Novapet Inc.

“Atlantic Canada’s largest processor of post-Consumer and

post-Industrial plastic”

Novapet Inc.

Located in Amherst Industrial Park70,000 sq. ft. buildingProcessing 15 million pounds of “flake” annuallyMechanized processing equipmentApprox. 52 trucks monthly (in-out)44 employees (29 FT, 15 PT)

The Competition20 “PET” Processors in North America

5 “PET” processors in Canada. (1-Atlantic Canada, 3- Quebec, 1- Alberta/BC)

All 20 compete for raw material and sales throughout Canada and United States.

What’s happening in the recycling industry 2003-2004?

Recycling in NA = Approx. 20% Still only 11 States with deposit legislationUnknown barriers/contaminants present costly challenges - thorough testing, evaluation and communication is necessaryStrong lobbying efforts commenced by APR

Industry Challenges/Impacts

Raw material supplyMaterial pricing (RM & FG)New barriers/contaminantsChina - NA market penetrationIncreased “Deposit Programs” requiredFreight costsProcessing costs

Raw Material – North America

Plastics stream = 4,200,000,000 lbs

Annual recovery = 840,000,000 lbs

Recovery rate = 20%

Raw Material in North AmericaSupply was very limited in 2003 and continues to be in 2004.Market prices have risen in 2003/2004 Processors are reaching outside their boundaries

Market PricingIncreased RM & FG pricing also brings increased costs, potentially lower marginsForeign exchange a major factor for CDN companiesQC more stringent Predatory suppliers

Barriers & ContaminantsNumerous contaminants in the plastics streamEffects price negotiations & penaltiesIncreased sorting costsStealth marketing

Barriers & ContaminantsPVC layersPVC LabelsNylonTPG coatingInk LabelsMulti-layers

AmosorbAdhesives/glueEVOHNylon 6Nylon 66PPG Coatings

Market/Operational Effects –(Contaminants & Barriers)

Additional washingHigher temperaturesCaustic solutionsQuality penalties – Sub-gradeReduced margins Reduced productivity

Bio-degradable materialThis material does not represent a solution or volume increase to recyclers. At best, this product should be clearly marked and distinguishable from main stream material

Bio-degradableThese are innovative items, however, the recycling industry would prefer to keep landfill volumes to a minimum.

If not clearly marked or easily segregated it will be viewed and handled as a contaminant

Reality

“When customers have a problem with a recycled product – than this will become an economic issue and either landfill or sorting costs will increase.”

Steve Carreras – President, Recycle America Alliance

The China FactorChina purchases approx. 300 million lbs. of PET annually (35%)China can handle low-end products (nylon, EVOH, PVC, etc.) more effectively due to lower labor, warehousing and processing costs.China’s consumption has steadily increased in the last four years

The China Factor

China pricing will remain strong and may get stronger in 2004Increased pricing has not increased raw material supplyThere is NO recycling program in ChinaImporting of PCR is illegal in China

Where does Novapet fit in the North America market?

Novapet is small, but successful in a very competitive marketDeveloped strong business relationships and strategic alliances with leading industry colleaguesQualified testing facility for Dupont Inc.Strategically located in Atlantic Canada

The Raw Material - NovapetSupply contracts with all 4 Atlantic Provinces

Deposit recycling programs - resulting in a consistent product.

Expected growth of4-5% in 2004

The Finished Product

15 million pounds sold in Canada and United States

The Finished Product

Novapet’s Future (next 24 mths)

Increased mechanization Expand raw material range (US/CDN)Increased post-industrial processingAdditional sales Assessment of value-added projectsAdditional employment

Summary

Critical issues for Recycling Processors are supply, barriers and costsAdditional “Deposit Programs”, especially in US are vital Increased communication and marketing are paramount to increased recycling

Novapet Inc.

Thank you