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Biodegradable plastics specialist Plantic Technologies (PLNT:AIM) will unveil plans in April to open a European manufacturing plant. The facility is likely to be in east Germany where a £2.9 million site is under evaluation. The jobs creation attached to the plant would see Plantic qualify for 40% cash subsidy from the German government.

Plantic makes environmentally friendly plastics out of corn starch which are used for food and drink packaging. Products, including chocolate trays for Marks & Spencer (MKS) and Cadbury Schweppes (CBRY), are made in Australia. Adding a European manufacturing basis would cut supply times from seven to two weeks for local markets.

‘All the major food companies like Kraft are moving operations to east Europe for cost reasons. Having a manufacturing plant nearby would help us tremendously to better serve these key markets,’ said chief executive Brendan Morris. He claims that a European plant would pay for itself within three years.

A development, distribution and manufacturing license deal was signed last year with US chemical giant, DuPont. The good news wasn’t enough to stop the share price falling 55% to 35p between October and February, prompting in the departure of then CEO, Grant Dow.

A well-received investor roadshow and the award of a US patent last week pushed the shares back to 44p. A new ‘nano’ sheet material will be officially unveiled in April, having already been promoted in recent days by DuPont in Taiwan and Korea. The biodegradable product is suitable for electronic devices, razor blades and Easter eggs, all requiring clear packaging.

House broker Libertas believes the company will break even at EBITDA level in 2009, with a positive net income recorded the following year. Plantic hopes to launch two more product lines by early 2009 which should be the trigger to greater revenue. Flexible packaging will see environmentally friendly plastic replace aluminium coating inside such items as coffee bags and crisp packets. Barrier resins will be used in drink bottles and wrapping for chilled foods that have traditionally been unsuitable for recycling.

Soft commodity prices have rocketed in the past few months, including corn prices which reached a ten-year high in January on demand for ethanol fuel. Plantic has secured long-term supply agreements in Australia and North America for the type of corn needed for its starch-based products. A price cap means it will only pay a maximum 8% increase for raw materials, even if the corn price increases to a higher level.

DuPont is an obvious buyer for Plantic but is unlikely to consider a takeover until the technology is proved on a wider commercial scale.

Shares says: Should make a fast recovery now that momentum is building on its technology.