BXB: BXB Profit Warning - US Service Centre issues undermine 4Q market recovery

Research evidence excerpt

BXB: BXB Profit Warning - US Service Centre issues undermine 4Q market recovery

o progressively improve pallet availability and

for "constraints to be resolved by the end of 1H27"

• Additional pallet capex ~$60m: BXB expects to spend a further US$60m to purchase ~2m new pallets in 4Q26 “to support

customer service continuity” and expects “further purchases in 1H27, subject to demand”.

• New $400m Buyback: $400m on-market buyback announced, to be commenced on completion of the current program and be

conducted across FY26 and FY27.

• Long-term (FY28) target reiterated: confirms target to increase margin by ~3ppts vs FY24 baseline.

RBC View: Supply issues aligning with the recovery in demand is unfortunate

Today's profit warning is unfortunate, given BXB (i) has confirmed that it was experiencing positive momentum in organic volume

growth (which was the market's major concern) and net new wins into 4Q26; and (ii) the 'break down' in the supply chain has

occurred at the service centres negating CHEP's ability to utilise the ~4m pallets currently sitting unrepaired in storage.

On the analyst call, BXB confirmed that two service centre subcontractors representing ~10% of volumes had decided to exit the

network, affecting the Central and North East markets in the US. The additional costs to (i) accelerate repair activity across the

remaining network; and (ii) relocate volumes, are expected to cost BXB ~$40m in 4Q26 with a declining impact into 1Q27-2Q27.

BXB noted that it expects to re-subcontract volumes or bring some capability in-house, and is currently purchasing more pallets

to mitigate the supply constraints.

The downgrade to FY26 EBIT growth (const FX) to 3-5% implies a ~6% reduction against the current RBC/consensus estimate

of ~9.7% growth (const FX).