The Secos share price has climbed more than 6% today. Here's why

The Secos share price is trading higher after a major new pet supply contract delivers material improvement in FY20 results

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Secos Group Ltd (ASX: SES) share price is up 6.9% today after a major new pet supply contract delivers material improvement in FY20 results. 

Located in Melbourne, the group is a leading developer and manufacturer of sustainable packaging materials. It supplies biodegradable resins, packaging products and high-quality cash films to a global customer base and has sales offices around the world including Malaysia, China, Mexico and the United States. 

Material improvement in FY20 results 

The Secos share price rise reflects a significantly improved profit and loss position anticipated for the year ended 30 June 2020. Unaudited FY20 net loss is expected to improve 71.5% to $1.2 million.

Additionally, the group achieved positive earnings before interest, taxation, depreciation and amortisation (EBITDA) in the second half, with a net loss of less than $0.1 million. The financial improvement has been driven by growing demand for its biodegradable products, significantly increased plant utilisation, lower interest costs and operational and manufacturing efficiencies. 

In FY20, unaudited financial headline numbers include:

  • Revenue from ordinary activities up 0.9%. $21.039 million in FY20 vs $20.848 million in FY19 
  • Gross profit is up 129%. $3.383 million in FY20 vs $1.478 million in FY19
  • Expenses are down 33.2%. $3.512 million in FY20 vs $5.257 million in FY19
  • Net loss for the period has improved 71.5%. $1.186 million in FY20 vs $4.170 million in FY19

The group's fully audited accounts will be released on 27 August 2020. 

Pet supply contract secured

Secos announced a significant supply contract this week with leading US pet company, JC USA Inc, a wholly owned subsidary of the Jewett-Cameron Trading Company. The contract is for the supply of compostable pet waste bags made from Cardia proprietary biopolymer resins. This supports an estimated $3 million in sales annually with growth potential as Jewett-Cameron grows its market reach and compostable pet waste bags sales.

There are more than 89 million dogs in the USA and a similar number in Western Europe, according to Statista. And Secos says pet owners are more focused on finding environmentally-friendly ways to manage their pet's waste and reduce the use of conventional plastic bags and eliminate micro plastic pollution. 

About Secos share price

The Secos share price has surged 6.9% to 16 cents at time of writing. It has a market capitalisation of $66.2 million.

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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