No one disputes there is a need to reduce the amount of plastic waste floating around the globe currently, but as with many environmental issues the wrinkle is how to do it.
Only 25% of plastic waste is currently recycled in Europe, with the rest going into landfill, burnt or just thrown away.
But the EU wants the use of landfill to come to an end by 2020 through higher use of recycling or bags that decompose.
Symphony Environmental Technologies plc’s (LON:SYM) technology is based oxo-biodegradeable additives that encourage oil–based plastic to decompose more easily in environments such as the sea.
Opponents, particularly those in Europe, say they are little better than what’s available currently but Symphony has spent heavily to illustrate the benefits.
A key decision will take place later this year when a report, including studies from Symphony, and others will be handed over to the EU for a decision on what the policy going forward will be.
A decision on labelling will also be required by 2017.
Product types
Symphony divides into products three ways: the oxo-biodegradeables (controlled life plastic) d2w; protective plastics (d2p) such as flame retardants, anti-microbial products and insecticides; and anti-counterfeiting (d2t).
Tighter regulation to boost demand
In an interview with Proactive Investors Michael Laurier, chief executive, said D2w sales are dependent on how regulation is enforced and there are signs that this is starting to happen, he said.
The strategic review also highlighted the need to focus more on the d2P branded opportunity, he said, and fifty applications with existing customers are under development currently just in the anti-microbial sector.
The group has just picked up its first order for its d2p anti-microbial plastics range with an unnamed retailer
In addition, a new initial order and letter of credit for US$160,000 has been received for a new application, while ten more consumer products are in the process of being developed.
Prospects
Symphony’s performance has picked up this year.
It moved into profit in its latest half year as the benefits of a cost-cutting programme started to show through.
Revenues in the six months to June dipped to £3.23mln (£3.42mln), but costs were reduced by £342,000 which enabled the group to post a profit of £19,000 (loss £181,000).
Symphony added that over the full year its cost programme will save around £750,000.
Most of the first half sales came from its established oxo-bidegradeable controlled-life plastic range of additives and finished products.
What the broker says
House broker Cantor Fitzgerald currently has a target price of 6.75p (currently 4.56p in the market) and ‘buy’ recommendation.
While it is too early to say for certain that sales of the d2p products are about to take off, the broker said, the first half was encouraging and contained some handy pointers.
However, there are still some hurdles to clear before sales in this
important product area properly gain traction.
But d2w oxobiodegradable additive sales are steady and underpin the on-going financial performance.
“The company has sufficient financial headroom to continue to invest modestly in growth and wait for past R&D expenditure to produce a return.”
-update for broker comment --