CHEP Meets Unprecedented Surge in Customer Demand

Since the outbreak of COVID-19, CHEP’s pallet businesses have successfully met an unprecedented surge in customer demand and processed significantly higher repair volumes with minimal disruption across its service center network, according to Brambles CEO, Graham Chipchase, commenting on the third-quarter trading update from the company. “These elevated activity levels and changes in network flows have driven short-term increases in supply chain costs while maintaining service levels, quality standards and asset control in increasingly challenging conditions,” he said.

“During this time of uncertainty, we’re proud to be playing a vital role in keeping local, regional and international supply chains moving. With over 80% of our revenues derived from the consumer staples and grocery supply chains, our 11,000 people are showing commitment and perseverance in connecting people with life’s essentials every day. Our highest priority is keeping our people safe and ensuring our facilities are well protected and appropriately managed to best support the needs of our customers and local communities around the world.”

Scheduled automation rollouts deferred in the U.S.

“With limited visibility into the sustainability of current operating conditions and even greater uncertainty about the longer-term economic, financial and operating implications of COVID-19 we remain vigilant in how we operate our businesses and allocate capital across our portfolio,” Chipchase continued.

“We are taking a number of actions around cost mitigation, working capital management and improved cash generation across the Group. In addition, in our US pallets business, plant automation rollouts scheduled for the balance of FY20 have been deferred to FY21 in order to maximize the level of capacity across our US service center network and avoid any potential disruptions during this period of peak demand.

Sales revenue for the first nine months of FY20

For Brambles’ largest businesses across Europe, North America and Australia, the effects of government lockdown, changes in consumer behavior and automotive manufacturing shutdowns in response to COVID-19 commenced in the last 2 weeks of March 2020. As a result, the impact on the nine-month and third-quarter trading performance was minimal.

Brambles generated sales revenue from continuing operations of US$3,527.1 million for the first nine months of the financial year ending 30 June 2020 (FY20), reflecting a year-on-year increase of 3% at actual FX rates. At constant FX rates, sales revenue increased 6% and comprised equal contributions from volume and price growth in the period.

Sales revenue performance by segment was as follows:

  • CHEP Americas sales revenue increased 9% at constant FX, including 9% growth in the third quarter. Growth was driven by pricing initiatives across the region and volume growth in the US Pallets business which included the rollover benefit from a large contract win in the prior year and solid like-for-like volume growth in the period;
  • CHEP EMEA sales revenue increased 4% at constant FX, including 3% growth in the third quarter. Growth was driven by the rollover contribution from European Pallets and Automotive contracts won in the prior year and price growth across the region. Like-for-like volumes were broadly in line with the prior corresponding period reflecting subdued economic conditions across the region; and
  • CHEP Asia-Pacific sales revenue in the first nine months of FY20 was in line with the corresponding period at constant FX rates as price and volume growth in the Australian Pallets business offset the rollover impact of a large Australian RPC contract loss in the prior year. Revenue decreased 3% in the third quarter of FY20 as the decline in RPC revenues more than offset price and volume growth in the pallets businesses.

“Whilst acknowledging the increased levels of demand volatility and the possibility of further rapid changes in the operating and economic environment due to COVID-19, Brambles expects FY20 sales revenue growth of between 5-7% at constant FX rates with fourth-quarter revenue growth in CHEP Pallets expected to offset loss of revenue in CHEP Automotive and Kegstar,” the company reported.