Morningstar | CHEP Americas set to expand margins, supporting our wide moat for Brambles.
Brambles is the largest global provider of pallet and reusable plastic crate, or RPC, pooling services. Global scale and years of experience provide competitive advantages and a wide economic moat. The global infrastructure and advantageous cost position are barriers to entry, but there is some competition at the regional level. Cash flow, operating margins, and return on equity are high, but until recently, the business struggled to achieve sustainable earnings growth over a prolonged period. Management has been able to refocus the business, and while earnings are currently struggling with the effects of subdued U.S. and European economies, this is more than offset by increased penetration of existing markets and expansion to new geographies and services. A recovery in the developed economies would provide a major earnings boost. Growth opportunities exist in the RPC and container businesses.Brambles is a supply-chain logistics company operating primarily through the CHEP and IFCO brands. Co. has three segments: Pallets segment, which primarily serves the consumer goods, fresh produce and beverage industries, and sub-divided into three regions: Americas, Europe, Middle East and Africa, and Asia-Pacific; Reusable Plastic or Produce Crates segment, which serves the fresh produce and food industry and comprising the IFCO RPC pooling business worldwide and the CHEP RPC pooling businesses in Australia, New Zealand and South Africa; and Containers segment, which comprises four business units: Automotive, Intermediate Bulk Containers, Oil and Gas, and Aerospace.
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