Brambles Ltd (ASX: BXB) shares plunged to a new 12-month low on Monday after the company sharply downgraded its profit outlook as it struggles to service its customers.
Investors head for the exit
Shares in the pallet supplier fell as low as $18.38 before recovering marginally to be changing hands for $18.44, down 16.6% in early trade.
This fall was despite Brambles announcing a new US$400 million on-market share buyback to be carried out over the remainder of this financial year and next year.
Brambles said in its statement to the ASX on Monday that increasing automation on the part of its customers was “leading to a requirement for consistently higher quality pallets compatible with these automated handling systems”.
Brambles said it was progressively increasing its repair quality to meet this demand, which had contributed to creating a bottleneck.
The company said:
During April 2026, this focus on quality consistency has coincided with short-term repair capacity constraints in parts of Brambles’ US subcontractor service centre network which Brambles expects to be resolved by the end of 1H27. These short-term repair capacity constraints have been driven by subcontractor turnover, labour availability challenges and the additional time required to repair pallets consistently to a higher standard. At the same time as repair capacity tightened, Brambles experienced higher than anticipated customer demand.
Brambles said these constraints were limiting its ability to fully service higher-than-expected demand, and there was also a “material” cost increase in the short term.
The company added:
Multiple measures are in place to improve service levels and restore pallet availability, including increasing pallet relocations, adding repair capacity and purchasing new pallets, including ~2 million in 4Q26, with additional pallet purchases expected in 1H27.
Profit aspirations scaled back
As a result, Brambles downgraded its sales revenue growth forecast to 2% to 3%, down from 3% to 4%, and downgraded its underlying profit growth forecast to 3% to 5%, down from 8% to 11%.
Much of that downgrade relates to a US$60 million impact from US repair capacity constraints, as well as some supply chain inefficiencies in Europe.
Brambles Chief Executive Officer Graham Chipchase said:
Today’s update reflects our increased focus on quality and customer outcomes, which has coincided with a combination of developments across the external operating environment and parts of our US subcontracted service centre network. Our immediate priority is to meet our customers’ needs and to restore stability and service in the affected parts of our US network. Our response and ongoing investments in quality reinforce that meeting our customers’ needs is non-negotiable. We will not compromise on the investment required to meet the quality, network resilience and service outcomes our customers expect. At the same time, we are making sure that we are positioned to meet our strategic objectives and do what is right for the long-term sustainability of the business. This includes ongoing investment in digital, automation and other customer initiatives, as we continue to deliver productivity and efficiency improvements across the business.
Brambles is valued at $29.38 billion.
The post Why are Brambles shares crashing more than 15% to a new 12-month low today? appeared first on The Motley Fool Australia.
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