China XD Plastics (CXDC) Signs Agreement for Production of 300K Metric Tons of Materials in Southwest China

March 17, 2017 9:40 AM EDT
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China XD Plastics Company Limited (NASDAQ: CXDC) today announced the official signing of an agreement with the People's Government of Shunqing District, Nanchong City of Sichuan Province for the production of 300,000 metric tons of bio-composite materials and additive manufacturing and 20,000 metric tons of functional masterbatch, a high-end color additive process in plastics manufacturing (the "Project").

"The official signing of the agreement of the Project is another milestone for the company," said Jie Han, Chairman and CEO of China XD Plastics. "The Project will help the Company expand its product mix from traditional petroleum-based materials to bio-based composite, 3D printing and functional masterbatch materials, paving the path to non-auto applications and further diversify our company's business as a key element of our strategic plan."

In its 'Made in China 2025' and 'The Thirteenth Five-Year Plan', the Chinese government has highlighted bio-composite materials and additive manufacturing materials as key planning technology areas and clearly stated the importance of strengthening research and development in bio-based polymer materials, developing bioplastics packaging, bio-plastic auto parts and other areas, with nation-wide initiative in supply side reform to promote the field of additive manufacturing materials. On December 12, 2016, encouraged by the strong demand and market potential for bio-composite materials, additive manufacturing and functional masterbatch, the Company's Board of Directors preliminarily approved the Company's strategic investment in these initiatives.

After initial approval by the Board of Directors and the Company's major investor on December 8, 2016, Sichuan Xinda entered into a strategic investment agreement with Shunqing Government, Nanchong City, Sichuan Province, on December 12, 2016. Due to the uncertainty of securing the necessary land use rights for the project, the Company waited until March 13, 2017 and entered into a "Land Use Right Transfer Agreement" with the government agency, formalizing its initial dialogue, and entered into a definitive agreement after approval by the Board of Director and its major shareholder. The Project will be located in a land area of 250 mu (equivalent to 41.2 acres), where 215 mu will be designated for bio-composite materials and additive manufacturing production and 35 mu will be designated for functional masterbatch production. The projected total capital expenditures for the project is approximately 2.5 billion RMB (estimated to be $357 million) with anticipated completion by the end of December 2018. The Project will add 320,000 metric tons capacity and the Company will also benefit from favorable tax policies under China's Go West Campaign by locating the Project in Southwest China.

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