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Interview With Frederic Scheer, CEO Of Cereplast

By Jorge Aura

Cereplast Inc (NASDAQ: CERP) is engaged in the development and commercialize of compostable, renewable, ecologically substitutes for petroleum-based plastics. The company produces and markets’ bio-plastics. The company was founded in 2001. Cereplast product portfolio currently consists of two top quality range of products:

- Cereplast compostable resins are made of renewable resources and are ecologically sound substitutes for fossil fuel-based plastics, replacing nearly 100% of the petroleum-based additives used in traditional plastics.
 - Cereplast sustainable resins replace up to 90% of the petroleum content used in traditional plastics.

The company acquired a production plant in Italy in October 2011. Cereplast Inc will benefit from the new laws of sustainability of plastic bags.

I contacted Cereplast CEO, Frederic Scheer, before taking the decision to invest in this company as well as to help us gain a better understanding of the company's plans and future prospects and I have had the honor of interviewing him.

[JA] First of all, I would like to thank you for this interview. Please, tell me the start of Cereplast and its long-term objectives.

[CEO] Cereplast was incorporated in September 2001 and the scope was to create a bioplastic resin manufacturer able to offer bioplastic a substitute to traditional polyolefins but made with biobased content instead of petroleum. We have experienced significant interest from a global perspective from companies seeking to market their environmental awareness, comply with new legislative initiatives which mandate the use of bioplastics and/or reduce their carbon footprint.

[JA] On June 2012, Cereplast announced it has reached a distribution agreement with Albis Plastic GMBH. How is the commercial relationship with this company developing?

[CEO] Cereplast entered into a distribution agreement with Albis GmbH, a large European distributor. We are very pleased with our initial development work with Albis and we are excited about future prospects being generated by their team. We executed our initial shipment of material and we are hopeful to report significant developments in the weeks to come.

[JA] In August, you opened a new office in India. How are your businesses evolving in India?

[CEO] Our Indian market development efforts are the most exciting opportunity in our pipeline. India has over 1.6 billion consumers in the entire subcontinent, who are extremely receptive to alternative technology cleaning up the environment. In our office in Hyderabad, south India we have organized tens of technical tests that are supported by our local Engineer who was trained in the United States. We announced this week the first product qualified to be commercialized in the Indian market and this was done in less than 3 months, a very fast sales cycle. We are expecting more announcements to come in the next few weeks and we believe that ultimately India will become a large part of our business. India is still enjoying a 6% annual growth rate and the prospects are excellent.

[JA] Congratulations for your recent nomination for Materialica's 2012 awards. What does this nomination mean to the company?

[CEO] The Materialica nomination is just another testimony that Cereplast resins are very performing and the new trend of plastic. We believe our cutting edge technology is important to the new world of plastic. Cereplast has always created trends and we continue. For instance, Cereplast invented the concept of "hybrid" resins. Today several companies are imitating us, but clearly we have an advantage. We believe that ultimately we will change the world but clearly it is a long and rocky road and it requires perseverance and tenacity. We know that we will succeed.

[JA] A.R.M.Y. Group is a partner in South Asian markets. How many annual sales can this partner provide you?

[CEO] This is a difficult question to answer; however, the addressable market in India is very significant. I believe that in the next five years, the bioplastic resins business will grow to over $250 Million. We are one of the first companies to introduce bioplastic resins in India so I am hopeful that A.R.M.Y. will be able to exploit this competitive advantage to Cereplast.

[JA] Are you planning to release any new range of products?

[CEO] R&D is the center of our success. We are working on our new technological platform for 2013-2015. We will announce a few new offerings in our resins. We are concentrating on a fewer applications, but with resins with improved performance and offers a significant economic advantage to our end users. Our new resins will be both in our Compostables® family and our Sustainables Biopolyolefins®. We are quite excited about these resins, which could become a game changer for Cereplast.

[JA] In 2011, the company ended the year with 20MM sales. Next, a constant decrease on sales is shown in your last financial reports. What is the main reason of this decrease on sales?

[CEO] 2012 is a tough year for the world economy and is a tough year for Cereplast. As you know, over 90% of our sales were made in Europe in 2011. Unfortunately, Europe entered into a recession and several of our large clients became financially challenged, leaving us with large amounts of unpaid receivables and forcing us to dedicate a lot of time and energy to recovery. This situation forced us to restructure our selling policy and we now make sales only to companies that pay upfront or open a Letter of Credit. Implementing this policy was necessary, but eliminated several small and medium sized companies and restrained our sales. In addition, legislation in Italy that was supposed to be implemented in 2011/2012 was delayed by state authorities and the demand on compostable material decreased. The combination of all of the above explained the decrease in sales we experienced. We needed to regroup and re-center our sales on new areas of growth and this is what we have done with our Indian operations. Now clearly it takes time to build up sales cycle but we are quite optimistic on the outcome for 2013.

[JA] Cereplast Inc. shares are quoted below $1 per share. What kind of measures are you going to adopt so as to meet NASDAQ market's requirements?

[CEO] We are working with the various agencies to regain compliance and we are hopeful that the current depression in our stock value will change very shortly. The fundamentals of our Company are still very good and we just need to execute on our new direction to see our stock regain the necessary levels. We have taken a proactive attitude and we are exploring options to recapitalize the company and resolve the liquidity burden through sales in India and we intend to embark in a very active investor relations campaign to reach out to our shareholders to rebuild confidence and regain market capitalization.

[JA] Is there any multinational interested in buying Cereplast?

[CEO] At this stage we are working with several large conglomerates but primarily to design specific resins. We have not entered into any M&A activity. We are open to any opportunity but believe that it would make more sense as soon as we have regained a position of strength.

Disclosure: Jorge Aura has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Jorge Aura wrote this article himself, and it expresses his own opinions. He is not receiving compensation for it.  Jorge Aura has no business relationship with any company whose stock is mentioned in this article.

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