ADM loses faith in bioplastic JV on cost and demand anxieties
The company cited concerns over production costs and lower than expected demand for the polyhydroxyalkanoates (PHA) material marketed as Mirel. The bioplastic is targeted at a host of markets including injection-moulded caps and lids and thermoformed food packaging, such as yoghurt containers as well as tubs and trays for meats and vegetables.
But while the Illinois-based giant said it had still to take a firm decision on the future of the Clinton plant in Iowa, it confirmed it would record a one-off write down of between US$300- $360m for the asset in its Q2 accounts. The fate of the 90 employees at the site was also under review.
The move shocked partners Metabolix, with the company forced to regroup and find both a new manufacturing partner and feedstock source.
Underperforming
The 50/50 partnership between ADM and Massachusetts-based Metabolix was inked in July 2006 and led to the formation of a dedicated bioplastics sales and marketing outfit Telles. ADM said the JV and Telles would be formally dissolved on 8 February.
Metabolix provided the intellectual property, while ADM provided the corn-based feedstock and the 50,000 tons per year capacity facility.
“We have analysed our business portfolio, identifying areas that are not delivering sufficient results now or are not expected to deliver sufficient results within a reasonable timeframe,” said Mark Bemis, ADM president of the corn unit.
He said the fermentation technology performed well but that the firm decided to end the JV over anxieties about costs, market demand and anticipated returns.
“Unfortunately, uncertainty around projected capital and production costs, combined with the rate of market adoption, led to projected financial returns for ADM that are too uncertain. Therefore, we have decided to exit the business as permitted by the commercial alliance agreement with Metabolix,” added Bemis.
Slammed on the brakes
The decision came as a hammer blow to Metabolix chiefs who admitted they were not expecting it. The firm said it would have to incur restructuring charges approaching $3m, as well as finding a new source of feedstock and processing plant.
A further short term problem would be meeting current contracts.
“Unfortunately, another implication of the termination is that in the very near term, it is highly unlikely that we will be will to supply our customers with commercial quantities and materials, due to the lack of a commercial manufacturing asset,” said Richard Eno, Metabolix president and CEO. “We will be working with each of our customers and prospects to manage this transition as effectively as possible.”
However, the executives could not hide their frustration at the development.
Company co-founder and CSO Oliver Peoples said: “Obviously, this is a major and extremely frustrating for set-back for Metabolix in our progress to commercialise the PHA bioplastics platform. I woke up last night at 2.00am thinking that just as we were emerging from a long dark tunnel with the light in view, someone slammed on the brakes.”
Eno agreed it was a setback but added that a number of positives remained – such as its strong cash position, a strong intellectual property portfolio and a good knowledge of the market.
