The Green Future of Recycling EPS

- An interview with Mr. Liu Fangyi, Chairman of Intco

 

With the total assets of more than 100 million yuan, Mr. Liu Fangyi owns Intco International Holdings Co., Ltd (hereafter Intco), which has eight exclusively invested subsidiaries and two joint-stock companies in and out of China. These companies have two main businesses, which have no connections with each other: medical products and expanded polystyrene froath (EPS) moulding and frame art products.

The former represents his entrepreneurship and the latter reflects his future.

 

CBF: You chose to study abroad in the USA after you finished your middle school and soon founded your own company of selling medical gloves. Then you came back to China and achieved another success by investing in the manufacturing industry. Can you briefly summarize this period?

Mr. Liu: Intco can date back to 1994 when I was still a college student in the USA. The company’s main business was to sell medical gloves. Due to the threat of Aids and the popularization of medical gloves, this industry saw a 30% growth rate each year and my company also developed very fast.

From 1994-1998, Intco was purely engaged in the medical glove trade in the USA. In 1998 we began to set up joint ventures in China, in which we put 3 million US dollars in total. Due to the lack of credit, some of our partners had gone public but we didn’t see corresponding benefits. In 2001 we changed our investment strategy and began to build exclusively invested subsidiaries in 2003. Now we have three manufacturing bases in Shanghai, Jiangsu and Shandong. The company also saw the fastest development in these six years.

 

CBF: Producing imitation wood frames from recycled EPS is one of Intco’s main businesses. Can you tell us how did you find this business opportunity?

Mr. Liu: In 2000, we introduced a photo frame product line from Korea. The raw materials were the abandoned EPS packing cases from Samsung and LG. At that time I sensed the business opportunity in this industry since the same kind of rubbish can be seen everywhere in China.

Initially, we met mountain-like difficulties in this new field. Hard problems haunted every process from the EPS’ collection, classification, transportation, processing and application. Money and technology were needed and it took a long time to see the return. But we didn’t give up. This year, Intco earned 42 million US dollars by selling imitation wood frames while the sales amount of medical products reached 90 million US dollars. Presently Intco is the largest company in the field of recycling plastic in China.

 

CBF: What do you think of the prospect of recycling EPS?

Mr. Liu: In the world, 12 million tons of EPS products are consumed each year, 10 million tons of which are abandoned. If piling up 10,000 tons of EPS, the height is the same with Jin Mao Tower. Presently Intco can recycle 20,000 tons of EPS each year, from which 800,000 cases of frames can be made. It usually costs two trees to produce a case of frames. That means we can save 1.6 million trees each year for the world.

With the more and more serious environmental pollutions and the drastic increase of oil price, the renewable resource industry is quite prosperous. Zhang Yin, board chairman of Nine Dragons Paper, became the richest people in China by recycling papers.

 

CBF: Only 20% of your company’s raw materials come from China and your products are mainly introduced to the foreign countries as well. Have your company been influenced by the financial crisis from last year?

Mr. Liu: Compared with Japan, Great Britain and North European countries, China’s resource recycling industry is far from maturation. In addition, our company was even fined for several times by the tax administration because of the lack of relevant tax-free policies. Therefore, we had to reduce the amount of EPS recycled in China.

The foreign terminal sales price is high and the markets are mature and large. Previously, Intco’s gross margin was very high. But the profits went down a half after the financial crisis last year because the distributors lowered the prices of our products. Fortunately, the influence is not that big and the profits have been recovered in this year. Moreover, with the technological improvement, Intco has successfully got involved in its upper stream industry chain. Its output value and profits will be greatly increased in the future. We aim at recycling 60,000 tons of EPS in 2010 and 100,000 tons in 2011.

 

CBF: Since China has recently launched the second board, does Intco have the plan of listing?

Mr. Liu: Intco’s subsidiaries engaged in environmental protection plan to go public on the second board while the ones of medical products will go public on the main board.

Previously Intco prepared for going public in Hong Kong. But we didn’t plan to sell our shares at low prices. We want to find a proper chance to go public when the price/earning ratio is satisfactory. Right now we have not decided to be listed in Hong Kong or Mainland China. IDG, Zero2ipo and Mr. Jiang Nanchun from Focus Media have invested in Intco’s subsidiaries of environmental protection. The investors and I are quite confident in increasing Intco’s production value to 500 or 600 million US dollars in the future.