Roy Davidson, 21 February 2019

brambles table 


Brambles (BXB) is a supply-chain logistics company specialising in the pooling and outsourced management of pallets, crates and containers primarily to the consumer goods, dry grocery, fresh food, retail and general manufacturing sectors. BXB operates in more than 50 countries, primarily under the CHEP brand.

BXB pools pallets delivering supply-chain efficiency for clients

Pallet pooling is the shared use of standard pallets and containers by multiple customers that collectively benefit from the network scale of the pool, rather than trying to manage reusable equipment individually. Pooling allows companies to reduce capital expenditure and improve day-to-day supply chain operations. Companies routinely outsource logistics operations like freight and warehousing and pallet/crate/container pooling is just another outsourcing activity that enables companies to focus their efforts and expenditure on their core business, allowing specialists to operate a scale model for multiple customers.

Getting back on track

BXB’s key North American division recently lost its way after several periods of strong growth due to combination of poor management, increased competition, and customer destocking. This resulted in several weak results and ultimately a change in management. Recent results have not produced any negative surprises and it appears that BXB’s new management team has its head around where improvements can be made in the business. These include increasing automation in the North American business to reduce capital requirements, and expanding the use of digital technology in tracking assets. Fundamentally this is a good business and BXB has stated that it expects to achieve mid-single digit revenue growth through the cycle, with profit growth ahead of revenue growth as it improves its operations and leverages its scale.

IFCO RPC business to be divested

In recent years BXB has grown its Reusable Plastic Crates (RPC) business. RPCs are used to transport and display fresh fruit and vegetables in the grocery sector, are reusable and don’t require treatment for pests. Recent results have demonstrated good growth in RPC’s for BXB, especially in the European market. However, while the business is high growth, it requires a lot of capital to bring up to scale, especially in the US market. With the renewed business focus on capital efficiency and boosting free cash flows, the decision has been made to divest this business and focus on the CHEP pallet business.

Investment view

BXB is the dominant player in the global pooled pallet industry with sizeable barriers to entry, good returns and relatively defensive demand. After a hiccup in the North American business, the new management team is focused on operational improvements and more sustainable growth, and is so far executing well. Ongoing improved performance, reduced capital intensity (thereby improving free cash flow), and abating cost headwinds are the key factors that will drive improved market sentiment from here.


  1. key customer losses
  2. higher material costs
  3. increased competition