$82m surcharge helps Brambles beat timber price rises, shortages

Chep pallets – which ship everything from TVs to potatoes – have become more expensive as timber prices soar.

Pallet maker Brambles offset rising timber prices via a surcharge that put $US60m in its coffers.

Timber shortages that have plagued the construction industry have made Chep pallets, used to transport anything from TVs to potatoes, more expensive after their maker Brambles introduced a surcharge, reaping $US60m ($82.3m).

The company said late on Tuesday that it has battled higher lumber costs and shortages in the second half – sharing the pain of many Australian renovators and home builders who have been struggling to access structural pine.

“Inflationary pressures accelerated in the second half of the year with higher lumber and transport costs in all regions,” chief executive Graham Chipcase said.

“Lumber costs were driven by increased demand and supply challenges which impacted pallet availability and resulted in both higher pallet capex costs and increased repair costs.

“The impact was particularly evident in the US and resulted in record levels of lumber inflation and industry-wide pallet shortages in key markets, with manufacturers and retailers also increasing pallet balances across their operations to avoid disruptions to their supply chains.”

Lumber represents about 80 per cent of new pallet costs, and the rising prices led to a $US150m increase in Brambles’ group capital expenditure. Structural timber and pine have been in short supply amid bushfires that have razed plantations as well as a surge in demand from the Morrison government’s Homebuilder stimulus package, which gave tax-free $25,000 and later $15,000 grants to renovators and homebuilders.

But unlike renovators, Brambles was able to offset the soaring timber prices via a lumber surcharge, which injected $US60m into the group’s coffers. It also received one-off compensation after it was forced to relocate a service centre in the Asia-Pacific region.

“These contributions to profit more than offset input-cost inflation and higher operating costs as pallet availability constraints resulted in additional repairs and relocations of the existing pallet pool to support strong customer demand,” Mr Chipchase said.

Overall, Brambles’ net profit firmed 5 per cent to $US535m in the 12 months to June 30. Meanwhile, revenue increased 7 per cent to $US5.2bn.

“This is a strong result for Brambles as we continue to support our customers to deliver goods safely and sustainably around the world,” Mr Chipchase said.

“I am very proud of how our teams responded to the challenges we faced in 2021 and our ability to strengthen our global leading position in sustainability while continuing to manage ongoing uncertainty across supply chains due to COVID-19, Brexit and the unprecedented conditions experienced across global lumber markets.”

The company did not outline FY22 guidance, leaving that it to its investor day on September 13-14.

It will pay a final dividend of 10.5 US cents a share, 30 per cent franked, on October 14.

Originally published as $82m surcharge helps Brambles beat timber price rises, shortages