Monday, February 8th, 2010
Biopack Eyes Expansion in Southern China
YES, I want free trades through Zecco.com!
Biopack Environmental Solutions Inc. (OTC:BPAC) may not have the strongest revenues or balance sheet at the moment, but it is betting on rapid expansion and cost-savings to drive future results.
Biopack Environmental Solutions Inc. (BPAC, Free Analysis) is a designer and manufacturer of 100% biodegradable packaging products made from locally available sugar cane waste called Bagasse, which are primarily distributed in Europe under the “Roots Biopack” trademark.
A Troubled Financial Picture
Biopack reported sales that increased 25.6% to $868,463 for the nine month period ending September 30, 2009, which was primarily due to the company’s efforts to secure packing orders in the European market for the fruit season.
Meanwhile, the company’s net loss widened to $208,786 for the period due to a switch from an OEM supplier to in-house manufacturing. However, it expects cost of sales to decrease as economy of scale in production is achieved, and most upfront spending has already been made.
The company’s balance sheet also appears less-than-robust with a working capital deficit of $3,385,410. Historically, it has met its financing needs by issuing debentures and demand promissory notes, which has led to high levels of debt on the balance sheet.
Looking Towards the Future
On Monday, Biopack announced that it has entered into discussions with Chinese local officials to expand its operations, with the development and construction of a new manufacturing facility in the Southern Chinese province of Guang Dong.
The new factory will allow the company to continue with its current production, as well as realize tremendous cost savings and plan for higher production levels and significant growth ahead, according to its press release.
In the end, these cost efficiencies and higher sales levels are needed to repair the company’s broken balance sheet and deliver shareholder value. If successfully executed, increased production could boost top-line results, while greater cost-savings could help the bottom-line.
Receive Free BPAC Analysis by E-Mail
Want to become a better trader? Click here to sign-up for a FREE trading e-course taught by a former floor trader!
-- Written by Rick Telfur
