BXB Brambles Limited

By Stuart Condie

SYDNEY--Brambles Ltd. decided against moving into plastic pallets after the capital cost for each unit increased by 50% in less than a year.

The Australia-listed pallet supplier on Thursday said that its decision not to proceed with the wide-scale production of what it called an industry leading plastic pallet demonstrated its disciplined approach to capital allocation. Brambles had engaged in a trial with U.S. retail giant Costco Wholesale Corp.

"In the current market environment, the price premium and commercial terms required to offset higher total cost-to-serve and deliver an appropriate return for Brambles' shareholders were prohibitive for Costco and its suppliers," Brambles said in a statement.

Capital costs had risen by 50% since September 2021, it said.

Plastic is being considered by industries as an alternative to traditional timber due to factors including its relative durability and low maintenance needs.

Brambles said that its relationship with Costco remained strong. It said any reduction in Costco volumes would likely be replaced by new business wins.

"We will continue to work closely with them as they assess the viability of other options to convert to a plastic pallet pool," Brambles CEO Graham Chipchase said.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

June 30, 2022 02:49 ET (06:49 GMT)

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