IFCO- Ergebnis Telefonkonferenz 31.8 - 500 Beiträge pro Seite

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Telefonkonferenz 31.08.2000 - Bericht


Titel der Konferenz: IFCO Systems

KONFERENZDETAILS

Datum der Konferenz: 31 August 2000

Uhrzeit der Konferenz: 15:00 Uhr

Konferenzdauer: circa 52 Minuten

Vorsitzender: Mr Vance Maultsby



Participant

Thank you Pat and thank everyone for joining us for the conference call today discussing the IFCO Systems earnings release for the first half of 2000.
I`m Vance Maultsby the CFO of IFCO Systems. Joining me today in our Barto Florida office is David Lee who`s the CEO of IFCO Europe, Martin Sherler is with us by telephone and will be available for questions and answers during the period for that.

A few administrative matters. First this conference call will be available for replay by phone and by internet. The replay information is on the Press release. Second there are some numbers and tables that you can refer to in our Press release that will help your analysis if you want to review them after the call. Third, I need to issue a warning the lawyers require me to make. This conference call contains forward looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such statements are subject to risks and uncertainties that could cause IFCO`s results to differ materially from those expectations for a whole host of reasons. Well that`s all of the housekeeping.

The points I would like to address today in the following order are the highlights of our earnings release and the action we announced today to transform IFCO Systems into a pure logistics systems and services company. Other developments since we spoke last, our financial results for the first half of 2000, the outlook for IFCO System`s business and finally your questions. The summary of the earnings release highlights the following. We`re moving to be a pure play logistics service provider as a result of our successful integration and transformation of PAWACs including the divestiture of the pallet manufacturing business in the near future. Our EBTA has increased significantly over the prior period. Our revenues are growing in the double digit range and we expect excellent growth for 2000 and we`re launching the start of the e-logistics programme. We announced in our earnings release today that we`re in the process of divesting of our pallet manufacturing operations in the US. The result of this decision is that we will be a pure highly focussed logistical systems and service business based on round trip carriers and e-logistics. We will re-deploy the proceeds of the divestiture into our fast growing systems and services businesses. We made this decision after examining what needed to be done to more closely align Palex`s North American network and business with IFCO`s stated goal of being a world leader in logistics systems and services. A primary conclusion that resulted was that we needed to devote all of our energies and resources to exploiting the huge opportunities in logistical systems and services linked to e-logistics and to our round trip carriers, RTCs, pallets and industrial containers. Pallet manufacturing is not core to this strategy. The manufacturing operations have about $165 million in annual revenues and the business is the largest of its kind in North America. It has 17 sites across the US. It is uniquely qualified to serve national accounts and it generates 8%-10% operating cash flow. It`s a good business, but the North American market for new pallets is growing slowly unlike our other primary target markets. So we`ve retained Batchilder & Partners to assist us with divestiture of the operations. Batchilder is a financial advisor in consulting firms specialising in mergers and acquisitions and strategic advice, and the company is based in San Diego, California. Now those of you that have followed Palex for a while may remember the name. They advised Palex with respect to the merger with IFCO. They are very familiar with the pallet manufacturing business. We`ve begun our preliminary discussions with potential buyers and we plan to conclude the transaction in the first half of 2001. Because the wooden pallet is a key element of our systems and services businesses we plan to retain a strong strategic relationship with the pallet manufacturing operations after the divestiture. Since our last earnings call we`ve made several announcements, I`d like to recap them quickly. We announced that Carl Poller has joined the company to assume responsibilities for our e-logistics activities and the formation of IFCO online AG. Carl is an experienced executive in the information technology industry and we`re glad to have him on board. We acquired three pallets service companies that were related they had about 10 million in revenue and are in the Western United States. We announced an agreement to acquire the second largest pallet service company in the US behind IFCO. It has about $50 million in revenue in 11 locations in the US. We expect to close this transaction very soon. We announced in July the introduction of a new pallet cooling system in Canada, the IFCO flex plan. In the last few weeks since its introduction we have had an enthusiastic response from the market there. Our first flex plan transactions begin in September. We announced yesterday the closing of the acquisition of Bromley Pallett which was the third largest pallet service company in the US. It has about $46 million in revenue at 15 locations some of which will be combined with our existing locations. The effect of the three acquisitions we have announced is substantial. The acquisitions will add about 25 new facilities when overlapping facilities are combined, approximately $100 million of annual revenue and a number of talented managers. It goes a long way of service work in filling out or service work in North America. I think it is obvious from these moves that we are fast developing our platform for being the world leader in logistics systems and services.

Now I would like to move to discussion of our financial results. We were very pleased with those, but first I need to explain five things. When a company makes a large acquisition or makes several large acquisitions they must be accounted for under purchase accounting, a comparison with prior periods is very hard to do and US gap comparisons, well they`re generally pretty meaningless. So we will make some comparisons based on a pro forma basis. That is we`ve treated IFCO and Palex as if they have been combined from the beginning of 1999 the first comparative period. It`s sort of a same store comparison. We will also eliminate non-recurring items primarily originating from the transaction. Second, we are accounting for the product manufacturing operations as discontinued operations. This lets the financial statement reader focus on the continuing business that we will have. My discussions that follow is concerned with the continuing logistical systems and services businesses. Third, as we discussed in our last earnings call the steep decline of the euro and the Deutschmark against the dollar confuses comparisons. We report our results in US dollars, however we have substantial operations in the euro zone. The translation of the currency and its effect on the reported results obscures the results of our business. We don`t have much exposure at all from currency risk as far as the euro zone versus the dollar goes, therefore we will discuss the result primarily in the functional currencies as opposed to reporting currencies. Fourth I`m going to try to make the discussion as simple as possible by focussing on two important measures, revenue and earning before interest, and taxes or EBIT A and amortisation, earnings before interest taxes amorisation or EBIT A. I think this will give you a pretty good picture of our operations in the time we have available to us. ?? finally our comparisons over the first half of 2000 versus the first half of 1999. Now, if you understood all of that the rest of this will be pretty easy.

First we will talk about revenue comparisons and outlooks. On a functional currency basis the revenue has increased 10%. Our North American pallet systems and services business grew 15% over the first half of 1999. This is primarily due to the gaining national account customers. We expect to continue to grow in this area rapidly the rest of the year as we increase our national sales focus and gain synergies with our new acquisitions. Our growth rate should be enhanced in late 2000 and definitely in 2001 as our Canadian flex plan ramps up. Revenue in our RTC operations grew on a functional currency basis by about 11% in the first half of 2000 compared to the first half of 1999. We think that our growth will accelerated the second half of 2000. Historically the second half of the year is our more active time of the year and the time that new customers start to take deliveries. So that time of the year is the harvesting season in Europe. We`ve signed up four new European retail system partners this year and that`s significant because deliveries for them begin in the second half of this year and these retailers represent 40 million potential trips per year. Thus we see the growth rate for the full year revenues for RTCs definitely exceeding the growth rate for the first half of 2000. Our industrial container business revenue was up by 3% from last year`s first half. That`s what we expected since we have the largest share about 20% in the steel drum reconditioning market which isn`t growing. However we plan to grow this business through a targeted highly profitable bolt-on or tuck-in acquisitions that complement our existing network. We also believe that the growing market for plastic industrial container reconditioning and systems offers opportunity. Furthermore we believe that the industrial containers offer synergies with other round trip systems. Now I want to address EBIT A. At first blush EBIT A appears to have risen 65% over the prior half year on a functional currency basis. From 10.3 million in the first half of 1999 to 17 million in the first half of 2000. That rise is attributable to four factors. Increased revenues, operational improvement, including reduced breakage of RTCs. Changes and accounting estimates of the useful ? of RTCs and assessments and allocations among acquired assets of Palex Now the last two factors, the useful ? of the RTC and assessments and allocations of purchase assets, amount to about $2.6 million. So excluding those last two factors, the underlying or comparative 2000 first draft EBIT A that can be compared to 1999 is about $14.4 million, and it`s up about 40%. So an apples to apples comparison is about a 40% increase. Much of that increase in EBIT A comes from our European operations due to reduced breakage of RTCs caused by better operating and logistics procedures. The breakage rate can vary some but it has steadily gone down over the last several years and we constantly see improvements. The first half of the year results are brought down by approximately $4 million of expenses for development of e-logistics and pallet tooling that we did not occur during the 1999 period. Now I would like to summarise some of the points that I have made today in order to give you an idea of our outlook for the business. We are optimistic about the future for many reasons. We have experienced double digit revenue growth in the first half of 2000 and we think that rate will accelerate for several reasons. Our RT business is poised to grow fast in the second half of the year which is normal and aided by our new customers. Our North American pallet systems and service businesses is growing well. It`s rate of growth will benefit from increased national sales, benefits of the acquisitions and the beginning of the flex plan programme in Canada. Our development stage businesses will drive future growth after that. We are advancing our plans to engage in North American wide pallet pooling and our e-logistics business is progressing well. We should be making additional announcements about e-logistics in the near future. EBIT A and other measures of operating results should progress in line with revenue growth. This growth will be affected somewhat by the rate at which we invest in our development stage businesses, but generally as our revenues grow dramatically it probably will fall as a percent of revenue. The divestiture of the pallet manufacturing business will let us focus on our high potential growth businesses and give us capital to invest in those business. Our overall growth rate and our EBIT A and other margins in our logistics business should be higher than before the divestiture of the manufacturing business.

We expect to have a logistics in services, a systems and services business with pro forma run rate revenues of about $490 million by the end of 2000 compared to approximately $340 million in 1999 on a functional currency basis. That`s a growth of over 40% due to organic growth and strategic acquisitions. Finally, our employees from around the world have enthusiastically worked to integrate the constituent companies into IFCO Systems over the last six months and it melded into a real force with a vision of being a world leader in making supply chains more efficient. I think it gives us a great outlook as we approach 2001. Now that`s all of my prepared presentation and Pat we are ready for some questions.

ACT ActionCall

Thank you sir. If any participant would like to ask a question please press the * followed by the 1 on your telephone. If you wish to cancel this request please press the * followed by the 2. Your questions will be polled in the order they are received. There will be a short pause while participants register for a question.

The first question today comes from Mr Michael Allison, please state your company name followed by your question.

Michael Allison - Morgan Stanley Investment Management

Hello Michael Allison from Morgan Stanley Investment Management. I`ve got a couple of questions if you could just answer them for me. Firstly you have given us the EBIT R figures have you got EBIT DAR including depreciation for the first half? 2000 versus 1999 on a pro forma basis?

Vance Maultsby - IFCO Systems

Yes the numbers, and I don`t have them in front of me, but the numbers when you factor out the pro forma basis and the development expenses that aren`t in either, on the first one, they are up about 15%, EBIT DA.

Michael Allison - Morgan Stanley Investment Management

Is that 15%?

Vance Maultsby - IFCO Systems

Yes.

Michael Allison - Morgan Stanley Investment Management

Right, and then if you give us what your net debt figure is and how you finance these acquisitions. I know you`ve had to go to your bank but whether it`s been entirely debt financed or there has been,

Vance Maultsby - IFCO Systems

No there is the financing of the acquisitions that`s run through a combination of debt and equity.

Michael Allison - Morgan Stanley Investment Management

Right, and can you give us sort of net debt figure at the end of June or after these acquisitions?

Vance Maultsby - IFCO Systems

The net debt figure is the end of June, total debt, including all over debt I think is about 260 million at the end of June. The b? borrowings that we had at the end of June were approximately $25 million at the end of June as I recall, and of course we are borrowing money to make these acquisitions. However, it`s, we are using a fairly good amount of stock in the acquisitions.

Michael Allison - Morgan Stanley Investment Management

Right and then just one last question. In terms of RTC`s within North America you said that the second half within Europe should be better because of the producing season there. Can you just update us on the progress that RTC penetration is having in the US?

Vance Maultsby - IFCO Systems

The RTCs in the US have grown significantly over the prior past year and the main challenge we have is really getting enough RTCs into the system, and so we are working hard to be sure that we can do all we can to get those out into the hands of the producers and because we have enough contracts with retail distribution centres, it`s just a matter of getting them into the street.

Michael Allison - Morgan Stanley Investment Management

Right, thanks very much.

Vance Maultsby - IFCO Systems

Yes sir. ACT ActionCall Our next question comes from Mr David Roberts, please state your company name followed by your question.

David Roberts - J B Weir

Yes it`s J B Weir. Just a quick one on the pallet pooling that you`ve developed or planning to develop in Canada. Do you have any ambitions to expand that into North America given now that you are shelling your manufacturing operations?

Vance Maultsby - IFCO Systems

That`s a reasonable assumption right there, yes sir.

David Roberts - J B Weir

Excellent and just on the RTCs you indicated that the first quarter result that your pool size there globally was about 65 million RTCs. Do we have an update on where that is now and the split between the US and Europe?

Vance Maultsby - IFCO Systems

We don`t have the split but we had a little over a million a month.

David - IFCO Systems

Yes, about a million.

Vance Maultsby - IFCO Systems

Yes I`ve got David with me here and he confirmed that. So we are up in the $68/69 million, million RTC range.

David Roberts - J B Weir

Excellent thank you very much.

Vance Maultsby - IFCO Systems

Yes sir.

ACT ActionCall

The next question comes from Mr Ralph Ming. Please state your company name followed by your question.

Ralph Ming - Casenove

Yes this is Ralph Ming from Casenove here, a very good afternoon. Vance a couple of financial questions. Looking at the depreciation in the IFCO Systems NV numbers, which is part of the gross margin it`s gone down about $7 million year on year. That`s the first part of 2000 compared to the first part 1999. Now can you just run us through that. I mean obviously you`ve got a lot more RTCs now than you had in the past. Can you just give us an explanation please?

Vance Maultsby - IFCO Systems

Pardon me, I`ve got a cough and I keep pushing the mute button and I may talk a long time without you hearing anything. Ralph the answer to that is, about $2.6 million of that difference comes from the changes in the useful life of the RTC. We were depreciating them about over five years and what we are finding is they are lasting longer than six years. So we are basically just trying to ?? useful life. So that`s the part we disclosed on that. That`s the biggest part of that. So you`ve got about $2.6 million that are attributable to that and some allocations in the US on purchased assets of Palex. The rest of it is reduced breakage, that`s what it is. The fact is we are just not, we are getting better at what we are doing.

Ralph Young - Casenove

But your number of RTCs has grown by about 10 to 15% in the same period. Vance Maultsby - IFCO Systems Absolutely, that`s right. Ralph Young - Casenove So what you are saying is that your breakage rate has improved by at least 20 to 30% year on year? Vance Maultsby - IFCO Systems It`s improved, let me, it`s closer to like 18 I think like that, something like that. Ralph Young - Casenove That`s the absolute number of the improvement?

Vance Maultsby - IFCO Systems

Yes. Ralph Young - Casenove That`s the improvement or the absolute number?

Vance Maultsby - IFCO Systems

Yes, that`s the improvement, that`s the improvement.

Ralph Young - Casenove

That`s the improvement. Great, then the second number is on the consolidation of the new assets, exactly as of when would you expect to consolidate the revenue for the ??

Vance Maultsby - IFCO Systems

If I understand your question is, when will they come into the, when will they come into the mix? Ralph Young - Casenove Exactly.

Vance Maultsby - IFCO Systems

Let`s see, Bromley came into the mix Thursday. The $10 million acquisition occurred within the last month, the other two, there`s one that we`ve announced and it`s going to be in very soon, you know very soon, I mean you know before the end of the quarter.

Ralph Young - Casenove

So let`s say it`s about a 100 million revenue in total.

Vance Maultsby - IFCO Systems

Yes.

Ralph Young - Casenove

And of that we will probably see about 30 million for the full year, ie for a third of the year?

Vance Maultsby - IFCO Systems

That`s pretty close yes.

Ralph Young - Casenove

Good then the next question is just on the number of shares, since the last count has gone up by about two million, what`s the reason?

Vance Maultsby - IFCO Systems

Exercise of options primarily.

Ralph Young - Casenove

OK and then just on the prices paid, is it fair to assume about one times the revenue, you paid for the acquisition?

Vance Maultsby - IFCO Systems

That`s, that`s a, that`s not an unfair but we`re not going to talk specifically how much we paid for them, we are still in the market to buy a few more.

Ralph Young - Casenove

And just the last question, on the price you could get for the pallet manufacturing, you`ve given us the cash margin but it looks like the EBIT margin is somewhere between 0 and 4% at the moment?

Vance Maultsby - IFCO Systems

No that`s not right.

Ralph Young - Casenove

I mean what,

Vance Maultsby - IFCO Systems

Let`s do this, because we`ve got a lot of questions I`m sure they`re backed up, the cash operating margin is about 8-10% and then a) is not that big so I don`t, we`ll have to work through your numbers later,

Ralph Young - Casenove

But just as a question how much do you think you can get, do you think one times the revenue which is just about what you paid for Palex total? It is feasible or are you more conservative?

Vance Maultsby - IFCO Systems

Yes I`m a bit more conservative than that, you know the, part of the, the parts that was really a great interest to IFCO, and I can assure you this from a long negotiation, was the North American wide network of pallet services and drum services that we had.

Ralph Young - Casenove

Thank you very much.

Vance Maultsby - IFCO Systems

That really supports it, and basically they looked at the pallet manufacturing as a very nice business but not the one that was core to the business or the one that was growing rapidly. So we think we can sell that for very nice number based on operating cashflow. Just like we bought them, have bought them before.

Ralph Young - Casenove

Thank you very much.

Vance Maultsby - IFCO Systems

Yes sir.

ACT ActionCall

The next question comes from Mr Colin Crook, please state your company name followed by your question.

Colin Crook

Hi Vance. I think most of my questions have been answered actually, there`s just one question I`ll probably put to David actually, could you just talk through the impact of ? success with Wal-Mart which seems to be causing a lot of secondary pallets, white pallets come back onto the market. Obviously gives you more ammunitions under the recycling business but depresses the manufacturing operations. Can you talk through the sort of logistics and the economics of that please.

David ?? - IFCO Systems

OK Colin the immediate reaction to that is that I think, and you tell me if I`m going off track on this but I think that creates a number of opportunities for us, I think on the RTC front we are doing extremely well with Wal-Mart and actually we will make, we`re not as big with Wal-Mart as Chep is but we`re making significant process against that. The, coming out of the recycle pallets into the market creates for us a great opportunity for us to actually use those pallets both as supporting our existing recycling business and also to help us with, how should I put this, development plans for moving our pooling operations into North America. So from our point of view there`s both a plus and minus, there`s a plus in the sense that the competition is taking some share from Wal-Mart that obviously we would rather have, sorry that`s the minus. The plus to us is that it gives us some capacity that we can use. It also ensures and this is the, the real benefit to the overall programme, it also ensures that the market itself is moving much more to the use of leased equipment and if Chep pushes that frontier for us with Wal-Mart that`s helpful, we can come along and capitalise on that later with improved services.

Colin Crook

What impact does that have on pallet pricing? Is it having an impact on pallet pricing, ability to price?

David ?? - IFCO Systems

I don`t think so, we`re not seeing it in the transactions we`re conducting.

Colin Crook

OK thanks. ACT ActionCall The next question comes from Mr G? Coratso, please state your company name followed by your question. Mr G? Coratso - Merrill Lynch Hi good afternoon, G? Coratso from Merrill Lynch. I have a couple of questions. The first question, if you could may be provide the capital expenditure of the quarter, and I guess that I think basically that you said capital expenditure for the full year should be around 120 million. Is that figure still correct or do you envisage a reduction following the disposable of the manufacturing operations?

Vance Maultsby - IFCO Systems

The, relatively speaking our capital requirements, capital expenditure requirements go down as a percent of revenue when we have service businesses rather than manufacturing businesses. So our requirements for capital expenditures will be less. However the growth opportunities in the service business are more, so my guess is they won`t change very much because we will be generating real close the same amount of cashflow from a $100 million of service business as we did a $175 dollars of manufacturing. So it won`t change a lot.

Mr G? Coratso - Merrill Lynch

So basically that, what you`re telling me you`re going to reduce your actual capital expenditure but you`re going have to increase in terms of acquisitions in order to expand the services.

Vance Maultsby - IFCO Systems

We also have some organic growth opportunities too in that business, so it really is, there`s several different ways to grow so we`ll be able to grow a little faster and we`ll see the money grow a little faster. So that, I hope that answers your question about relative capital expenditures there.

Mr G? Coratso - Merrill Lynch

OK that`s very helpful, and the other question I had is in terms of, I know you didn`t want to comment on the price that you paid for the business for the recent acquisitions, but could you may be give us a guidance if that`s very much, the EBIT margins that they those businesses are generating are very much in line with the, EBIT margin that you have on your business line now, excluding the manufacturing. I believe that`s about 14%/14‡%?

Vance Maultsby - IFCO Systems

Yes sir. The answer is yes.

Mr G? Coratso - Merrill Lynch

And then the other question that I had is, have you made any further progress from the previous quarter, from quarter one in adding significant customers to your, significant system partners to, in Europe and in the US and if so if you could detail which ones they are?

Participant

OK. ?? added four.

Vance Maultsby - IFCO Systems

Well we`ve added four new ones in Europe. We announced the name of ?, however the other ones we, I just checked and we probably shouldn`t say their names, we haven`t cleared that, and again after the first quarters and we signed up K-Mart but we already talked about that and US is one of our big system partners. We planned to probably have an announcement in September where we lay out a number of our new system partners in our new national accounts. Again it`s one of those things where we haven`t cleared their names so are real sensitive about that. But we`ll put something out in September about that. We`ve had a number of new national accounts that we signed up over the August and then we`re going to close some in September too. So we`ll let you know about that, we`ll get ?? names.

Participant

Our intention is, our intention is to ensure that there`s a train of these names coming out, we will get authority to use those names as we do the deals.

Mr G? Coratso - Merrill Lynch

And my last question is basically now that you have, you have basically developed a little bit more ? logistics initiative, could you maybe give us some guidance in terms of what return and capital employed are you expecting to achieve from those businesses?

Vance Maultsby - IFCO Systems

Martin are you, are you capable of addressing that at this time? I guess he`s not, I was going to defer that to Martin because Martin is really at the forefront of our e-logistics activities, we think they`ll be very substantial, we think the rate of return will be greater than what we have in our existing business. That will ramp up over time of course because you know we`ve got to spend the money to put the network in place and the systems, but we think it will show the returns that you would normally see in a systems orientated business, one that is not capital intensive, so it will be a pretty high rates returns.

Mr G? Coratso - Merrill Lynch

OK that`s excellent, thank you very much.

Vance Maultsby - IFCO Systems

Sure.

ACT ActionCall

Your next question comes from Mr Philip Volticelli. Please state your company name followed by your question.

Philip Volticelli - CIBC

Vance I just want to try to get an idea of what the company is going to look like on a run rate basis. You mention that 490 of sales for the year. If I were to make some estimates could you tell me if I`m in the right ballpark, roughly, and EBITDA margin between 15 and 16% would give you somewhere between 73 and 80 million of EBITDA and if I make some conservative assessment, do you guys still expect to run this company with a leverage somewhere in the 3 to 3‡ times level, is that something that`s safe to say?

Vance Maultsby - IFCO Systems

Philip you did a pretty good job.

Philip Volticelli - CIBC

OK you`re comfortable with those kind of numbers for a full year?

Vance Maultsby - IFCO Systems

Yes on the run rate basis I`m comfortable.

Philip Volticelli - CIBC

OK and in terms of the filing, are you going to have gap numbers in your filing because I had a very difficult time, obviously it`s probably impossible trying to reconcile the six currency numbers in this release to the first quarter release. Are you going to have a gap release in the 6k?

Vance Maultsby - IFCO Systems

Yes we`ve got a full gap statement. Yes we have the gap income statement attached to the back but we`ve got the full gap statements in the 6k.

Philip Volticelli - CIBC

And just one final question, with regards to the US RTC business, I know you can`t mention this, the growth of the number of trips or anything like that but is there any news that we can look forward to in terms of a new partner there or an expansion with your existing partner there or anything along those lines? Participant I think the only thing we`d say on that is we`re very confident that we`ll continue to expand with Wal-Mart and we will be expanding with one or two others but those names for the same reasons as I`ve said before, we keep it confidential until we can announce it.

Vance Maultsby - IFCO Systems

Yes Phil the governor is really just getting the RTCs into the system and it really is balancing between serving our very important customer Wal-Mart and taking on new customers with the limited resources. And we`re making this ?? as fast as we can.

Philip Volticelli - CIBC

Would it be safe to say that we could hear something before the end of the year or is it more of a 2001 event? Participant No it`ll be before the end of the year.

Vance Maultsby - IFCO Systems

Yes we`ll have some things before the end of the year.

Philip Volticelli - CIBC

OK thanks for your time guys.

Vance Maultsby - IFCO Systems

Thank you Phil.

ACT ActionCall

The next question comes from Mr Sven Olsen. Please state your company name followed by your question.

Sven Olsen - Deutsche Bank

I just have I guess a few questions, most of mine have been already answered but do you have any buyers lined up for the manufacturing business that you`re selling? Or do you have any prospective buyers that you`d be more inclined to ?? settled earlier as opposed to later or do you think the timing is going to be 01?

Vance Maultsby - IFCO Systems

As I age time flies faster and so 01 doesn`t sound that far off to me any more. But I would hope it would be earlier in 01 rather than later in 01. We do have some potential buyers identified and some very preliminary discussions going. We think there are certain ones that make a real live strategic fit with this business and what we really want to have when we get through is an excellent strategic partner for IFCO. So that`s one of our considerations. If anything stands, that might be the thing that slows it down a little bit because we`re going to be very selective mainly because this is a long term relationship we`re trying to establish.

Sven Olsen - Deutsche Bank

OK great. And then secondly can you break out your capital expenditures expected in the second half of the year between excluding acquisitions in terms of just funds you needed to support the internal growth of the RTC and pallet businesses.

Vance Maultsby - IFCO Systems

Well let`s see if I can give you some ? here and this may answer the gentleman from Merrill Lynch, your question too. I think he might have another part of it that I didn`t answer. During the second quarter we spent approximately close to $20 million in capex between the two companies that are not associated with acquisitions. And so that gives you a pretty good idea what it will be during the course of the year. It will accelerate some as we go into the busy season because we`ll be adding more RTCs as they`re needed more. But that probably gives you close to $100 million which is close to that number we were talking about earlier.

Sven Olsen - Deutsche Bank

Great, thank you very much.

ACT ActionCall

The next question comes from Mr Peter Morris. Please state your company name followed by your question.

Peter Morris - Goldman Sachs

Hi this is Peter Morris from Goldman Sachs in London - I just want to check I understand the depreciation and breakage accounting, that depreciation lines in the earnings released today if I understand it, that includes breakage.

Vance Maultsby - IFCO Systems

Yes.

Peter Morris - Goldman Sachs

OK so the EBITDA number is around 14.4/14.5 if I just take EBIT and add back amortisation and depreciation?

Vance Maultsby - IFCO Systems

Yes.

Peter Morris - Goldman Sachs

So your EBITDA to interest cover is around 2.2 times?

Vance Maultsby - IFCO Systems

No it`s more than that. There are some pro forma adjustments that had to do with the acquisition and so the interest coverage is actually quite a bit higher than that. Also our second quarter is our slow quarter, our seasonally slow quarter.

Peter Morris - Goldman Sachs

And the pro forma adjustments would be things like what?

Vance Maultsby - IFCO Systems

They`re having to do with costs that were incurred with the acquisition that don`t go against the balance sheet. Certain plant rationalisation costs and the like that you can`t book against the balance sheet. And we`ve got those set out in the, I think they`re set out in the few earnings statement, they`re laid out there.

Peter Morris - Goldman Sachs

OK and that`ll be filed when? Today or sooner?

Vance Maultsby - IFCO Systems

Today or tomorrow.

Peter Morris - Goldman Sachs

OK thank you very much.

Vance Maultsby - IFCO System

Yes sir.

ACT ActionCall

We have a follow-up question from Mr David Roberts. Please state your company name followed by your question.

David Roberts - J B Weir

Yes David, just a quick one again on the pallet pooling operations in the US. Are you at a stage now with regards to infrastructure to develop that or do you see that you need to make a number of acquisitions or further acquisitions to gain further facilities?

Vance Maultsby - IFCO Systems

I don`t, we may make some additional acquisitions but we`re from an infrastructure standpoint it`s really quite ? now. There`s a couple of places around the US that we need to add some facilities so from infrastructure standpoint, this physical infrastructure standpoint we are well positioned at this point. Our primary activities now have more to do with the manner and this information systems that we are working on. We`re in the marketplace, we`re talking to potential customers and partners in the business. They`re enthusiastic about having an alternative to the one player that`s out there now. So it really is working on the systems and we want it to be absolutely world class from the start.

David Roberts - J B Weir

And what`s the timing do you think you`ll be able to launch a service? Participant To launch a service I think we will be making an announcement on launching a service certainly before the end of the year. I would prefer not to be more specific than that at this moment but it`ll be before the end of 2000.

David Roberts - J B Weir

Excellent. Thank you very much.

ACT ActionCall

Once again ladies and gentlemen if you would like to ask a question please press the* followed by the 1 on your telephone. To cancel this request please press the * followed by the 2. We have a question from Mr Greg Ward. Please state your company name followed by your question.

Greg Ward - Credit Swiss First Boston

Morning Vance, morning David.

Participants

Morning Greg.

Greg Ward - Credit Swiss First Boston

Just a couple of questions. Can you just confirm what the annual breakage rate has come from, what it was reported for the period and what your kind of medium to longer term target is?

David ?? - IFCO Systems

Yes I can give you the sort of, basically the results roughly. I mean we were talking about 5% at the beginning of `99 and we`re down to just a little over 3% now.

Greg Ward - Credit Swiss First Boston

And your target?

David ?? - IFCO Systems

Zero.

Greg Ward - Credit Swiss First Boston

Right OK. David ?? - IFCO Systems Or ?? I suppose we`d like them to come back in better condition than they go out. But Greg maybe the best answer is that that number is probably the effective target for the time being. We don`t look at it being able to increase a lot more, we`ve had a lot of attention paid to that and gotten good results.

Participant

We would like Greg just to do, after the flippant answer we would like it to get down to 2‡ maybe between 2‡/3% range as the volumes grow because we believe that as the volumes grow the efficiencies of operating the equipment grow with it and that should enable us to continually shave off the limpet type 100 metre sprint number.

Greg Ward - Credit Swiss First Boston

So hence no change in accounting depreciation policy figure? Participant I don`t think so do you?

Vance Maultsby - IFCO Systems

No no. ?? 2.6 captures all of that and some in the US too.

Greg Ward - Credit Swiss First Boston

Terrific. The other question is now that you`ve roll out your network, your extensive network platform, firstly what is the key to roll out is it the RTCs or your pallets, and secondly which channels in particular are you looking to attack what supply channels?

Participant

Well I think it`s ?? to roll out both. I think it`s important for both product lines. Essentially the infrastructure that will underpin both is going to be very similar and a number of the customers we`re aiming at want to use both so I think both will be very important to us. The channels that we will seek to attack are the obvious ones where there`s a fast moving circuit, and obviously dry goods, food and the private label markets, automotive, house and hardware, do it yourself type markets in there are the parts ?, are the circuits we`re going to go for.

Greg Ward - Credit Swiss First Boston

OK. One other question is the strategy regarding the pallet to launch a standardised pallet or as the name might suggest in Canada a kind of flexible pallet depending on requirements of the customer. Participant Our objective would be to have a standard pallet. We want to be able to offer customers a standard high quality platform that they can use and we believe that we`re well placed to offer distinct advantages there.

Greg Ward - Credit Swiss First Boston

Great thanks guys.

Participant

Thank you.

ACT ActionCall

The next question comes from Mr William Frankland. Please state your company name followed by your question.

William Frankland - London & Capital

Yes hello gentleman it`s London it`s London & Capital here. Just one question with regards to the timing of the announcement of the disposal of the manufacturing business given it may take 12 months plus to effect the disposal why announce it now when it has such a material impact on the financials?

Vance Maultsby - IFCO Systems

Well I don`t think it is going to take 12 months plus that`s the first response. What we said was is that we expect to have it completed in the first half 2001 so that`s first. The second is is that we believe that it was important to signal to the marketplace, and when I`m talking about the marketplace I`m talking about people who buy our services and subscribe to our systems, the fact that we are clearly focused on logistics, systems and services. There is a little bit of confusion in that marketplace about what it was we were doing and we decided the best thing for us to do is to let you know that we`re doing it. It causes some additional work inside the company because you`ve got to be sure that your employees keep the enthusiasm up, we`re working real hard to be sure that that takes place but the fact is that we wanted the marketplace where we sell our systems and services to know what we did and so that`s the reason why.

William Frankland - London & Capital

So it`s not a legal requirement or anything like that it`s purely just to keep your staff and customers happy.

Vance Maultsby - IFCO Systems

Yes.

William Frankland - London & Capital

OK thanks.

ACT ActionCall

We have a question from Mr Stefan Heinzherrling please state your company name followed by your question.

Stefan Heinzherrling - DWS in Frankfurt

Could you please specify revenues, EBIT A and operating results for each of your business lines?

Vance Maultsby - IFCO Systems

I don`t have that available for me. You can call our investor relations group they will help you with that. The revenue numbers are stated in the press release so those you can get and then the EBIT A percentages across those I can give you the rough numbers but I can`t give you exactly. Now the rough numbers are the drum business, the EBIT A is currently in the 10 to 12% range. That`s a bit of ?? there, and we`re talking about half year for their figures and second half ?? and the systems and services business is 15% ? and the RTC business is 20% plus. I think I answered your question.

Stefan Heinzherrling - DWS in Frankfurt

What about the operating line EBIT margins for those three business lines?

Vance Maultsby - IFCO Systems

Well you pretty much just spread the A across there by revenue size, it`s how it is allocated and that`s really a corporate charge and we really don`t pay a lot of attention to that it comes off as a, it`s not allocated to any particular business really. It`s corporate charge that`s how we look at it. We don`t charge them for capital based on ?.

Stefan Heinzherrling - DWS in Frankfurt

Thank you.

Vance Maultsby - IFCO Systems

Yes sir.

ACT ActionCall

We have a follow up question from Mr Ralph Ming please state your company name followed by your question.

Ralph Ming - Casenove

Yes just one quick follow-up question with the roll out of the Wal-Mart contract can you give us an indication how the number of depots are split at the moment between you and Chep, ie whether you are above 50% or below 50%

Vance Maultsby - IFCO Systems

We`re probably a little below but that`s a hard number to say, Participant You`re talking about the Wal-Mart depots that will receive from us I assume? Participant Yes and I think we`re a bit below half.

Vance Maultsby - IFCO Systems

But the reason is hard to say because they`re opening up a lot of depots to RTCs. I mean in effect opening up I think all their depots to RTC and pretty soon we`ll both be at 100%. Martin Hi Martin here I can add something to that.

Vance Maultsby - IFCO Systems

Sure hello Martin. Martin Because just Gustav ? been there and I just got his report today. The plan is that both Chep and IFCO can go to all RTCs and that growers can choose to open competition on the total potential, and Wal-Mart was re-emphasising that the potential is really huge and we think we compare very well for this gain; and it is understandable for us that a retailer can handle two systems. We think it becomes tough for him to handle more than two systems.

Ralph Ming - Casenove

OK then just one follow up question also on the number of RTCs. You talked about the run rate of around one million additions a month, what level would that be let`s say in Q4 2000 roughly what do you expect? Martins Run rate growth, additional crates in the pool you mean?

Ralph Ming - Casenove

Exactly RTCs being added to the system excluding the ones that break, I know the net level but how many can you feed into the system per month let`s say by the end of the year.

Martin

Well we have foreseen to grow with one million per month so that is on a total pool of 60, it`s a growth of 20% in capacity by the end of the year and this should be the right I guess for the time being.

Ralph Ming - Casenove

Excellent thanks Martin.

ACT ActionCall

We have a question from Mr Jim Johnson. Please state your company name followed by your question.

Jim Johnson - Waste Canoes

I am just wondering how the pallet recycling business will be affected by the decision to sell manufacturing and how important is it going forward?

Vance Maultsby - IFCO Systems

I don`t think it will be ill effective at all. We`re going to retain the national distribution arm in IFCO and we`re going to establish a network of pallet providers to be able to give to our customers a full line of services and products in the arena of pallets and RTCs. So we think that we will still have a strong strategic relations ? so we can access it and our pallet recyclers operate independently of the pallet manufacturers and we don`t see any operational difficulties but we see good marketing synergies, no negative operations that impact.

Ralph Ming - Casenove OK

thank you.

Vance Maultsby - IFCO Systems

You`re welcome.

ACT ActionCall

We have a follow up question from Mr Greg Ward. Please state your company name followed by your question.

Greg Ward - Credit Swiss First Boston

David probably a question from you can you kind of elaborate in terms of the capacity constraints of producing these RTCs, and secondly recently Brambles have kind of signalled that they`re having problems getting decent labour in the US particularly for the pooling business of pallets. Can you elaborate whether you`re actually seeing similar circumstances.

David ?? IFCO Systems

Yes taken in reverse order if I could Greg, I don`t, I mean we`re not experiencing any particular labour problems on our side I mean that`s just a statement of fact we`re not having labour problems. As regards the capacity we are taking significant steps at the moment to fix that capacity constraint by introducing new moulds and ensuring that we keep our capacity ahead of our demand. It is something which has been frustrating for us for a few months but we`re fixing now

Greg Ward - Credit Swiss First Boston

Just on the way that`s run.

David ?? IFCO Systems

I think I missed the first part of that.

Greg Ward - Credit Swiss First Boston

Just back on the labour front please is there the ability to actually use the pallet recycling labour into the expertise related to that. Are there synergies to bring that across to a pooling business?

David ?? IFCO Systems

Oh absolutely. The people who are in this they know the customers, they know the circuits, they know the carriers, they know most importantly they know the commercial terms on which things have been put into the marketplace, so these people are very useful to us.

Greg Ward - Credit Swiss First Boston

Right thank you very much.

ACT ActionCall

There are no further questions at this time sir please continue.



Vance Maultsby - IFCO Systems

That`s the end of our conference call and we want to thank you for joining us today and again we`re very excited about the progress the company`s made and the results of the first half and look forward to a good second half and thanks for joining us and goodbye for now. Bye.

ACT ActionCall

Thank you ladies and gentlemen, this concludes the IFCO Systems half year`s earnings announcement conference call. Thank you for participating.

Vance Maultsby - IFCO Systems

Thank you Pat. ACT ActionCall That concludes the replay for today. If you wish to listen to the replay again please redial if you have experience any difficulties during the replay please dial 0800 376 5170 alternatively if calling from outside the UK please dial 0181 901 5400.

Ende der Konferenz

[MrMoe]

Wer will das denn alles lesen ?

[GewinnmitNamen]

Ich beispielsweise. Und wohl auch sonst jeder, der sich für
die Aktie interessiert. :-)

[Brüller]

Ich tu mir das nicht an!

[titi]

das telefoninterview ist sehr interessant!