Following the completion of a strategic review, Brambles has announced that it intends to divest its non-core North American recycled whitewood pallet business, CHEP Recycled.
CHEP Recycled provides a network of pallet management services in the USA and Canada that supplies and recycles over 90 million primarily whitewood pallets annually. Brambles acquired its US recycled pallet business as part of the global acquisition of IFCO Systems in March 2011. The Canadian recycled whitewood business, Paramount Pallet, was acquired in November 2011.
“Our strategic review highlighted that CHEP Recycled is not a core part of Brambles and that the business has not delivered the financial returns we require to generate sustainable shareholder value,” stated Graham Chipchase, Brambles’ CEO. “In addition, under new ownership, CHEP Recycled could be operated with a lower cost structure, providing it with a competitive advantage and access to additional revenue opportunities not currently available. For these reasons, we believe that CHEP Recycled’s overall returns and growth outlook are more likely to improve under alternative ownership.”
“Going forward, we will focus on Brambles’ value proposition as the world-leading provider of supply-chain logistics solutions based on the provision of reusable pallets, crates, and containers,” Chipchase added. “With this in mind, we will retain the CHEP Recycled facilities that assist with the repair and recovery of our pooled pallets, ensuring we keep the synergies achieved in our US pooled pallet business to date.”
Brambles is seeking to divest the 80 plants and TPM (total pallet management) sites which currently service its recycled pallet operations. As part of the transaction, approximately 2,200 employees who work at these sites will transfer to new ownership on completion of the sale.
Brambles will retain the 73 pooled pallet service centres and TPM sites currently managed by CHEP Recycled, with approximately 1,400 employees remaining with the Group to manage these sites. Brambles will inform the market of any material developments in the divestment process.
Impairment and Accounting Implications
CHEP Recycled will be classified as “assets held for sale” and recognised in discontinued operations in Brambles’ FY17 accounts, which are scheduled for publication on 21 August 2017.
Brambles expects to declare a US$243.8 million non-cash impairment of the CHEP Recycled assets, which will be recognised in the FY17 accounts as a Significant Item in discontinued operations.
Brambles Limited is a supply-chain logistics company operating primarily through the CHEP and IFCO brands. Brambles enhances performance for customers by helping them transport goods through their supply chains more efficiently, sustainably and safely. The Group’s primary activity is the provision of reusable unit-load equipment such as pallets, crates and containers for shared use by multiple participants throughout the supply chain, under a model known as “pooling”. Brambles primarily serves the fast-moving consumer goods (e.g. dry food, grocery, and health and personal care), fresh produce, beverage, retail and general manufacturing industries, counting many of the world’s best-known brands among its customers.
The Group also operates a specialist container logistics business serving the automotive sector. Brambles has its headquarters in Sydney, Australia, but operates in more than 60 countries, with its largest operations in North America and Western Europe. Brambles employs more than 14,500 people and owns more than 550 million pallets, crates and containers through a network of more than 850 service centers.