Brambles (ASX: BXB): Withstanding The Impacts of Trump’s Tariffs (For Now)

Brambles (ASX: BXB) has significantly outperformed the ASX 200 in the past year, gaining nearly 20% even with the drop during the furore over Trump’s tariffs.

As a company worth over $30bn that operates across approximately 60 countries worldwide, with its business heavily tied to global trade flows, it is sensitive to tariffs and geopolitical changes to a greater extent than just about any other company on our bourse.

The big question now is whether Brambles can absorb any impact or will its growth be disrupted?

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Brambles’ Business Model: A Logistics Powerhouse

Brambles traces its roots from a butchery business that began in Newcastle in 1875. By the time it listed on the ASX in 1954, it had expanded into transport and logistics. But it was 1958 when it entered the pallet-pooling business by buying the government-owned enterprise CHEP (Commonwealth Handling Equipment Pool) and the rest is history. To this very day, the division in the company still is called CHEP.

Rather than make and sell pallets and containers, it leases them. This business model allows manufacturers, retailers, and distributors to lower costs and increase efficiency. It is also good for the environment too. With pallets and containers re-used repeatedly within the supply chain, this provides a more sustainable option than single-use packaging, minimising waste and helping companies reduce their carbon footprint. This model resonates with the global push toward greener logistics solutions.

Always vulnerable to macro factors

As a vast network, Brambles’ operations are influenced by macroeconomic factors such as trade policies, raw material prices, and currency fluctuations. Taxes on imports and exports can directly affect its operating costs, especially in markets like the United States and Europe. Additionally, rising fuel and transportation costs may impact operational expenses, affecting the company’s overall margins.

However, it is the tariffs that had investors worried in late 2024 and early 2025. Even if pallets themselves do not incur tariffs, regimes on raw materials (i.e. wood, fasteners) involved in producing pallets or processing returns naturally increase input costs. Broader economic uncertainty, higher costs, or slower consumption in the U.S. could suppress demand for pallets (since pallets track with goods movement and logistics activity).

Now, the reshifting of supply chains could be a benefit. As tariffs and trade wars prompt importers to rethink global supply chains, some manufacturing or distribution may shift to domestic or near-shore facilities — which could increase demand for pallet-pooling services in local markets. A reshoring trend tends to benefit domestic pallet services rather than import-based ones.

Moreover, Brambles’ unique advantages (its broad geographic footprint, a large network and a reusable pooling model which may appeal more when companies want to avoid raw-material import risks), help Brambles better absorb cost and demand shifts vs. smaller competitors

Brambles’ Strong FY25, but a nuanced FY26 is expected

Investors welcomed the company’s FY25 results, released in August. Its sales revenue from continuing operations was US$6.7bn, up 3% in constant currency. Its underlying profit was US$1.4bn, up 10%, and its post-tax profit from continuing operations was US$864.2m, up 12%.

Its ROIC was an impressive 21.9%, up 1.4 percentage points vs the prior year, and it paid 39.83 cents per share in dividends which was up 17%. The company bought back US$400m in shares and announced another US$400m buyback in FY26.

The company guided to 3-5% sales growth and 8-11% underlying profit growth. But management noted that like-for-like volumes may be “slightly down” in FY26 vs FY25, citing uncertain macroeconomic conditions (especially in key markets such as the U.S.), excess pallet stock in U.S. network (~4 million excess pallets) and associated storage and repair costs, albeit balanced by a planned “capital expenditure holiday” in the U.S. until the first half of 2027.

Strong ESG goals

The company wrapped up a 5-year sustainability program and unveiled a brand new  sustainability program for 2030. Brambles is upping its focus on “share and reuse” of load-carrying equipment (pallets, crates, containers) rather than single-use or one-time products — helping reduce demand for raw materials, and decreasing waste and emissions across supply chains.

Several environmental targets have already been set and met, including growing 3m trees in FY25, having 41.4% of plastic material having recycled or upcycling content, diverting 93.6% of product materials from landfill, operating using 100% renewable electricity and reducing Scope 1, 2 and 3 emissions by 17.2%. So you can have confidence it can strive for better.

Goals for the future include a 42% reduction in absolute scope 1 and 2 emissions by 2030, net zero by 2040, regenerating two hectares of land for each one required for its timber needs and turning 80% of product waste into net-positive solutions. This is not just doing less bad, but now doing good.

Future Outlook: What’s Next for Brambles?

Going forward, Brambles’ resilience will depend on macroeconomic conditions, trade policies, and the execution of its cost control strategies. Investors should closely monitor US-European trade negotiations, as these will significantly impact the company’s cost structure.

If trade tensions remain manageable, Brambles should continue to see positive growth. However, if tariffs increase in scope or become more stringent, the company may need to recalibrate its pricing strategies or focus on additional cost efficiencies to maintain profitability.

The challenge is that as an A$30bn company on the ASX, investors may perceive there is little room for growth just by virtue of its size. Analysts covering the company expect ~10% growth in the 12 months ahead. They call for FY26 revenues of US$7.1bn and a profit of US$965m. For FY27, $7.4bn revenue and a $1.06bn profit. These estimates result in a 21.4x P/E but 1.7x PEG.

From a company perspective, there’s little not to look about Brambles. But it is subject to various macroeconomic factors outside of its control and investors need to weigh these before considering an investment,

FAQs

• What caused Brambles’ recent share price recovery?

  Brambles has performed well due to pricing adjustments, sustainability initiatives, and the stabilisation of its supply chain. Additionally, the company’s dividends and share buybacks have boosted investor confidence.

• How do tariffs affect Brambles’ business?

  Tariffs can increase material costs, disrupt international trade, and cause currency fluctuations, all of which can affect the company’s profitability. However, Brambles has implemented proactive strategies to mitigate these risks.

• Is Brambles a good investment for long-term growth?

  With its defensive model, strong pricing power, and focus on sustainability, Brambles presents an attractive long-term investment. However, investors should remain aware of risks such as trade policies and inflation.

• How is Brambles addressing inflation and rising costs?

  Brambles has successfully passed cost increases onto customers and is working on improving automation and operational efficiency to manage rising costs.

• What impact would a US-China trade war have on Brambles?

  A US-China trade war could disrupt global supply chains, affecting Brambles’ operations. However, the company’s geographical diversification allows it to adjust to changing trade dynamics.