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Secos shifting film manufacturing to Malaysia

Bioplastics manufacturer Secos Group Ltd. will move its cast film manufacturing to Malaysia from Melbourne, Australia.

Secos announced a review of its Stellar Films Australia subsidiary in early October, but has already said the review's preliminary results show Secos can "achieve significant operating and overhead cost savings by moving the company's traditional plastic film production from Melbourne to its production facilities in Malaysia."

Melbourne-based, publicly listed Secos Group Ltd. was formed by the April 2015 merger of Cardia Bioplastics Ltd. with privately held Stellar Films Group Pty. Ltd.

Secos, an acronym for "sustainable eco solutions," has a cast film and bioplastic production plant in the Melbourne suburb of Deer Park; resin, film and bag production facilities in Nanjing, China; and two plants in Malaysia.

Its subsidiary Stellar Films (Malaysia) Sdn Bhd operates a cast film manufacturing plant at Port Klang, Malaysia's largest port, 24 miles southwest of the capital Kuala Lumpur.

In March, Secos leased a new 30,000-square-foot facility, 12 miles from Port Klang, to manufacture its Cardia Biohybrid resin, a mix of corn starch and traditional resins.

Secos told the Australian Securities Exchange it can save A$1 million (US$707,700) a year by moving film production offshore. It said initial estimates are "the one-off closure and relocation costs will not exceed A$1 million and could be substantially lower."

Secos said pressures on its Australian operations include increasing energy and freight costs and high fixed costs.

Chairman Richard Tegoni said consolidating the film operations will better use existing capacity in its Malaysian facilities and is "consistent with the company's primary strategic focus on rapidly growing, higher-margin bioplastic sales."

In China, Secos has spent more than A$800,000 (US$566,000) in one-off costs to restructure its business and another A$300,000 (US$212,251) in capital expenditure. China general manager Leo Lu said demand for Secos's bioplastic resins has grown and it has "significantly improved raw material purchasing, finished goods management, and operational efficiency" at the Nanjing facility.

Lu said a September visit by Chinese and Australian government officials to the facility is "a vote of confidence" in the company.

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» Publication Date: 29/10/2018

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This project has received funding from the European Union’s Seventh Framework Programme for Research, technological development and demonstration (FP7/2007-2013) under grant agreement n° [606350].

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