Sustainable Plastics Business Sharpens Plans

Increased efficiency is emphasized by manufacturer of bio-based, sustainable plastics for packaging

-- Packaging Digest, 9/23/2008

Cereplast, a manufacturer of proprietary bio-based, sustainable plastics, announced that it is implementing a broad plan to maximize operating efficiency and increase profit margins. Integral to the plan is the start of production at the Company’s Seymour, Indiana facility and the concentration of all core manufacturing assets at that location.

“This plan does not represent a change in our strategy, but rather a change in our focus toward greater efficiencies in how we run our business and meet our customers’ needs,” said Frederic Scheer, Chairman and CEO of Cereplast. “I am confident that the plan we are implementing will accelerate the company’s transition from small manufacturer to thriving, full-scale bioplastics company.”

Cereplast is now actively structuring its manufacturing and quality control operations to allow for delivery of resins in larger quantities and in a more efficient manner. The company is also focusing its sales efforts on a more targeted portfolio of existing and prospective clients with whom contracts, joint development agreements or other arrangements have been negotiated and established.

“This strategic operational review is an important step forward for our Company,” said Randy Woelfel, Cereplast’s President and Chief Operating Officer. “We have put in place a more streamlined production process that reduces production costs per pound in the short- and long-term, and at the same time allows the Company to handle the tremendous growth in demand - and output - expected in coming months.

“In addition, re-focusing our sales and marketing efforts is having an immediate impact on our existing and potential clients,” continued Woelfel. “It is allowing us to improve technical assistance and product support to customers, which has resulted in a broadening of commercial product applications.”

The effort to focus primary production at the Seymour facility is driven by:

The increased total production volumes required to fulfill forecast demand from JDAs and other commercial agreements and the expected timing of those volumes
The greater efficiencies and significantly lower operating costs that will come from a centralized manufacturing location located in Indiana
The ability to expand the Seymour site’s ultimate capacity to 500 million pounds per year of resin production by as early as 2010

This strategic move also is coming at a time when the company is readying for the second phase of previously-announced joint development agreements with major market and brand leaders, including Group Danone, for the development of bio-based food packaging, and PSA Peugeot-Citroen Group for the introduction of sustainable automotive bioplastics. In total, the Company’s portfolio of joint development projects represents additional growth opportunities of several hundred million pounds for Cereplast resins within the next three years.

These JDAs are in addition to ongoing relationships with converters such as Pace Industries, Genpak and Cell–O–Core, as well as a number of customer development projects that are expected to come to fruition before the end of 2008, and that represent significant potential market opportunities for Cereplast. As of June 30, 2008, more than 120 companies had requested and been provided with samples of Cereplast bioplastic resin for use in more than 112 different product applications, and the number of commercialized products using Cereplast resin had grown to more than 85.

Separately, but related to the plan, the Indiana State and local authorities have started the extension of a nearby rail spur to serve Cereplast’s operations at the Seymour site and work is expected to be complete before the end of 2008.