The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst
: Graham, just hoping if you could share any findings from the trial and how that came in relative to your expectations? Obviously, the pricing has
come in below in terms of the acceptance of that pricing, but what did the loss rates, the damage rates and all the other sort of key metrics, how
did they perform?
Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst
: And you made a few references just to the new business wins that might be available. Just hoping if you could talk a little bit about that. I'm not
sure whether you know about the quantum of what might be out there. But maybe if you could just talk to that? And also just, I guess, how much
of this pent-up demand for your products is related to the really high whitewood prices at the moment or perhaps just the shortage of pallets more
generally?
Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst
: Just wondering, I mean it's following up on the previous question. But in terms of timing, do you know how advanced Costco are in their discussions
with alternative providers or exploring alternative business models here? Or is the conclusion of these trials sort of back to square one for them?
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JUNE 30, 2022 / NTS, BXB.AX - Brambles Ltd Plastic Pallet Decision
Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst
: Okay. On the sort of commercial terms that you were exploring with them, did you ever talk about them -- Costco or all the customers themselves
assuming any of the asset risks from the capital investment? For example, an increased amount of compensation in the event of losses?
Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst
: Okay. And from the trials and things you learn from it, what -- maybe just remind us of the what are the aspects of the Costco supply chains that
are unique to the situation that helped with the plastic economics? And I guess what I'm also asking is did you learn anything from the trials that
might give you ideas of who else either in the U.S. or globally could suit the plastic model?
Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst
: Okay. And just one more for me, which is in the event that Costco proceeds and you sort of go through with the transition, you've made comments
about short-term transition costs. Can you give us some clues on how to think about sizing those transition costs and how they compare with the
estimated CapEx savings that you might have on the wood pallets that get freed up?
Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst
: And are the wood CapEx savings still in line with guidance that you're going to give -- I mean, I guess the alternative on the price at the time.
Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst
: Just a few questions from me. Just the first one, I guess, a point of clarification. It's really -- you said that the -- you couldn't achieve the right terms
on effectively loss compensation, and you mentioned input cost volatility, and I assume that means you couldn't put resin price pass-throughs into
the contracts. So just to confirm that that, in and of itself, effectively increases the risk profile of the investment, if you couldn't capture both of
those dynamics? And is it fair to say that that was really what knocked over the decision and the fact that whilst you could get a return, you couldn't
appropriately accommodate the risk profile?
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JUNE 30, 2022 / NTS, BXB.AX - Brambles Ltd Plastic Pallet Decision
Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst
: Sure. So effectively, the risk-adjusted return was just nowhere near what was acceptable for the Brambles despite your scale and the potential
efficiencies that you could have derived across this pool. I guess my next question is, do you think that level of return -- risk-adjusted return is
anywhere near appropriate for any of the other potential poolers to come to meet that task?
Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst
: Does Costco provided any indications to you what their plan B would be if no providers come to the table?
Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst
: Okay. And then just one final one for me. It seems like the transport efficiencies was a big part of the possible benefits from this model. Are there
any learnings from that that you can deploy into the timber pool? Or is timber just too different to get those sorts of efficiencies from?
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