UPDATE: Metabolix To Cut Bioplastics Business After ADM Withdraws
January 12 2012 - 6:05PM
Dow Jones News
Biochemicals maker Metabolix Inc. (MBLX) said it will reduce its
bioplastics business after partner Archer Daniels Midland Co. (ADM)
decided to pull out of the two companies' joint venture.
Metabolix shares dropped 45% to $3.30 after hours following a
halt on the stock. It had climbed 23% over the past three months
through Thursday's close.
News of ADM's choice to leave the companies' Telles LLC joint
venture comes a day after the agribusiness giant said it would cut
1,000 jobs, or 3% of its work force, amid simmering investor
discontent about the returns on its capital expenditures in recent
years, including new ethanol plants and the bioplastics
venture.
Formed in 2006, the Telles joint venture produces plant-based
biodegradable plastics for the U.S., Europe and other countries.
Metabolix said it is still working out the details of its plan to
trim its bioplastics business, a move that will cost between $2
million and $3 million in restructuring charges this year.
The company said it will continue focusing on developing
renewable industrial chemicals, though management is also
conducting a strategic review of its business priorities for
2012.
"Over the past few years, we now have proven the technology at
industrial scale and believe that we now have the opportunity to
launch this business with a different business model," Chief
Executive Richard Eno said. "We will be evaluating alternate plans
for commercialization and clearly wish to supply this growing
market in the future."
ADM made its decision after looking for "areas that are not
delivering sufficient results now or are not expected to deliver
sufficient results within a reasonable timeframe," Mark Bemis,
president of ADM's corn business, said in a statement. He added
there was uncertainty about projected costs and the rate of market
adoption.
Morgan Stanley, in a December research note, called the venture
"a very high-return investment, though the payoff is likely many
years away."
Analysts say the company's capital expenditures from 2007 to
2010, focused mainly in the U.S., have not produced enough returns
to satisfy some investors. The company has since shifted its focus
on international projects that will expand its grain merchandising
and processing capacity.
ADM will still keep a Clinton, Iowa, factory that has produced
the plastic resin after it withdraws from the partnership on Feb.
8. Metabolix will retain all the technology used in the joint
venture.
Metabolix ended 2011 with an unaudited cash and investment
balance topping $78 million.
ADM's stock was up 0.1% to $29.18 in after-hours trade. It is
down 11% over the past year.
-By Drew FitzGerald and Ian Berry, Dow Jones Newswires;
212-416-2909; Andrew.FitzGerald@dowjones.com;
ian.berry@dowjones.com
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