Sustainability trends are driving SECOS\u2019s growth
\nSECOS currently dominates Australian market with its compostable bags
\nWe reached out to SECOS\u2019 CEO, Richard Tegoni\u00a0<\/p>\n
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The global shift towards sustainability is undeniable.<\/p>\n
Countries worldwide are adopting stringent regulations aimed at curbing plastic pollution and promoting environmentally friendly alternatives.<\/p>\n
In the US, for instance, California has required all organic waste to be composted as the state aims to reduce 56% of its total landfill.<\/p>\n
In the EU, negotiators have just reached an agreement to ban single-use plastic packaging for fresh fruit and vegetables, mini hotel toiletries, and fast food in restaurants.<\/p>\n
And in Australia, the government has committed to ambitious goals, with the\u00a0National Plastics Plan<\/em> stating that 70% of plastic packaging needs to be compostable.<\/p>\n One ASX company that\u2019s strategically positioned to capitalise on these market trends is SECOS Group (ASX:SES)<\/a><\/strong>, a Melbourne outfit that has established itself as a leader in sustainable packaging solutions.<\/p>\n SECOS\u2019 MyEcoWorld products \u2013 launched in 2021 \u2013 are now prominently featured in 2,300 stores across major Australian retail chains such as Coles and Woolworths.<\/p>\n The company recently introduced MyEco bin liners, made from 95% recycled post-consumer soft plastic waste, and certified under the Global Recycled Standards (GRS).<\/p>\n Source: SECOS<\/strong><\/em><\/p>\n \u00a0<\/p>\n Over the past 10 years, SECOS has strategically divested away from its traditional plastics manufacturing base towards biodegradable and compostable products.<\/p>\n \u201cWe now specialise in manufacturing compostable resins and sustainable packaging that we distribute around the world,\u201d said SECOS CEO, Richard Tegoni.<\/p>\n \u201cIn Australia, we are the number one provider of compostable bin liners and bags to councils and in retail outlets, including Woolworths, Coles and other retail chains.\u201d<\/p>\n \u201cOur aim is to be a 100% sustainable business. So we want to manufacture purely sustainable products, that\u2019s our mission\u201d<\/p>\n \u00a0<\/p>\n As the only listed compostable plastics business on the ASX, SECOS has been recognised with the prestigious Silver EcoVadis<\/em> rating.<\/p>\n This rating signifies that a company has achieved a high level of sustainability performance based on EcoVadis\u2019s (an environmental rating agency) assessment criteria.<\/p>\n SECOS\u2019 biodegradable products primarily utilise various grades of resin, but its core resin grades, particularly those used in the MyEco bag products, are derived from corn starch.<\/p>\n This corn starch comes from a commercial grade of non-GMO corn, ensuring the product is entirely renewable.<\/p>\n \u201cCommercial graded non-GMO produced corn enables the product to be naturally composted back into the environment, returning valuable nutrients back to the soil,\u201d said Tegoni.<\/p>\n The process of turning corn starch into compostable products involves processing the starch into a polymer using additives, and blending it with other compostable materials like Polyhydroxyalkanoates (PHA).<\/p>\n SECOS blends its corn starch with higher contents of PHA to achieve the required product characteristics, ensuring natural biodegradability of the end products.<\/p>\n \u201cThis blend of materials allows our bags to fulfil their intended purpose effectively, while also being environmentally friendly.\u201d<\/p>\n In discussing their usage, Tegoni explained the crucial role of bioplastics in tackling pressing issues such as food waste.<\/p>\n Compostable bags and bin liners, he said, enable households to separate food waste effectively, facilitating food waste composting instead of landfill disposal, thereby mitigating the production of methane, a potent greenhouse gas.<\/p>\n \u201cThere\u2019s a huge opportunity here with bioplastics to replace not only conventional plastic, but also to collaborate with local governments in diverting food waste.\u201d<\/p>\n Research and development has always been a big part of SECOS\u2019 strategy to lead in this space.<\/p>\n Over the past few years, the company has significantly invested in biopolymer technology through its Global Research and Development Center<\/em> as well as its three biopolymer plants in Asia.<\/p>\n \u201cOur goal is to ensure that our compostable bags and packaging not only meet, but exceed industry standards for environmental sustainability,\u201d said Tegoni.<\/p>\n \u201cSome of the projects we\u2019re working on are, for instance, [tackling questions such as]<\/em> how do we make our compostable bags compost quicker in an anaerobic environment, and how do we make the process more efficient?\u201d<\/p>\n \u00a0<\/p>\n In Australia, SECOS\u2019s products have achieved a significant market share.<\/p>\n \u201cWe have around 45% market share of compostable bin liners in major retailers, and we supply to about 30% of local government councils,\u201d Tegoni said.<\/p>\n However, Tegoni pointed out that this represents only a small market segment for the company.<\/p>\n \u201cThe idea of the Australian market was to create a model that works, and with data points that we can use to go overseas,\u201d he says, adding that the US market in particular offers a compelling opportunity.<\/p>\n SECOS has strategically entered the North American market through partnerships with distributors like Jewett-Cameron Trading Company (NASDAQ: JCTCF)<\/em>, targeting both the United States and Canada.<\/p>\n \u201cWe\u2019ve leveraged relationships established over several years to enter new markets effectively,\u201d Tegoni said.<\/p>\n SECOS has also diversified its market footprint into Latin America, focusing on the raw resin market.<\/p>\n \u201cWe\u2019re selling our raw materials into the this market to converters that make compostable products without really doing all the finished product there at the moment.\u201d<\/p>\n \u00a0<\/p>\n From a financial perspective, SECOS has successfully navigated recent challenges such as supply chain disruptions and initial market entry costs in North America.<\/p>\n Despite a temporary decline in sales earlier this year, Tegoni is optimistic about future growth prospects, citing improving sales trends and expanding market acceptance.<\/p>\n \u201cWe saw a turnaround in Q3 with sales increasing from an average of $3 million to $4 million per quarter. We anticipate similar growth going forward,\u201d he noted.<\/p>\n The path to profitability for SECOS hinges on sustained revenue growth, he said, supported by enhanced operational efficiencies and market penetration in key regions.<\/p>\n \u201cOur cost base has stabilised, and our margins are improving. Top-line growth in established and emerging markets will be critical to achieving profitability.\u201d<\/p>\n Looking ahead, Tegoni believes SECOS will continue to capitalise on the global shift towards sustainable packaging solutions, driven by regulatory support and changing consumer preferences.<\/p>\n \u201cWe\u2019ve laid the groundwork, established partnerships, and proven our products in demanding markets. SECOS is ready to seize the opportunities ahead and drive sustainable change globally.\u201d<\/p>\n \u201cWe\u2019re a pure sustainability play. Investors interested in ESG or sustainability may want to consider SECOS,\u201d Tegoni said.<\/p>\n\n \u00a0<\/p>\n \ufeff<\/span><\/span>\u00a0<\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.<\/em><\/p>\n Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.\u00a0<\/em><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n The post SECOS rides high on global trend towards sustainable packaging, eyes American markets<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"Focus on research and development<\/h2>\n
Global expansion<\/h2>\n
Charting a course to profitability<\/h2>\n