24 Sep 2015 07:00
24 September 2015
RM2 International S.A.
OPERATIONAL UPDATE
RM2 International ("RM2" or the "Company"), the vertically-integrated innovator in pallet development, manufacture, supply and management, today announces an update regarding developments in both customer engagement and manufacturing.
The engagement with senior management of customers, which we reported in June, has begun to generate proposals for specific implementations and roll out opportunities. We have recently signed contracts with two of the largest packaging companies in North America, each with the potential for significant expansion. This brings total contracted customers to 15, the vast majority in leasing contracts (as opposed to pallet sales contracts). We are currently conducting trials with nine additional potential customers. Trials are only undertaken after a thorough screening process in which the alignment of customer and Company metrics are demonstrated, and since initiating the assessment process, virtually every formal customer trial has led to a contract. In addition, three of the largest retailers in North America have accepted the RM2 pallet for trial by their vendors and we are working with the retailers to implement defined loops between them and their vendors.
Direct feedback from customers has highlighted the need to change the friction coating method from powder coating to a gel based system. The gel coating addresses customers' health, hygiene and safety needs better, increases durability over the life cycle of the pallet and is also expected to bring efficiencies and cost savings to the manufacturing process. The first gel coating systems are being commissioned, with the balance of the systems expected to be delivered during Q4.
As a result primarily of the decision to change to gel coating, the Company will not achieve the substantial upswing in production that had been expected to begin in Q3 this year and accelerate through Q4. This means that revenue and production numbers for the full year will be significantly below previous guidance. Production is expected to be not less than 2.5 million pallets in 2016, with a production run rate at the end of the fourth quarter of 2016 of c. 300,000 pallets per month. Based on current contracts and trials as well as discussions underway, the Company is confident of being able to deploy profitably all the pallets produced.
Chief Executive Officer, John Walsh, commented:
"Introducing a revolutionary product into an established market will always involve substantial challenges.
We have learnt difficult lessons, particularly with respect to the friction coating, but I am confident that the issues have been identified and are being addressed appropriately. I have no doubt we have a product and an offering which is creating significant value for customers, something which is increasingly recognized by critical decision makers.
Although the decision to change to gel coating will have a significant negative impact on reported revenues and cash flow in 2015, the Company believes that its long term competitive position, brand and quality control objectives are well served by this enhancement to the BLOCKPal and ultimately are expected to drive higher market share, and greater revenues and earnings."
The Company will publish its results for the half year to 30 June 2015 on 30 September.
Forward-Looking Statements
Certain statements included in this announcement contain forward-looking information concerning the Company's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company's control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. Nothing in this announcement should be construed as a profit forecast and no part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company, and must not be relied upon in any way in connection with any investment decision. Any forward-looking statements made herein by or on behalf of the Company speak only as of the date they are made. Except as required by the FCA, AIM Rules or applicable law, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
For further information please contact:
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Notes to Editors
RM2 International S.A. specialises in pallet development, manufacture, supply and management to establish a leading presence in global pallet supply and improve the supply chain of manufacturing and distribution businesses through the effective and efficient use and management of composite pallets. It is quoted on the AIM market of the London Stock Exchange under the symbol RM2.L.
For further information, please visit www.rm2.com
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