Novarise Renewable Resources International (Novarise - ASX:NOE) is based in Fujian Province, China and listed on the ASX in April 2010. Its main operating business is the sourcing, processing and re-use of post-consumer waste polypropylene (PP) as feedstock, the production of PP yarn and the manufacture of finished products using this yarn. The company is China’s largest producer of PP yarn and claims to be the only organisation in China that recycles post-consumer PP into yarn and webbing products. 

 

Novarise was founded in 1998 and, until its listing, was 90% owned by the current executive chairman, Mr Qingyue Su. The recycling technology was developed inhouse over a number of years and was introduced into the production process in 2009. The company is now moving towards using 100% recycled feedstock.  

Although Novarise exports some products, the majority of its sales are to domestic Chinese customers. Many of these customers, however, have points of sale overseas. They are the suppliers of components and completed products for many global brands including HP, IBM and LENOVO. 

The A$25 million raised in the IPO in 2010 was used to develop the company’s retail product lines and to construct a new production facility on the outskirts of the city of Quanzhou. The decision to list in Australia was based on Novarise’s ambitions to become a global recycler using its patented technology and a consequent desire to take the first step into international markets.

The finished products being developed, which include such items as notebook bags, shopping bags, rucksacks and work clothing, are expected to be launched for sale by the third quarter of 2011.

The new production facility at Nan’an, which is nearing completion and expected to be operational by the end of 2011, will increase the capacity of Novarise from 35,000 tonnes per annum to 75,000 tonnes per annum. The company claims that not only will its production capacity be more than doubled, but there will be significant operational efficiencies captured through the improved design of this purpose built facility. This clearly has the potential to make a significant impact on Novarise’s revenues and profits.

The company’s reported 2010 revenue was A$75 million, up from A$63 million in 2009. The associated NPAT (net profit after tax) rose to A$15.2 million in 2010 from A$13.3 million the previous year. Novarise’s operating currency is renminbi, whilst its reporting currency is Australian dollars. The rising AUD during 2010 therefore impacted the company’s results for the year.  

At the end of June 2011, Novarise’s share price was A$0.22 - down from its peak of over A$0.30 earlier this year but up from its low of below A$0.18 in October 2010 - giving a market capitalisation of A$91 million.