One of China's largest makers of polypropylene filament yarns wants to use a stock offering in Australia to expand its business using recycled PP feedstock.
Novarise Renewable Resources International Ltd. believes focusing on green materials will give it a cost advantage and meet rising demand for ecoproducts. The firm hopes to raise A$32 million (US$28.9 million) from the IPO on the Australian Securities Exchange and will use proceeds to build a plant and expand another in China, and further develop research capabilities.
Novarise claims that it owns about 10 percent of China's capacity for PP filament and is the only company there with the technology to make fiber-grade PP pellets and yarn from recycled PP waste. It uses a process it began developing in 2005 when oil prices were rising rapidly.
Under the IPO's terms, Novarise of Adelaide, Australia, will become the holding company for Quanzhou Sanhong Chemical Fiber Co. Ltd. in Quanzhou and a related firm, Fujian Sanhong Renewable Resources Technology Co. Ltd.
We believe our reliance on recyclable PP waste provides us with a stable and cheaper supply of raw materials, and gives us a sustainable cost advantage over competitors who rely on virgin PP pellets, said Novarise Chairman Qingyue Su, in the Feb. 4 IPO prospectus.
The bulk of the proceeds, A$17.1 million (US$15.4 million), will go toward a new facility for making fiber-grade recycled PP pellets.
Novarise formed in 1998 under the name Sanhong, making its materials from virgin PP. It commercialized its recycling technology in 2008 and believes that process can give it a 20 percent cost advantage over competitors. It said it has patents pending in China on the recycling process.
The firm said it sources a little over 50 percent of its materials from outside China, and is establishing an Australian subsidiary to expand its ability to collect recycled PP there and market its products. The company said it gets better-quality materials in waste sourced from Europe and other places with more advanced recycling systems.
Novarise resins and materials are generally exported, sold first to other Chinese manufacturers that then make laptop bags and other products for global brands including Sony, Dell, Samsonite and Disney. The firm wants to establish relationships with supermarkets and retailers to expand its business making green shopping bags under its own brands.
Rising consumer preferences for recycled products and environmental legislation such as plastic bag bans, in China and worldwide, should boost demand significantly, it said.
The expansion will give Novarise 77 million pounds of capacity for fiber-grade recycled PP and nearly 62 million pounds of filament yarn capacity in 2010, the company said. It produced about 20.5 million pounds of fiber from recycled PP in 2008.
Novarise and its subsidiaries reported sales of A$39.7 million (US$35.8 million) in 2008. It projects 2010 sales of A$73.8 million (US$65.6 million).
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