2009-03-27 Brambles defends CHEP business after contract loss
BRAMBLES says it is still winning contracts, despite key customer Pepsi switching to a rival plastic pallet provider in the US.
Brambles share price fell 11.7 per cent yesterday after the Quaker, Tropicana and Gatorade (QTG) units of PepsiCo confirmed they would replace their wooden CHEP pallets with plastic pallets supplied by Intelligent Global Pooling Systems (iGPS) from April.
Sydney-based Brambles said the contract loss was insignificant, in its response to an Australian stock exchange query about the sharp fall in the share price.
"QTG's decision does not impact CHEP's other business with PepsiCo in the United States or elsewhere around the world," Brambles said.
"This contract represents less than 0.7 per cent of Brambles' annual sales revenue and is immaterial, particularly as Brambles continues to win new business that far exceeds any contract losses."
Analysts have suggested QTG's move to plastic pallets, which are lighter than timber ones and contain an inbuilt tracking system, signals the beginning of an industry-wide shift away from timber pallets.
But Brambles said its CHEP business "remains robust".
"CHEP is continuing to win significant new business, through both converting customers from white wood and winning customers from competitors," it said.
A downturn in consumer spending has forced Brambles to scrap almost nine per cent of its pallet stock, destroying seven million of its 80 million CHEP pallets in the US at a cost of $US99 million ($A142.46 million).
Brambles' share price closed up 21 cents at $5.20.