6th Apr 2016 16:27
LONDON (Alliance News) - RM2 International SA Wednesday said it entered into an agreement that will allow the company's BLOCKpal pallet to be mass produced at a lower price in China from early 2017, but said it will fall far short of its production targets this year as a result.
The logistics company and developer of the BLOCKpal pallet said it signed a strategic cost-saving manufacturing agreement with Zhenshi Holding Group Co Ltd, which is a major shareholder in one of the largest manufacturers of fibreglass in the world, China Jushi Co Ltd.
Fibreglass is one of the key raw materials used in the manufacture of RM2's BLOCKpal pallet, and the London-listed company said the agreement will allow the pallet to be mass produced at a facility owned by Zhenshi in Tongxiang, which is adjacent to China Jushi's glass fibre manufacturing plant.
RM2 said initial production under the deal is expected to occur in the first quarter of 2017, aiming to produce 1.5 million BLOCKpal pallets per year with the aim of getting that up to 5.0 million pallets a year in the "medium term".
The pallets produced in China will initially be sold and transported to customers in North America and Europe, marketing the pallet's superior characteristics over standard pallets.
However, RM2 and Zhenshi have identified a significant strategic opportunity for BLOCKpal deployment in the domestic Chinese and other Asian markets as Chinese logistics develop, it said in a statement.
The two companies will also develop additional areas where their resources and expertise are complementary, particularly in the area of logistics. Producing the pallets in China will ultimately lower RM2's costs, and is the main point of the agreement.
More importantly, the decision to move those assets and because of lower-than-expected production in Canada, RM2 said it will "fall well short of its 2016 production target."
"Management analysis has demonstrated that the cost per unit benefits support this decision. The company continues to seek to improve and optimise its manufacturing processes and remains committed to volume production in North America and will update the market on these plans over the coming months," said RM2.
RM2 shares closed down 2.7% to 36.0 pence per share on Wednesday.
By Joshua Warner; [email protected]; @JoshAlliance
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