Secos Group holds fire sale for Aussie business because no one wants to buy it
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Bioplastics maker Secos Group spent two months trying to sell film and laminate maker Stellar Films, but has now called in the liquidators after no one buyers came forward.
Secos (ASX:SES) has been shifting from traditional plastics to bioplastics, and now says it can focus fully on the latter with the liquidation of Stellar.
Secos was formed in 2015 from a merger between Stellar Films and resin producer Cardia Bioplastics, but the underperformance and high fixed costs of the Stellar Films business has put the company under pressure.
It launched an independent strategic review into Stellar Films in October, and a month later decided to cease all of its Australian film manufacturing operations. Stellar specialised in linings for a range of products such as nappies, feminine hygiene products, incontinence pads and surgical gowns.
Secos will now go all-in on bioplastics, with its Malaysian production plant up and running and producing “over 50 tonnes of bioplastic resins a month”, according to chairman Richard Tegoni.
SES shares were flat at 6.2c on the news.
“Every effort was made to look for a buyer over the Christmas period but we decided there was no point letting it drag out any longer,” Mr Tegoni told Stockhead.
“The business had ceased trading already and now it is in the hands of the liquidators who have told us it is a fairly straightforward process.”
Secos admits there will be costs involved with winding up Stellar Films in the order of $900,000, but Mr Tegoni said the second half of the 2019 financial year was looking more positive than the first.
“There were fairly high costs associated with keeping that business open, we had to keep financially supporting it,” he said. “But in closing it down and calling in the liquidators we now don’t have to pump cash into it.
“We’re not hoping that with this process underway we’ve incurred a lot of costs in the first half and they are behind us now.
“The Malaysian plant is growing rapidly, producing over 50 tonnes of bioplastic resins a month and the prospects for the second half of 2019 look a lot more positive because of that and our reduced costs.
“It’s an emerging market so we’ve still got some hurdles to get through to achieve profit but without high fixed overhead costs and the plant now established the second half is looking positive.”