Eco Investor April 2016

Pre-Profit Securities

SECOS Responds to Banning Compostable Plastic Bags Idea

The push in Australia to ban plastic bags could affect biodegradable or compostable bags, including those made by SECOS Group. Jeff Angel, convenor of the Boomerang Alliance of 34 groups, which is campaigning against plastic bags, said "Our call includes the so-called biodegradable or compostable bags which are just as dangerous when littered or in the marine environment. They don't disappear."

However, SECOS chairman Richard Tegoni told Eco Investor that this statement is incorrect. He said Mr Angel's statement "applies to the so-called degradable bags, i.e. bags made from polyethylene and blended with degradable, typically heavy metal catalyst that fragments plastics bags under UV or heat. These fragments stay and can end up in water ways if not properly disposed."

"Certified compostable bags are different. Australian Standard AS 4736 ‘Biodegradable Plastics Suitable for Composting and Other Microbial Treatment' clearly defines critical performance criteria that certified compostable plastics and plastic bags have to meet. Both the South Australian and Tasmanian Government based their exemptions on plastics from the bag ban on meeting AS4736 standard.

"AS4736 requires certified compostable plastics to disintegrate into small flakes within three months, then fully biodegrade to compost, CO2 and water within six months, selected plants grow on compost, and earthworm toxicity and heavy metal limits are met."

The key point, he said, is that AS4736 conditions are for industrial composting where bacterial activity, moisture content, and temperature are higher and controlled.

Mr Tegoni said SECOS' Cardia brand compostable bags and other starch based compostable bags will also compost and biodegrade in home composting, in soil, in fresh water, and in salt water. Bacterial activity is lower so the timeframe is extended but it will still biodegrade the compostable flakes to biomass, CO2 and water. The timeframe extends from six months to one to a couple of years to fully biodegrade as a leaf would do, but it will fully biodegrade.

"This is the reason why Governments around the world like Italy, France, etc exempt bags made from certified compostable bags from bag ban legislation," said Mr Tegoni.

His view is that as people will still require some carry bags after the ban, it is better to use certified compostable bags as these can be reused as waste management bags for collecting organic and kitchen waste. These can then be disposed with the garden waste and diverted to composting, which enriches poor soils and closes the organics cycle.

Mr Tegoni's views are backed by the Australian Organics Recycling Association (AORA), which said it welcomes the debate about banning single use plastic bags. AORA's policy is to ban all single use, non-compostable plastic bags, agricultural films and packaging that cannot be reused, recovered or recycled.

In regard to certified compostable bags it says they are biodegradable and the best solution for the separation of food and garden organics, even if biodegradable bags are not always compostable.

And like Mr Tegoni it says it is critical that compostable plastics carry the Australian Standards certification, which verifies that the plastics will biodegrade in commercial composting. The applicable Sandards for compostable bags are AS4736-2006 and AS5810-2010. Compostable bags and plastics which meet these allow for effective separation at source and organic resource processing.

Organic recyclers and composters acknowledge the need for a convenient way of containing kitchen and other wastes. Certified compostable bags do this and must be exempt from any ban on single use plastic bags made of polyethylene or conventional plastics, said AORA.

AORA executive officer Peter McLean said "It's important that everyone understands the differences between products claimed as degradable, oxo-degradable, biodegradable and certified compostable. They simply aren't the same thing and unless they are Australian Standards certified compostable then they are not considered suitable for use in organics recycling."

Operationally, SECOS Group has raised $879,427 from a placement of shares to professional and sophisticated investors and another $1,084,920 through a share purchase plan. The issue price was 8.2 cents per share. The $1,964,347 is to meet operational plans.

SECOS said it has attracted a strategic investor with key relationships in the USA and this gives it an opportunity to increase its position there for sustainable products including waste management. A SECOS distributor heavily focused on sustainable products is located on the US West Coast and has already achieved success with several councils in California. The strategic investor was keen to invest directly in SECOS, and in conjunction with the distributor to achieve rapid expansion in the fast growing US waste management market, said Mr Tegoni.

About $300,000 of the share purchase plan is to expand production capacity for film and bag production at the company's plant at Nanjing in China. The plant's bag making capacity is now over 250 million Biohybrid and Compostable bags per year, and sales are increasing. Monthly orders of Biohybrid and Compostable dog waste bags to major US and European retailers have increased to over $100,000 per month, 60 per cent above sales 12 months ago. (ASX: SES)

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