The two-year lease commitment has an option for an additional two years over the 30,000 square foot facility located 19 kilometres from Malaysia’s largest port.
SECOS will move its new resin compounding equipment into the facility which also has sufficient space for significant further expansion.
Resin manufacture and delivery expected by June 2018
SECOS will initially commission two resin compounding machines to rapidly address its existing backlog of customer orders.
The company sees potential to increase production capacity at the new plant to 12,000 tonnes per annum of bioplastic resin over the medium term.
At current market prices, and assuming the plant is fully utilised, 12,000 tonnes in resin sales would generate $40mln revenue per annum.
Demand increasing in a market with few direct competitors
Demand from customers is increasing for compostable resin and the price spread to traditional petroleum-based resins is continuing to tighten.
With few direct competitors, SECOS is striking a balance between leveraging its pricing power and promoting broader uptake of its products, such that resin sales can continue to grow strongly and sustainably.
Shares have rallied to 11 cents from their December low of 7.6 cents
SECOS’s managing director Stephen Walters said: “We will be delighted to commence manufacturing resin in Malaysia within the next three months to help meet the strong demand the company is experiencing.
“This is our core product line, and SECOS’ establishment of a Malaysian resin manufacturing facility supports the company’s international growth strategy while leveraging the ‘green initiatives’ set by the Malaysian government.
“The new business will benefit by leveraging the existing infrastructure and management team well established in the region.
“We are looking forward to strengthening our customer relationships through this new production facility, as it opens the potential for innovative new products and guarantees continuity of supply.”