The Secos Group Ltd (ASX: SES) share price is soaring higher today after the sustainable package materials company announced a positive sales update. At the time of writing, the Secos share price is trading up 12.9% higher at 18 cents. Let's take a look.
Sales growth
Secos reported its September quarter sales were $5.8 million, up 19% on the June quarter. Biopolymer sales jumped more than 75% compared to the prior corresponding period. This represented its strongest quarter result on record.
The company said that sales were expected to further increase more than $8 million in the current December quarter. Demand for its Cardia biopolymer resin, film and bags continues to grow with increased awareness of compostable plastics as an effective alternative.
Organic treatment programs
Secos said there were further opportunities for growth in organic treatment programs.
Typically run by councils, food organic, garden organic (FOGO) programs enable the use of compostable biopolymer bags to dispose of household waste.
Secos said that using eco-friendly bags rather than traditional methods significantly reduced cost and the environmental impact. With more than 120 councils in Australia adopting FOGO programs, that amounts to around 20% growth in the sector in the last two years.
Operating highlights
To cater for the increase in customer orders, the group has focused on expanding production capacity during the past few months. Proceeds of a recent $15 million equity placement were invested into new manufacturing assets and working capital.
Capital expenditure investment was made in film and bag lines for local government council food and organic waste bags, and dog waste bags.
In addition, Secos committed to meeting $1.5 million sales orders of resin, by increasing capacity at its Malaysian plant.
Fixed operating costs were well-contained, with a portion of savings from employee and administration expenses redeployed to marketing investments. It's anticipated that this will support retail store sales as well as its own branded line of products.
FY21 outlook
Secos advised that it expected the robust global demand in its core segments to continue into FY21. However, no guidance was given by the company.
Commenting on the company outlook, Secos CEO Ian Stacey said:
We remain on track to meet or exceed our internal sales targets and are actively expanding capacity to supply current sales commitments and to cater for additional growth opportunities that we see.
About the Secos share price
The Secos share price reached a low of 4.6 cents in April, representing a drop of 269% on today's price. The company has been making tailwinds in recent months with a raft of positive announcements and a shift in consumer behaviour towards eco-friendlier alternatives.
