Pallet maker RM2 International (RM2:AIM) has warned its full-year revenue and production numbers will be significantly below its previous guidance, sending shares in the £187 million cap plummeting 19% to 47p.
The company, whose pallets are made of a fibreglass and resin composite that is stronger, more cost-efficient and more environmentally-friendly than traditional wooden pallets, was told by its customers to change its friction coating from powder coating to a gel-based system.
RM2 says the gel coating addresses customers’ health and safety needs better and increases the pallets’ life cycle, but the change means it ‘will not achieve the substantial upswing in production’ that had been expected to begin in the third quarter.
It says the change will have a significant negative effect on reported revenues and cash flow in 2015.
‘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 recognised by critical decision makers,’ says chief executive Jon Walsh.
It’s a massive set-back for RM2, which over the past year has been signing up blue-chip customers like Nestle (NESN:VTX) for its BLOCKPal pallet following a difficult trading period caused by its move to a new factory.