Crate washing, pooling and new acquisition boost Pact Group shares
Shares in Pact Group (ASX:PGH) were boosted by two significant announcements during the June quarter both of which focused on ‘crate washing’, which involves end-to-end management of a customer’s container network. While the ‘pooling’ network is similar to Brambles (CHEP pallets), whereby PGH controls the logistics, maintenance, repair and resupply of new containers as crates are damaged or lost.
Firstly, PGH announced a new agreement for crate wash and pooling services with an unnamed customer. The agreement remains subject to final approval between PGH and its customer, although once signed, we expect the scope of the deal to be material to PGH, requiring a reasonable amount of capital, and hence incremental returns.
Secondly, PGH announced the acquisition of the Fruit Case Company (FCC), a NZ-based crate pooling and hire business for NZ$21m.
Clearly, PGH is keen on growing its presence in crate pooling – it is clearly within its manufacturing capability but also adds an annuity-style income stream as PGH is managing a network.
PGH expects the FCC acquisition will meet its 20% investment hurdle (ROI) by year three.
June 2016 reports