Joint Venture announcement

Zotefoams, which manufactures and sells high-performance foams, announces that it has entered into a joint venture with Inoac Corporation of Japan for the manufacture and exclusive sale of its Azote® polyolefin products in Asia and Australasia.

On 11 July 2013, Zotefoams signed a joint venture agreement with Inoac Corporation (“Inoac”) for the manufacture and exclusive sale of its Azote® cross-linked polyolefin foam products (“Products”) in Asia and Australasia (the ”Territory”). Inoac Corporation has been a distributor of Zotefoams’ Products in the region since 2007.

Zotefoams and Inoac (“the Parties”), effective from 1 July 2013, have established a 50/50 owned sales joint venture company in Hong Kong (“S-JV”). The S-JV will be managed by Zotefoams’ existing Asian polyolefin sales team. Initially, the S-JV will sell Products manufactured at Zotefoams’ Croydon site in the UK and shipped direct to the S-JV’s customers in the Territory.

In parallel, the Parties will invest in a new manufacturing facility in South Korea to supply the S-JV with Products. This facility, based adjacent to an existing Inoac manufacturing site, will be similar to Zotefoams’ factory in Kentucky, USA. Non-expanded intermediate product will be supplied from the UK for expansion in South Korea, which significantly improves the economics of foam supply to customers in the Territory. The Parties will establish a 50/50 owned manufacturing joint venture (“M-JV”) managed by Inoac. It is anticipated that the M-JV factory, with a total investment of approximately US$ 8 million, will commence operations during 2015.

Zotefoams initial capital contribution to the S-JV is US$0.3m and to the M-JV US$0.5m, which is expected to be followed by a further contribution of US$1.4m to the M-JV around the end of 2014. Zotefoams expects these contributions to be made from existing cash facilities. Inoac’s contribution to the two companies will match that of Zotefoams and in addition Inoac will purchase the major capital machinery for lease to the MJV.

The Territory covers Japan, South Korea (Republic of Korea), People’s Republic of China, Hong Kong, Malaysia, Indonesia, Singapore, Thailand, Vietnam, Philippines, Taiwan, Laos, Australia, New Zealand, Myanmar (Burma) and Cambodia (to the extent that there are no trade sanctions prohibiting sales in any particular country).

Commenting on the joint venture, David Stirling, Managing Director of Zotefoams plc said:

“Demand for our Azote® polyolefin products in Asia is growing and this joint venture demonstrates our commitment to develop this market. I am delighted that we have entered into this joint venture agreement with Inoac, with its strong manufacturing and market presence in Asia.”

Mr Soichi Inoue, Chairman of Inoac Corporation, said:

“Inoac have been a Zotefoams’ customer for a number of years and we are impressed by the technological advantages of their Azote® product range. We are pleased that we are entering into an agreement with Zotefoams to share in this exciting next phase of market development in the Asian region.”