employ 15.
Cereplast uses corn, tapioca, wheat and potatoes to make its bioplastics. The firm also compounds Ingeo-brand polylactic acid-based bioplastic made by NatureWorks LLC. In October, Cereplast announced plans to launch a line of bioplastic resins based on all-natural algae by the end of 2010.
Being in Seymour also puts Cereplast closer to its customers and supply base, Scheer said.
There are a lot of large plastic processors within 300 miles of Seymour, he said. And we'll be closer to the NatureWorks plant in Nebraska and to our starch suppliers in Iowa and Illinois.
A 10-employee office will remain in El Segundo. Scheer said he will be based in California, but he's acquiring an apartment in Indiana and will spend plenty of time there as well.
In the first nine months of 2009, Cereplast posted sales of about $2.1 million a drop of 37 percent from the same period in 2008. Officials attributed the drop to existing customers delaying orders or launches of their own commercial bioplastic applications because of the general economic downturn and global drop in demand.
The full benefit of new long-term sales contracts with construction products giant Georgia-Pacific LLC and Dorel Juvenile Group should be reflected in the first quarter of 2010, officials said.
Cereplast lost $4.2 million in the first nine months of 2009 after losing $10.1 million in the same period in 2008. On Wall Street, Cereplast was trading near 10 cents per share in early trading Jan. 12. The price had been at 70 cents in early 2008 before beginning a steady decline and falling under 20 cents in October.
In August, Cereplast received an unspecified amount of investment from Zurich Cantonal Bank of Switzerland, which allowed the company to move forward aggressively, officials said then.
Cereplast's Scheer also recently was named chair of the Bioplastics Council of the Washington-based Society of the Plastics Industry Inc. for 2010. The council's plan is to create more awareness and growth for the sector, Scheer said in a news release.
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