Pallet availability and balances across the CHEP North American network are not expected to return to more normal levels until the fourth quarter of the fiscal year.
Brambles has reported revenue increases of 9% for the first quarter of its 2022 reporting year. Revenue was almost US$1.3 billion. Volumes were in line with the prior corresponding period as net new business growth of 2%, primarily in the European pallets and Australian RPC businesses, was offset by lower like-for-like volumes in North America largely due to pallet availability constraints.
The company says its first-quarter sales growth demonstrates the effectiveness of its pricing and surcharge mechanisms in supporting the recovery of increased costs across global supply chains. The company states that it continues to operate in a high inflationary environment with pallet availability constraints and ongoing lumber, labor, and transport scarcity disrupting supply chains and driving increased costs across its businesses.
“Pallet availability remained challenging in the first quarter with industry-wide shortages of new pallet supply across the globe as well as lower levels of pallet returns and longer cycle times in our North American business,” stated Graham Chipchase, Brambles CEO. “This was a contributor to the decline in like-for-like volumes in North America and contributed to the lower rates of new business growth across the Americas and Europe, as we prioritized servicing existing customer demand over new customer wins.”
The company incurred additional plant and transport costs to collect, relocate and repair existing pallets due to suboptimal levels of plant stock across its network. This situation has resulted in further network inefficiencies as the company continues to respond to volatile customer demand.
“Our key focus in all regions is increasing pallet balances across our plant network to service our existing customers and support both growth and improved network efficiency,” he said. “We are progressively rebuilding our pallet pools by purchasing new pallets as supply becomes available and continuing to drive asset efficiency improvements.”
Specifically, in North America, CHEP is implementing the asset productivity and pricing initiatives outlined at the full-year result announcement and recent Investor Day. With limited access to lumber and new pallets and ongoing disruptions to global supply chains, Chipchase does not expect pallet availability and balances across the CHEP North American network to return to more normal levels until the fourth quarter of the fiscal year.
“Despite some moderation in lumber inflation in North America, lumber prices across the Group remain above historic levels and pallet prices continue to increase, particularly in Europe and Latin America,” he said. “We expect inflationary pressures to remain for the balance of FY22.”
Results by Segment
CHEP Americas sales revenue increased 9% driven by targeted pricing actions across the region to recover the cost-to-serve. Net new business growth in the region was modest and like-for-like volumes declined in North America as the business cycled strong COVID-19 related demand in the prior year and pallet availability constraints impacted volume growth with new and existing customers in the quarter.
CHEP EMEA sales revenue increased 8% driven by price growth across the region, net new business wins in the Southern, Central and Eastern European pallets businesses and a recovery in the Automotive business, which was impacted by COVID-19 related shutdowns in the prior year.
CHEP Asia-Pacific sales revenue increased 11% driven by price realization and increased demand for pallets in Australia, reflecting increased at-home consumption driven by COVID-19 lockdowns. The Australian RPC business also grew strongly, benefitting from the rollover contribution from a large contract win in the prior year.