It’s been a rough time for bio-plastics company Cereplast Inc. Sales fell and about 45 of 70 workers were laid off. But the Hawthorne company has kicked off the new year with an ambitious agenda.
In the first few days of 2010, Chief Executive Frederic Scheer announced the company is moving its manufacturing operations to Indiana, expanding distribution into Europe, and laying the groundwork for a jump to a higher-profile stock exchange.
Cereplast isn’t a total loss to L.A.’s business world: It will open offices in El Segundo as its downsized corporate headquarters. But it’s another example of companies that have to move manufacturing out of state or shrink dramatically in order to afford keeping a base in the L.A. area.
“I’m still committed to staying here because we have a lot of brainpower that I brought in from other cities or recruited here and don’t want to keep moving around people,” Scheer said. “I will fight to stay here in Los Angeles as long as I can, but it’s just cheaper to be in another state.”
Cereplast makes biodegradable resins from corn, wheat and potatoes. The resins are sold to companies that use them to make plastic products such as plates, cups and baby booster seats. But Cereplast saw sales decrease by 50 percent in third quarter 2009 from the same period in 2008, and as a result had to cut back from 70 to 25 employees.
The company has signed a five-year lease for 3,000 square feet in El Segundo, down from its peak of 85,000 square feet in Hawthorne. The move of the production and research and development lines to Indiana is a way of saving money on costs such as electricity, which Scheer said is 70 percent cheaper in Indiana.
On the business side, Cereplast announced two weeks ago that it would implement a one-for-40 reverse split of its outstanding common stock in order to position it for listing on the NYSE Amex Equities or Nasdaq. It has been trading in recent weeks for about 10 cents on the OTC Bulletin Board; the reverse split would make it eligible for trading on a bigger exchange.
The company is part of a small but growing $1 billion bio-plastics niche.
“Cereplast was a founding father for the bio-plastics industry,” said Steven Mojo, executive director of the New York-based Biodegradable Products Institute, which Scheer helped establish. The institute, which is independent of Scheer and Cereplast, now represents 84 bio-products manufacturers, up from a handful when it was founded 10 years ago.
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