Consumables
ECO2 Plastics Revises Revenue Guidance – Provides Operating and Financing Strategy Updates
Monday 04. February 2008 - ECO2 Plastics, Inc. (BULLETIN BOARD: ECOO) ("ECO2" or the "Company"), the eco-friendly recycling company that is changing the way plastics are recycled, today announced that the Company is revising downward its Q4 2007 and 2008 revenue projections as it addresses production constraints.
Revised Guidance:
ECO2 Plastics is revising its guidance downward for Q4 2007 and fiscal year 2008 revenue and operating profit. Q4 2007 revenue is revised downward from $4,000,000 to $2,300,000 with fiscal year 2007 revenues of $4,300,000 versus prior guidance of $6,000,000. Fiscal year 2008 revenue projections have been revised downward from between $24 and $30 million to $20 million. Due to the lower rates of production in the near term, the Company will continue to run operating losses through Q2 2008 but expects to generate profits from operations for the fiscal year 2008.
The Company has recently discovered a mechanical design problem that affected the quality of plastic produced at higher rates of throughput at the end of Q4 2007 and quantities of material shipped in December and January are being returned. The cleaning process as designed remains effective, however, modifications are being made to correct the manufacturing issue and improve the Company’s organization structure to rapidly respond to customer feedback.
“Although revenue grew approximately 60% between Q3 and Q4 2007 and our 2008 revenue projections represent growth of 465% over 2007, I am not satisfied with our performance. We are implementing changes to insure continued growth in revenue, profitability and additional capital investment to increase throughput and maintain quality,” said Rod Rougelot, ECO2’s CEO.
Operations Update:
The Company has reorganized its operating and reporting structure to better monitor product quality, and improve communications with its customers. These changes have resulted in the elimination of certain positions within the Company and a decision to modify its agency relationship with sales distributors. Reconfiguration of the Company’s existing processing equipment is underway with the guidance of Gary De Laurentiis, ECO2’s CTO. New equipment scheduled for installation in Q2 2008 will enable the Company to run at full capacity. To ensure its customers receive the highest quality product during its ramp up, the Company will move to a direct relationship with its customers. Rougelot stated, “Combined, these changes will allow us to achieve, in a more efficient manner, our projected volumes while meeting the quality parameters set by our customers.”
Financing Update:
As previously announced, the Company is evaluating financing options for developing additional production capacity and continuing to strengthen its balance sheet. ECO2 has developed a strategy to restructure its balance sheet with the goal of converting a significant amount of convertible debt on the Company’s balance sheet to equity. This effort will be necessary prior to securing additional capital. The Company expects to complete the restructuring by the end of February 2008, enabling the Company to access new capital in March or April 2008.
Rod Rougelot, CEO of ECO2 stated, “More disappointing than missing our numbers is the fact that we did not identify the shift in quality before our customers had seen it. We are taking steps to fix the quality problems. Changes within our organization and moving to a direct sales relationship with our customers will improve communications. We are encouraged by the results we are seeing with our new structure and remain optimistic about the opportunity ahead of us.”