How SECOS Group profits from the war on waste

The war on waste is heating up. Last month, Queensland became the latest Australian state to ban single use plastic plates, bowls, cutlery, and polystyrene takeaway containers. The Sunshine State expects the ban to reduce plastic waste by 20% in the next two years.

This move comes three years after the decision by Australia’s two largest supermarkets to stop offering single-use plastic bags – which prevented an estimated 1.5 billion bags from being introduced into the environment. 

SECOS Group (ASX: SES), a company that develops and manufactures biodegradable and compostable packaging, is one business that stands to benefit from the shift to sustainability.

At the moment, Australia produces around 1 million tonnes of single use plastic every year. Much of this ends up in landfill where it takes hundreds of years to break down. As it decomposes, microscopic plastic particles can seep into the environment and cause pollution.

“The problem we’re facing isn’t just an environmental problem, but one that is a health problem as microplastics enter our food chains and we end up eating it,” said SECOS Group’s Executive Chair, Richard Tegoni.

“We’re seeing a strong push not just by consumers who are demanding environmental products but governments are starting to act which is a huge change to where we were five years ago,” added Mr Tegoni.

Many countries are now going further than single use plastic bans. Some now mandate that all packaging is made from compostable materials.

While Australia hasn’t gone there yet, it certainly could be on the horizon. In July, the Morrison Government announced a ban on plastic exports. Exporting plastic to be recycled at overseas plants was once a mainstay of Australia’s waste management strategy. This decision means Australia will soon have to deal with its own waste, and this will drive up costs of plastic disposal.

“We think that packaging is increasingly going to lean towards being biodegradable and sustainable,” said Stephen Scott from K2 Asset Management.

“We believe that they’re [SECOS Group] well positioned to participate in this trend”, he added.

In the 2020 December quarter, SECOS Group turned a profit that drove share prices up by 390%. This impressive surge made it one of the best performing stocks on the ASX in the 2020 financial year.

The company is now making strides in its expansion plan, having increased production in its factories in China, as well as launching a new plant in Malaysia.

Click here to view more videos from Stephen Scott’s ‘Meet the Fund Manager’ session, or click here to view the full ‘ The Insider: Meet the CEOs’.

The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.

Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.

The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.