Brambles Limited (ASX:BXB) operates a global pallet and container pooling Business through the CHEP brand, supplying reusable equipment across major retail, Manufacturing and logistics networks. Its FY26 result showed higher Underlying Profit despite significant disruption in the United States, where repair-capacity constraints reduced equipment availability and added transport, plant and replacement-pallet costs. The company enters FY27 expecting those operational constraints to ease, although some of the associated supply-chain costs are expected to remain.

FY26 profit increases despite US disruption

Brambles reported sales Revenue from continuing operations of US$7.043 billion for FY26.

Revenue increased 2% at constant currency, with approximately one percentage point of growth coming from price and one percentage point from volume.

Underlying profit reached US$1.494 billion, representing growth of 4% at constant currency.

Underlying profit Margin also improved during the year.

Brambles estimated that the US repair-capacity issue reduced FY26 underlying profit by around US$90 million. Excluding that impact, underlying profit growth would have been materially higher.

Basic earnings per share from continuing operations increased to 69.9 US cents.

Return on Capital invested was 22.6%, reflecting the capital-intensive nature of the pallet-pooling model and the scale of the company’s global asset base.

The pallet-pooling model depends on equipment circulation

Brambles does not operate as a traditional pallet manufacturer selling equipment outright.

Instead, customers use CHEP pallets, crates and containers within a shared pooling system. Equipment moves through Supply chains, is collected, inspected, repaired where necessary and returned to circulation.

This model generates recurring revenue, but it also depends heavily on fleet availability and the efficiency of repair and collection networks.

At the end of FY26, Brambles managed approximately 350 million reusable platforms globally, including around 320 million pallets.

The company purchased about 39 million additional units during the year.

The size of the fleet is central to the business model because equipment that remains unavailable for too long can limit Customer Service levels and force additional capital spending.

Americas remains the largest division

CHEP Americas generated revenue of US$3.867 billion during FY26.

Underlying profit was US$750.6 million.

The region remained Brambles’ largest business, but its result was affected by repair-capacity constraints in the United States.

CHEP EMEA generated revenue of US$2.580 billion and underlying profit of US$727.5 million.

CHEP Asia-Pacific recorded revenue of US$595.9 million and underlying profit of US$214.6 million.

Asia-Pacific produced the highest return on capital invested among the major regions.

The geographic mix matters because the US repair issue was concentrated in the Americas, while EMEA and Asia-Pacific continued to contribute earnings growth without the same operational disruption.

US repair constraints reduce equipment availability

The main operational issue in FY26 developed in the United States, where repair capacity was insufficient to process the Volume of pallets moving through the network.

Brambles estimated the total FY26 underlying profit impact at approximately US$90 million.

That amount included lost revenue, additional plant costs, higher transport expenses and increased equipment-related charges.

The company also purchased around 1.3 million additional pallets during the fourth quarter to support customer requirements while unrepaired equipment remained out of circulation.

Approximately 3.4 million unrepaired pallets were held in storage at the end of FY26.

Brambles expects this inventory to be progressively returned to service rather than written off or permanently removed from the fleet.

The company has indicated that repair-capacity constraints are expected to be resolved during the first half of FY27.

Some higher costs are expected to remain

Although the temporary repair bottleneck is expected to ease, not all associated costs are expected to disappear.

For FY27, Brambles expects an impact of approximately US$35 million to US$55 million related to the US supply-chain issue.

Of this amount, around US$25 million to US$35 million is expected to represent more structural increases in supply-chain costs.

These costs reflect changes in transportation, plant operations and other network requirements rather than only temporary disruption.

Brambles also expects to purchase approximately 2 million additional pallets during FY27.

The associated cash outflow is expected to be around US$100 million.

This means the operational recovery should improve equipment availability, but FY27 will still include a financial effect from the steps taken to strengthen the US network.

FY27 guidance points to continued growth

Brambles expects FY27 sales revenue growth of between 2% and 4% at constant currency.

Underlying profit is expected to increase by between 2% and 6%.

The company expects earnings growth to be weighted toward the second half of the year.

Underlying profit is forecast to decline by a mid-to-high single-digit percentage in the first half before increasing at a low-double-digit rate in the second half.

This pattern reflects the timing of the US repair recovery and the additional costs expected early in the financial year.

The guidance assumes the repair-capacity constraints ease broadly in line with management’s current expectations.

Any delay could affect the timing of the projected earnings recovery.

Free Cash Flow expected to moderate

Brambles generated free cash flow before dividends of US$1.048 billion in FY26.

For FY27, free cash flow before dividends is expected to range between US$800 million and US$950 million.

The lower range primarily reflects additional spending on pallet purchases and the continuing cost of strengthening the US repair network.

Pallet purchases are a normal part of the business because the company must replace lost, damaged or unavailable equipment and support growth in customer activity.

However, unusually high purchases can reduce cash flow even if accounting earnings continue to increase.

The relationship between capital spending, repair recovery and equipment availability will therefore remain important through FY27.

Dividends increase in FY26

Brambles declared total FY26 dividends of 46.15 US cents per share, representing an increase from the prior year.

The final Dividend was 23.15 US cents per share.

The company’s dividend policy targets a payout range of 50% to 70% of underlying profit after finance costs and tax.

FY26 distributions remained within that framework.

Future dividends will depend on earnings, cash generation, Capital Investment requirements and the board’s assessment of the company’s financial position.

The higher level of equipment spending planned for FY27 makes free cash flow an important measure alongside underlying profit.

Capital management continues

Brambles also continued its share buyback program during FY26.

The company completed substantial on-market purchases during the year and entered FY27 with an additional buyback program still underway.

Capital management therefore remains part of Brambles’ broader financial framework alongside dividends and fleet investment.

The company must balance those uses of cash with spending on replacement equipment, service-centre capacity and digital initiatives.

The scale of the US repair disruption demonstrates why maintaining financial flexibility is important in a pooling business where operational bottlenecks can require rapid capital deployment.

Digital tracking remains part of the long-term strategy

Brambles is continuing to invest in digital tracking and asset visibility through initiatives such as Serialisation+.

The program is designed to improve visibility over pallet movements and provide more detailed information about equipment flows through customer supply chains.

Better tracking could help reduce loss rates, improve network planning and support more efficient use of the existing fleet.

However, the company is still developing these capabilities, and their eventual financial contribution will depend on adoption, implementation costs and how effectively the data improves day-to-day asset management.

For now, the more immediate operational focus remains on repair capacity and fleet availability in the United States.

What could shape FY27 performance?

The most important Factor is whether Brambles restores US repair capacity in line with its timetable.

If more pallets return to service during the first half, the company should be able to reduce some of the temporary costs associated with transport, storage and additional equipment purchases.

The scale of the structural cost increase will also matter. Even after the repair Backlog is cleared, higher network expenses could continue to affect margins.

Customer volumes, pricing and broader supply-chain conditions will influence revenue growth across all regions.

Currency movements are another factor because Brambles reports in US dollars while operating across multiple markets.

FY27 will therefore test whether the company can translate the expected operational recovery in the United States into stronger second-half earnings while absorbing permanently higher elements of the supply-chain cost base.