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Brambles SWOT & PESTLE Analysis

Last Updated : 12 May, 2017

OVERVIEW

Name of the Company: Brambles

Business Sector: Logistics, Supply-Chain

Operating Geography: Australia, Global

About the Company: Brambles was founded in 1875 and is headquartered in Australia. The company specialises in the pooling of unit-load equipment and the provision of associated services, with a focus on the outsourced management of returnable pallets, crates and containers. It serves the consumer goods, dry grocery, fresh food, retail and general manufacturing industries. In addition, the company has specialist businesses serving the automotive manufacturing, aerospace and oil and gas sectors. As of June 2016, the firm employed more than 14,500 people.

Revenue: AUD 5.53 bn - FY ending 30th June 2016

SWOT & PESTLE Analysis

The SWOT Analysis for Brambles is given below:
Strengths
Weaknesses
1. Global leader in supply chain equipment solutions for the consumer staples sector.
2. Strong competitive advantage gained via the network effect of Brambles' core CHEP pallet operation.
3. They don't really have a global competitor except for regional players.
4. FY14 saw a 7% increase in sales revenue to US$5.4 billion on a constant-currency basis.
1. Spending money in efficiency, growth and in a weak Europe which is leading to slightly lower growth overall in 2014.
2. Low dividend payout ratio.
3. High debt levels despite a decrease to 2,361.7 as on June ’14.
4. Earnings coming in across multiple currencies
Opportunities
Threats
1. Opportunities looking bright in IFCO RPC business space in Europe and North America.
2. Expansion in emerging markets, particularly in central and Eastern Europe, Latin America, the Middle East and Africa
1. A downturn in economic conditions can lead to a downturn in the movement of goods, and hence, less use of their pallets.
2. Weak economic conditions in Europe.
3. Rapidly evolving retail supply chains.
4. Cost pressures throughout the supply chain.
5. Dynamic competitive environment
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Strengths

1. Global leader in supply chain equipment solutions for the consumer staples sector: Brambles is the global leader in supply chain equipment solutions for the consumer staples sector.

2. Strong competitive advantage gained via the network effect of Brambles' core CHEP pallet operation: The main factor behind the company's moat is the strong competitive advantage gained via the network effect of Brambles' core CHEP pallet operation contributing sales revenue in the Pallets segment of about US$4,123.4 million.

3. They don't really have a global competitor except for regional players: Brambles holds a unique position in the market, as it is truly the only global pallet pooling business and all its competitors are fairly small by comparison. In the US, their key competitors there are PECO and iGPS, which is a plastic pallet provider. In Australia and the Asia-Pacific region, one of Brambles competitors is Loscam, while in Europe there are a few small players and also a pallet exchange system. In the US, the whitewood pallet industry which comprises lower-quality pallets that tends to move around in something akin to an exchange system.

4. FY14 saw a 7% increase in sales revenue to US$5.4 billion on a constant-currency basis: In 2014 result, on a constant-currency basis, comprised a 7% increase in sales revenue to US$5.4 billion, a 6% increase in Underlying Profit to US$960 million and Return on Capital Invested of 16.3%.

Weaknesses

1. Spending money in efficiency, growth and in a weak Europe which is leading to slightly lower growth overall in 2014: Brambles looks like spending more money in efficiency, growth and in a weak Europe which is leading to slightly lower growth overall in 2014. The Capital expenditure on property, plant and equipment in Europe region saw an increase from US$233.7 million to US$ 262.7 million.

2. Low dividend payout ratio: Dividends for the year of 27.0 Australian cents per share were in line with FY13, reflecting the Board’s stated intention not to reduce dividends after the Recall demerger. This indicates a low dividend payout ratio which is not investor friendly. Brambles being an established firm can put up a higher dividend payout ratio.

3. High debt levels despite a decrease to 2,361.7 as on June ’14: The net debt for the year 2014 is US$ 2,361.7 million whereas in 2013 it was US$ 2,714.4 million. Figures indicate a high debt level despite a decrease to 2,361.7 as on June ’14.

4. Earnings coming in across multiple currencies: Brambles has earnings coming in across multiple currencies.

Opportunities

1. Opportunities looking bright in IFCO RPC business space in Europe and North America: Sales revenue in RPCs was US$895.8 million, up 10% (9% at constant currency), primarily reflecting solid organic volume growth, continued penetration with existing retail partners in Europe and Australia and improved second-half growth momentum in North America. - Europe sales revenue was US$581.4 million, up 14% (9% at constant currency). Retail partners extending the use of RPCs in their supply chains and a strong summer growing season were the primary contributors to the growth. IFCO RPC business growing (earnings) at around 15 per cent per annum and would increase in the coming few years as well.

2. Expansion in emerging markets, particularly in central and Eastern Europe, Latin America, the Middle East and Africa: Expansion in emerging markets, particularly in central and Eastern Europe, Latin America, the Middle East and Africa. And though Brambles is working off a small base in those regions, it is nevertheless growing very strongly.

Threats

1. The downturn in economic conditions often leads to a downturn in the movement of goods, and hence, less use of their pallets: The pallets are shipping mainly fast-moving consumer goods around, a downturn in economic conditions can lead to a downturn in the movement of goods, and hence, less use of their pallets. So that would be a key risk.

2. Weak economic conditions in Europe: Weak economic conditions in Europe would affect Brambles in a big way. It has been a big market historically for Brambles in Europe and one of their main operations. So, that is certainly a key risk for them.

3. Other threats: Also, factors like rapidly evolving retail supply chains, cost pressures throughout the supply chain and a dynamic competitive environment are possible threat for Brambles.

Brambles SWOT analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

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The PESTLE Analysis for Brambles will be updated soon.

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