Closed Loop hails performance despite downturn

Plastic bottle recycler Closed Loop Recycling has overcome the “financial challenges” to establish itself in the UK and is confident of ensuring a lasting presence in the sector, according to its managing director Chris Dow.

The accounts seen by letsrecycle.com, which were approved by the company's board of directors on August 4 2010, show the profit and loss deficit for the company rose by £7.4 million to the year ending June 2009 – going from £3.19 million in 2008 to £10.5million in 2009.

In the accounts, the auditor, Steven Wakefield of Dixon Wilson, said the plastics recycling firm was “dependent on its lenders not to seek repayment of loans in the short term”.

And, he added: “This condition, along with other matters explained in the accounting policies, indicate the existence of material uncertainty which may cast doubt about the company's ability to continue as a going concern.”

However, Mr Dow, who highlighted the fact that the accounts were over a year old, said the company had managed to overcome “extraordinarily volatile” industry conditions and was now pushing on with its expansion plans – such as its proposed 50,000 tonnes-a-year capacity plant at Deeside in North Wales. And, he pointed to the stresses and strains involved in starting up a recycling business in the plastics sector and then finding world markets hit by the recession.

He said: “Obviously we have had our financial challenges during our development phase and our auditors are right to draw attention to them as they are required to take a very prudent approach.

“The management is confident in the future of the business and the auditors have not disagreed with us. We now have a proven and profitable model here at Dagenham.”

The accounts also showed that, at the year end, the company had net liabilities of £4,926,487 and net current liabilities of £11,180,832. After the year end, the company received further loans of £6,555,000 which are repayable on the fifth anniversary of their drawdowns or on a sale.

Improved

The coalition government has stated that it wants to be the greenest government yet and we need to create a level playing field for green industries

 
Chris Dow, managing director, Closed Loop

Commenting on the issues behind the accounts, Mr Dow said the company had been hit by a marked decline in plastic bottle prices in October 2008 caused by the economic downturn and he also drew attention to the domestic sector's dependence on export as an area for concern.

“It's madness that we have a state of the art recycling plant in Dagenham, supported by the Mayor of London, and yet over half of London's plastic bottles are still being shipped abroad,” said Mr Dow.

“The coalition government has stated that it wants to be the greenest government yet and we need to create a level playing field for green industries so we can keep valuable waste in the UK and stimulate the market growth.”

Mr Dow has been very vocal on this issue in the past and has met with government officials – including business minister Mark Prisk – to attempt to encourage the government to act to help support development of the domestic recycling market (see letsrecycle.com story).

Support

Mr Dow acknowledged that the company had been able to establish itself in Dagenham through support from the Allied Irish Bank Group and also venture capitalists Foresight Group – which issued Closed Loop with £350,000 in August 2008 and has retained a 4% stake in the plastics recycling firm.

He said: “We had to create the plant from scratch, but we worked with some of the best manufacturing and engineering solutions in the world. Foresight Group identified that there was a valuable market in waste, and our food grade plastic is the highest value in terms of cost per bottle. We knew we had the right business model, but could never plan for the major recession that hit the market”.

And, in its annual report, Foresight states that Closed Loop had sought a further £6 million from the market to help purchase new equipment, refinance short-term debt and provide additional working capital. This was due to “delays in full commissioning”.

It states: “These product audits have now largely been completed and initial orders are now being received from several large UK and multinational companies. This project has taken longer to get to full operating output than originally planned resulting in significantly higher costs than budgeted.”

And, while Foresight acknowledges issues faced by Closed Loop, it states: “We remain confident, however, that following the current financing round, Closed Loop has the potential to become a significantly profitable business.”

Support

Development of the Dagenham facility was aided by the Waste & Resources Action Programme (WRAP). The government-funded body first supplied an interim manager to provide four months of technical support during 2009 to focus on PET and HDPE production – with further assistance being given to look at mixed plastics.

WRAP has also supplied two rounds of grant support for the firm, totalling around £2 million. The first being £1 million in 2005 to help construct the plastic recycling facility for PET plastic and the second, also for £1 million, was issued to help install a food-grade HDPE process line into the plant.

WRAP said this month that the grant funding has helped Closed Loop process 161,000 tonnes of PET plastic over the last five years and that the firm is on course to process 42,100 tonnes of food-grade HDPE plastic by 2011.