Another acquisition has been made, this time in the recycling space, a part of our industry that is set to grow rapidly over the next few years as the tide against plastics becomes stronger. Here is the full statement from Eurocell.
One of our five key strategic priorities is to increase the use of recycled materials in our primary extrusion processes. The combination of planned growth in our business and developments in extrusion tooling indicate that our demand for recycled material could be greater than our existing in-house production capability within two years. We have also been keen to develop a larger presence in the recycling market in the face of increasing competition.
We were therefore very pleased to complete the acquisition of Ecoplas on 1 August 2018. Ecoplas is a recycler of PVC windows, operating from a single site near Selby, North Yorkshire. The operation is similar to our existing facility in Ilkeston. Current output is approximately 7k tonnes of recycled compound per annum, sold into the building trade (including windows). The initial consideration is £5.0 million. Further details on the financial aspects of the transaction are included in the Group Financial Review.
Significant raw material cost inflation, with average resin prices up by approximately £150 per tonne over the last two years, has resulted in a widening gap between the cost of virgin PVC compound and our recycled compound, making the case for further investment more compelling. As well as driving strong returns, investments in recycling also support the increasing demand for co-extruded profiles and improve the sustainability of our products and our business. As described above, we have made substantial investments in our existing recycling facility in Ilkeston over the last three years, which has increased our planned use of recycled materials for 2018 to approximately 10k tonnes (almost 20% of material consumption).
Capital investment will be required to improve the environment and reliability of the Ecoplas plant, to eliminate bottlenecks from production processes and to expand capacity. We will also need to accelerate investment in co-extrusion tooling at our primary manufacturing facility. This will begin immediately and take approximately 18 months to complete.
In terms of material usage, following these investments, with increased capacity we expect to consume approximately 2k tonnes of recycled compound from Ecoplas in our primary extrusion processes in 2019 and around 4k tonnes in 2020.
The acquisition of Ecoplas represents a significant step change in our recycling capability and also reduces our dependence on the Ilkeston plant. Recycling now sits demonstrably at the heart of our business and I am delighted to welcome the Ecoplas team into the Eurocell Group.
The rush to recycle
Eurocell has been one of the front runners when it comes to the recycling sector within fenestration. They have their own major recycling facilities, have been using more recycled content in their own products, and now they’re on the acquisition trail, buying up businesses in the recycling part of the market.
From my own conversations with the company, they have been quick to see the attitudes towards plastic changing. Social media is already filled full of anti-plastic comments and posts. The attitude towards the material is definitely changing, and it’s important for the industry to get in front of the curve and demonstrate that PVCu windows and doors are very much a useful material to continue to make fenestration products from.
However, social changes will mean that more of those new windows and doors will have to be made from recycled materials. Public opinion will drive that more than anything else. As we all become more aware of sustainability, our industry will need to adapt it’s who supply chain.
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