The future for beleaguered pallet manufacturer RM2 International (RM2:AIM) is looking more positive on news Canada’s largest retailer has begun accepting its pallets in its supply chain network.

Loblaw (L:TSX), a grocery and pharmacy retailer, is using RM2’s BLOCKPal pallets, which are made of a fibreglass and resin composite that is stronger and more environmentally-friendly than traditional wooden pallets.

RM2 says it will work with Loblaw to further implement a programme of pallet deployment in the coming years, sending the shares up 5% to 36p.

RM2 INTERNATIONAL - Comparison Line Chart (Rebased to first)

RM2’s share price has plummeted by 35% since September 2015 when it warned its full-year revenue and production numbers would be significantly below previous guidance. This was because it had to change its friction coating to a gel-based system to better address its customers’ health and safety needs.

Even news that Neil Woodford was upping his stake in the company from 27.6% to 28.1% in December failed to stem the £136 million cap’s share price decline.

The fact Loblaw has started using the pallets suggests RM2 achieved its target of completing the switch to gel coating in the fourth quarter.

If the company can keep signing up large customers, which also include Nestle (NESN:VTX), 2016 could be a better year.

Issue Date: 17 Mar 2016