The announcement that one of the UK’s leading plastics recyclers is looking for a buyer is a symptom of increasingly challenging operating conditions in the country, industry insiders have said.
Jonathan Short, founder and deputy chairman of ECO Plastics, confirmed the company was seeking new backers to secure “a long-term platform” for the development of the business.
The announcement came after Ludgate Environmental Fund (LEF), which has invested some £5m in equity in ECO Plastics, said it had written off the company book value of £2m at September 2014.
“There have been recent operational challenges at ECO Plastics and unfavourable market conditions,” said LEF. “Unfortunately, this situation has not improved in recent months and, although the company has been working with creditors to find a solvent solution, this is no longer expected to be achieved.”
In the latest financial results dated December 2013, ECO Plastics reported annual pretax losses of £4.9m, as production costs and administrative expenses were higher than a turnover of £47m.
The company indicated that poor quality feedstock available within the UK presented a challenge to the business.
ECO Plastics operates the largest plastic bottle recycling facility in Europe at Hemswell, Lincolnshire.
The plant is capable of sorting up to 150,000 tonnes of plastics a year. The business also operates 72,000 tonnes of wash capacity and 40,000 tonnes of extrusion capacity.
The plant’s output streams include food grade recycled PET (rPET). Its largest customer is Coca Cola Enterprises, which in 2012 signed a 10-year supply partnership.
The price of rPET has decreased by almost a third this year. According to MRW data, clear rPET was selling at £245-265 per tonne at the beginning of December 2013, but has now declined to £160-200.
Industry insiders told MRW the struggle of ECO Plastics reflected increasingly challenging market conditions in the UK waste industry. The plastics sector is also affected by the decline in oil prices which are translating in lower virgin polymer prices.
An industry insider described ECO Plastics’s announcement as marking a “sad day for recycling”.
Another expressed concern on the state of the entire plastics recycling industry. “If ECO Plastics can’t do it, who can?” he said.
However, industry insiders said they were confident the company will be able to find a buyer given its strong credentials.