Brambles scraps Costco deal, Liontown inks deal with Ford and Commonwealth Bank hikes fixed mortgage rates

Brambles (ASX: BXB) has announced it has scrapped its investment and will not participate in the transition to plastic pallets in Costco’s United States supply chain.

The Australian pooling solutions company developed an industry-leading plastic pallet which complied with US fire regulations and, together with Costco, came up with a more efficient operating model which was shown to deliver system cost efficiencies.

Despite this, Brambles has walked away from the deal after establishing efficiencies will not be sufficient to cover the additional capital cost of a plastic pallet, which is an estimated four times higher than that of a wooden pallet.

Brambles chief executive officer Graham Chipchase said the company needs to prioritise capital allocation, but insists there is no love lost and the companies will continue to work together in the future.

“Our decision not to proceed demonstrates our disciplined approach to capital allocation,” he said.

“Costco remains a highly valued retail partner in North America and we will continue to work closely with them as they assess the viability of other options to convert to a plastic pallet pool.”

“We believe today’s decision is the best course of action for our business as we concentrate on helping our customers through the current challenges across global supply chains,” he added.

Liontown Resources

Liontown Resources (ASX: LTR) has announced a newly inked deal with Ford Motor Company to supply lithium from its flagship Kathleen Valley project in Western Australia.

The mineral exploration and development company said on Wednesday it will supply Ford with 150,000 dry metric tonnes of lithium spodumene concentrate each year for five years, which will be used in the production of electric vehicles.

This is the third time Liontown has completed such a transaction, after deals with Tesla and South Korean battery maker LG Energy Solution.

A global push towards decarbonisation and achieving net zero carbon emissions has given rise to the demand for electric vehicles, causing a surge in the prices of battery metals like lithium to unforeseen levels.

Ford in recent times has made no secret it is prioritising electric vehicle production, declaring in March it would boost spending on electric vehicles by two-thirds to $50 billion through 2026 and set up a separate unit to produce such vehicles.

Liontown said it has also secured a debt facility of $300 million from a Ford unit to aid in developing the Kathleen Valley project.

Liontown expects the mine to cost $545 million, having secured most of the funding from a $450 million capital raise last year.

The Australian miner is expected to start supplying spodumene in 2024, starting with 75,000t in the first year of the deal, before rising to 150,000t in the third year.

Origin Energy

The federal court has hit Origin Energy (ASX: ORG) with an order to pay more than $17 million in penalties after breaching its obligations to customers experiencing hardship and payment issues.

It comes as the largest total penalty ever imposed for breaches of the national energy retail law and rules, with over 90,000 customers estimated to have been affected in the ordeal.

Origin has admitted that its automated processes for hardship customers did breach its hardship obligations on more than 100,000 occasions over four years.

The Australian Energy Regulator (AER) alleged Origin failed to comply with its own hardship policies.

The energy company has cooperated with the AER, admitting to breaches of energy law and rules along with making joint submissions with the regulator on its penalty.

The court handed down an order for the company to pay $200,000 in legal costs and set up a compliance and training program.

AER chair Clare Savage said the court’s decision is a precedent indicating that “automation is a dangerous substitute for human interaction”.

“Applying automated inflexible processes across thousands of customers without considering whether they can actually meet the payments shows a complete disregard of the hardship obligations in the national energy laws, which are designed to protect customers in vulnerable situations,” Ms Savage said.

Origin Energy executive general manager for retail Jon Briskin said the company is regretful and is fully responsible for its actions.

“We deeply regret that some customers did not receive some of the important protections they were entitled to,” he said.

Commonwealth Bank

Australia’s largest mortgage lender Commonwealth Bank (ASX: CBA) has increased its fixed mortgage rates by a whopping 1.4%, with the other major banks expected to lift rates in response.

The news comes just days before the upcoming Reserve Bank of Australia (RBA) board meeting.

While fixed mortgage rates for owner-occupiers and investors have increased for one-to-five-year loans, CBA has slashed its lowest variable home loan rate by 0.15 percentage points to 2.79%, with a 30% deposit.

RateCity.com.au research director Sally Tindall said the significance of the rate hikes are unlike anything she has seen from the CBA.

“The bank is responding to the rising cost of fixed-rate funding and a market that refuses to believe the Reserve Bank will stop hiking the cash rate at around 2.5%,” she said.

Economists and experts suggest the RBA will lift the target again next week, in its attempt to convince the population that it hasn’t lost control of inflation.

“Less than a year ago, CBA was still offering one fixed rate under 2%. Today the bank’s lowest fixed rate is just under 5%, while the majority are well over 6%.”

“It’s incredible to see fixed rates move this dramatically in such a short space of time,” she added.

Carsales.com

Carsales.com (ASX: CAR) this week announced the successful completion of the institutional component of an entitlement offer, raising approximately $842 million.

The capital raising proceeds will be used to complete the acquisition of the remaining 51% interest in Trader Interactive for US$809 million (A$1.17 billion), as announced by the company on Monday.

Carsales chief executive officer Cameron McIntyre called the deal an encouraging opportunity for the Australian-based company.

“We are very pleased by the support demonstrated by institutional shareholders for the entitlement offer and their endorsement of the acquisition,” he said.

“We look forward to working with the Trader Interactive team to capture growth potential and realise value for our shareholders.”

Trader Interactive is based in Virginia, US and was founded in 2010. It connects buyers, sellers and renters in the powersports, recreational vehicle, aircraft, marine, commercial vehicle, and heavy equipment industries.

Carsales believes Trader Interactive is 16 times larger than its Australian counterpart and is double the size of the Australian automotive market.

“The acquisition is a natural evolution of our international growth strategy into large, attractive markets. We have demonstrated an excellent track record of delivering strong shareholder value by diversifying in international markets,” Mr McIntyre added.