22 WESTERN PALLET
Brambles Results: Resilient Perfomance Despite Covid-19 and Related Uncertainty
CHEP Americas enjoyed a 1-percentage point increase in margins and, in Latin America, strong revenue growth and asset efficiency improvements during 2020 Fiscal Year. Overall global sales revenue increased 6% as strong growth in the global pallet businesses more than offset Covid-19 related declines in the Automotive and Kegstar businesses which account for ~5% of Group revenue.
Approximately 80% of Brambles’ revenues are derived from customers in the consumer-staples sectors, which are primarily serviced by the pallet businesses. During March and April 2020, the pallet businesses experienced strong levels of customer demand across global grocery supply chains. This demand was driven by lockdown measures introduced in all major markets and subsequent changes in consumer behavior including pantry stockpiling in developed markets and a shift to ‘at-home’ consumption across all regions. This initial surge in activity was followed by a period of high volatility in demand during May and June 2020 as regions across the globe progressed through different phases of the pandemic.
While revenue growth increased in line with higher pallet volumes, servicing the additional customer demand and managing volatility and disruptions across Brambles’ network led to higher supply-chain costs during the period from March to June 2020. These cost increases largely related to additional transport, handling and repair costs required to ensure continuity of pallet supply while minimizing the level of capital expenditure to service these temporary spikes in customer demand.
Brambles’ Automotive containers and Kegstar keg-pooling businesses, which account for approximately 5% of Group revenue, were significantly impacted by Covid-19. Customer demand in the Automotive business was impacted by the closure of the global automotive manufacturing industry while in Kegstar, lockdown laws significantly reduced ‘on-premise’ consumption of beer in served markets from March to June 2020. Collectively, fourth-quarter revenues in the Automotive and Kegstar businesses decreased 50% on the prior corresponding period, reducing Group Underlying Profit growth by US$23.0 million or 3-percentage points.
Brambles remains committed to its US supply chain efficiency targets despite delays in rolling out service-center automation during the fourth quarter of FY20 due to Covid-19 travel restrictions. Implementation of US service center automation recommenced in July 2020 and Brambles expects to meet its original FY21 implementation targets, including the completion of site upgrades delayed during FY20, assuming no further travel restrictions due to Covid-19.