CHEP Owner Brambles Lifts Annual Profit 4% Despite Repair Constraints — Update

By Stuart Condie

SYDNEY--Global pallet supplier Brambles reported a 4% rise in annual profit, meeting its downgraded guidance despite a larger-than-expected financial hit from the U.S. repair constraints that prompted a historic selloff of its stock.

Australia-listed Brambles, which leases out pallets under the CHEP brand, on Thursday reported an annual underlying profit of $1.49 billion, up by 4% on the prior year once currency moves were stripped out.

Sales revenue for the 12 months through June rose by 2% to $7.04 billion, also on a constant-currency basis.

Brambles had initially guided for an 8% to 11% rise in underlying profit, but slashed its outlook in May to between 3% and 5% on an increase in costs from unexpected capacity constraints at subcontracted pallet service centers in parts of the U.S.

The downgrade prompted the stock's largest one-day drop since 2002. Several formerly bullish analysts cut their rating and the consensus forecast for annual underlying profit fell from $1.565 billion to $1.48 billion ahead of Thursday's result announcement.

Analysts had been looking for sales of $7.04 billion, according to data compiled by Visible Alpha.

Brambles said its underlying profit had taken a $90 million hit from the U.S. repair constraints, exceeding its prior estimate by 50%. The effect included lost revenue and additional transport and plant costs, it said.

More positively, additional fourth-quarter pallet purchases to address shortages cost $40 million, $20 million less than expected, as it utilized excess pallets in storage.

Brambles, which raised its dividend to $0.2315 from $0.2083, said it expected to resolve the constraint issues by the end of December, as previously flagged.

"Our actions are already delivering positive results, with customer order fulfilment improving materially since mid April," Chief Executive Graham Chipchase said.

"We remain on track to resolve the repair capacity constraints by the end of the first half of FY27 and position our U.S. business to strengthen customer relationships and pursue growth."

Payment for the new pallets is due in the December half and Brambles expects to spend another $60 million on an additional 2 million new pallets in the same period, resulting in a total cash outflow of $100 million.

Brambles expects fiscal 2027 free cash flow before dividends of between $800 million and $950 million, down from $1.05 billion in the fiscal year just ended.

It expects underlying profit growth of between 2% and 6%, and sales revenue growth of between 2% and 4%, both in constant currency terms.

Brambles didn't add to the $400 million buyback extension announced in May. It expects to complete the current on-market buyback in the current fiscal year.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

August 19, 2026 19:56 ET (23:56 GMT)