revenue potential from trials in china

Here's what we've been provided to date on our trials in China to supply household kitchen waste bags...

* Nanjing trial - 15th December 2011 - awarded a supply contract valued at $260k for a 6 month trial to supply household kitchen waste bags.

* 23rd January 2012 - Cardia supplies three more City Districts in China to supply household kitchen waste bags...

- Shanghai Pudong (City District) - population 7m people
- Hangzhou West Lake (City District) - population 8m people
- Yuhang - (City of Yuhang) population 1m people
- Nanjing - (City of Nanjing) population 7m people

Announcement highlighted that the total sales value for the supply of bags for the trials is expected to be in the order of AUD$600k over the next 6 months (this was back in January 2012).

That equates to $150,000 per City Council just for a 6 month trial ($600k / 4 City Councils = $150,000 approx).

Note: As part of the six-month trial period, Cardia successfully supplied its Biohybrid™ kitchen bags to approximately 5% of Pudong’s households. This supply has now expanded to 20% of Pudong’s households with the potential to expand rollout.

In one of my previous posts I highlighted that there are 32 City Councils in China. Just for the sake of this exercise, let's assume that Cardia are selected in 50% of these city councils. That would equate to sales value of $2.4M ($150,000 x 16 city councils) for supplying bags to these Councils for 6 months.

For this exercise, I'm not going to calculate if Cardia moves beyond a trial to a full contract, but as you can see it's clearly evident just how significant the potential revenue for a trial can be moving forward (and this is just in China alone). And why wouldn't Cardia be be in numerous trial negotiations right now? The first 4 were achieved within a few years with one now moving to full contract (Shanghai Pudong) on 20% of households with with potential to expand rollout in due time. I believe the significance of this full contract should not be underestimated.

Taken from CA...

The other three Councils in trial phase are Nanjing, Hangzhou and Yuhang and Cardia is looking to expand into other provinces of China.

and...

Through our successful pilot programs, which are already in place in other key districts in China (Nanjing, Hangzhou and Yuhang) we are confident in our corporate strategy of securing additional long term contracts in China.

http://www.cardiabioplastics.com/news/13/53/2012-12-11/cardia-bioplastics-secures-an-exclusive-annual-supply-contract-into-shanghai-china/

Note: No doubt Cardia will definitely need to look at a further ramp-up of production capacity. I'm sure they're a step ahead in relation to this. Pretty exciting stuff isn't it?

In addition, Cardia has a certified compostable offering for its organic waste management business, where trials are underway in Australia, New Zealand, Malaysia, Canada, USA, Brazil and the UK.

I'm expecting more trials in China and in succession. Get your shares whilst you can because as soon as more trials are announced I'd also expect more full term contracts to follow.