Pandemic fallout a boon for Brambles

The pallet giant is on track to meet full-year targets amid high levels of at-home consumption during the pandemic.

Brambles has benefited from high levels of at-home consumption during the pandemic. Picture: Bloomberg

Pallets, crates and containers giant Brambles has reaffirmed its guidance for the full year as COVID-19 restrictions continue to encourage domestic consumption and uncertain businesses increase inventory levels.

In a trading update on Thursday, the $15bn multinational, which operates under the ubiquitous CHEP brand, said sales revenue rose 6 per cent at a constant foreign exchange basis in the first nine months of the year.

The company booked sales revenue of $US3.79bn ($4.89bn) for the period, putting it within the upper end of its guidance of 4-6 per cent sales revenue growth for the 2021 financial year.

Brambles CEO Graham Chipchase said customer demand remained strong over the third quarter, with the ongoing impact of COVID-19 on the global supply chain and consumer behaviour producing some beneficial results.

“COVID-19-related restrictions continued to support high levels of at-home consumption in key markets, while general uncertainty across global supply chains led customers and retailers to increase inventory levels, particularly in the US and Europe,” Mr Chipcase said.

The impact of increased ­consumer demand had boosted the need for capital expenditure, but Mr Chipcase said free cashflow would cover the additional cost.

“Investments in pallet purchases increased in the third ­quarter in response to elevated demand levels, longer cycle times and higher-than-anticipated lumber costs,” he said.

“While these additional pallet purchases and lumber inflation have driven increased investment in pooling capex, the cashflow generation across the group remains strong and we expect free cashflow to fully fund capital ­expenditure and dividends on a full-year basis.”

Brambles chief executive Graham Chipchase

CHEP’s Americas division recorded sales growth of 7 per cent on a constant foreign exchange basis over the nine-month period, to $US1.909bn. CHEP Europe, Middle East and Africa recorded growth of 4 per cent to $US1.379bn and the Asia-Pacific division increased 8 per cent to $US324.4m.

Mr Chipcase said labour and transport markets “remained tight” across all regions while lumber inflation, particularly in the US, continued to increase input costs. However, he said these factors were being offset by supply chain efficiencies and cost savings that “in combination with the benefit of surcharge income and price realisation are offsetting input-cost pressures and additional repair and handling costs across our network”.

As well as reaffirming sales growth, Brambles said it would achieve underlying profit growth guidance between 5-7 per cent at constant FX rates.

A dividend payout ratio between 45 per cent to 60 per cent was also reaffirmed, as was the continuation of the share buyback program for the rest of the ­financial year.

Citi analysts said the result would assist a continual recovery in the company’s share price.

Brambles shares closed at $10.66, up 2.4 per cent.