RE:iGPS, RM2, otheriGPS got up to 5 - 7 million pallets (depending on whom you believe), and they were turning positive EBITDA right up until they had to start accounting for pallet losses - then the financial losses soon started to mount. Pallet damages, logistics infrastructure, pallet losses and repositiioning costs ended up sinking them. The fire retardant material, deca bromine, that they used, caused more publicity issues than actual.
RM2 is an up-and-coming pallet pool from Europe, but manufactured in Brampton. Their 48x40 pallets are 54 lbs (not 80), rackable to 11,000 lbs (which is incredible), and the screw-together system is viewed by many as an advantage as the pallets are module repairable. RM2 however is another example of what worries me about Axios. For the first 6 months of the current fiscal year, they reported $1.77 million USD in revenue, and $25.4 million in losses.
RM2 is producing 300,000 pallets per month right now and have signed a few major deals lately - including being accepted at Loblaw in Canada. They have miles to go before they're profitable though.
Axios is shipping into Wal-Mart - which is an open loop. To think that there won't be losses in naive. The key here is to mitigate them, which means you need a good logistics infrastructure and this is not cheap. The real threat isn't grinding them up and selling the plastic, that wasn't the big hit for iGPS, it was stealing them and using them to ship overseas as there is no threat of infestation.
It doesn't really matter who the 'Alternative Material' pallet supplier is, they will have massive challenges on their hands. CHEP and PECO both have a cost advantage, and a huge head start.
I'm not long nor am I short this stock...I'm just watching.
VeeP