BXBLY (BXBLY) Q4 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to Brambles Full Year Results Presentation for the 2026 financial year. I'll start with an overview of our FY '26 performance including financial highlights and our key areas of focus this year. I'll then cover the operating environment and our response to the repair capacity constraints that emerged in our U.S. business during the fourth quarter. I'll also provide an update on Brambles of the Future and serialization+ before handing over to Joaquin for a more detailed view of our financial performance. Let's start with a review of the highlights for FY '26. We delivered a resilient financial result while advancing the customer, operational and sustainability initiatives that strengthen our long-term competitive advantage. For the full year, revenue increased 2%, reflecting strong new business growth across the group and price realization. These increases more than offset lower like-for-like volumes from softer consumer demand in most regions. Underlying profit increased 4% including a USD 90 million adverse impact associated with U.S. repair capacity constraints. Excluding the U.S. repair capacity impact, underlying profit increased 11% with price realization, cost management initiatives and productivity improvements more than offsetting inflation and strategic investments across the group. Free cash flow before dividends exceeded USD 1 billion for the second consecutive year, demonstrating the progress we have made in reducing the capital intensity of the business. This supported the 16% increase in total dividends declared for FY '26 to USD 0.4615 per share. Together with the USD 509 million of share buybacks completed in FY '26, this brought the total cash returns to shareholders to approximately USD 1.2 billion for the year. These financial outcomes demonstrate the benefits of our transformation over recent years and reinforce the importance of continuing to build the capabilities that strengthen our business and underpin the next phase of value creation. During the year, we maintained our focus on what matters most to our customers, improving their end-to-end experience and investing in to deliver the quality, service and insights they need. In the U.S., we prioritized our customers by making the necessary investments to improve service levels and strengthen the network. We also continue to modernize our network with automation and digital initiatives underway to improve resilience and efficiency while reducing the overall cost to serve. Finally, we launched our 2030 sustainability program marking the next phase of our ambition to create regenerative supply networks. The program is focused on delivering nature positive outcomes and strengthening the communities and economies we serve. Turning to the FY '26 operating environment, which was characterized by persistent inflationary pressures, subdued consumer demand and continued new business momentum in key markets. Labor costs increased in all regions and were particularly pronounced in the U.S., where competition for blue collar workers increased significantly in a tightening labor market. Fuel and transport costs also rose significantly in the second half of the year, largely owing to the Middle East conflict. Transport inflation in the U.S. was further compounded by driver shortages with significant increases in spot rates for transport during the fourth quarter. Although lumber prices varied by region, the weighted average capital cost of our pallets increased by 4% on FY '25, largely due to the higher proportion of pallets purchased in the U.S. market. In response to these inflationary pressures, we have maintained commercial discipline recovering input cost increases through a combination of contractual pricing, indexation and surcharge mechanisms. In Europe and Latin America, we have also introduced fuel surcharges and other pricing mechanisms to reduce the lag in recovering fuel cost increases. In addition to strengthening commercial terms, we have continued to focus on productivity improvements and cost efficiencies to reduce cost to serve increases and deliver better value for our customers. On the demand side, cost of living pressures and macroeconomic uncertainty continued to weigh on consumer demand, particularly in our larger markets of the U.S., Europe and Latin America. In the U.S., we saw a sharp increase in customer demand in Q4 ahead of consumption events, including the FIFA World Cup while in Australia, inventory optimization across retailer and manufacturer supply chains contributed to a lower pallet demand in the year. To offset lower underlying demand from existing customers, we have continued to drive new business growth in key markets with momentum supported by enhancements to our customer value proposition, stronger sales capabilities and tightening supply of high-quality whitewood pallets, particularly in the U.S. and European markets. We also continue to see higher levels of automation across manufacturer and retail supply chains increasing the need for consistent high-quality pallets. This reinforces the importance of the investments we've been making in automation, digital and repair consistency initiatives to meet our customers' evolving needs and boost the long-term resilience of our network. Turning now to the repair capacity constraints that emerged in parts of our U.S. network during the fourth quarter. As outlined on the slide, these constraints were not the result of a single factor, but rather reflect the convergence of several issues in the fourth quarter. As you will see on the slide, one of the contributing factors have since been resolved. Others are improving and a few continue to feature in our operating environment. Among the ongoing factors are the quality initiatives we have been implementing over the past 2 years to support increasing levels of automation in customer and retailer supply chains. These initiatives include additional repairs, enhanced quality audits and more recently, the rollout of end-of-line inspection equipment to improve repair consistency across our network. While strategically important, this focus on repair consistency increased the number of component repairs required per pallet, reducing repair throughput at certain sites in our network. From April, this planned activity coincided with a number of unexpected developments within our subcontractor network and the broader operating environment. This included the tightening labor market in the U.S. which remains an ongoing challenge and continues to be an area of focus. With the availability of labor declining, it became more difficult to attract and retain service center staff across our network, which further reduced repair throughput with some repair benches not being fully utilized. At the same time, we experienced turnover in our subcontractor base with 2 operators in the Northeastern and Central regions of the U.S. choosing to exit the network due to service center management being noncore to their business and challenging operating conditions. Although all 15 affected sites remained operational, repair throughput was below optimal levels. A transition plan is now in place for these affected sites. And importantly, there have been no further subcontractor exits from our network. These pressures then coincided with higher-than-expected customer demand in the fourth quarter, which has moderated since July. Individually, each of these factors would have been manageable within the normal course of operations. However, occurring simultaneously, they created temporary repair capacity constraints in parts of our U.S. network and disrupted our ability to fully meet customer demand and onboard new business. In response to this, we increased pallet relocations across our network to meet customer demand. As these relocations were unplanned, we had to rely on significantly higher spot transport rates, which increased the cost of moving pallets to customers in the fourth quarter. We expect unplanned relocations to reduce as repair capacity constraints are resolved through the first half of FY '27. The repair capacity constraints and flow-on effects resulted in a negative earnings impact of USD 90 million, together with USD 40 million of additional pooling CapEx associated with new pallet purchases. Joaquin will provide a more detailed breakdown of these financial impacts shortly. Moving to the next slide, which outlines the actions we are taking to resolve repair capacity constraints by the end of the first half of FY '27 and strengthen customer relationships as network performance continues to improve. Since these constraints emerged, our immediate priority has been to restore service levels for our customers. To do this, we have focused on improving pallet availability and increasing repair capacity across the network. The actions on this slide are primarily short-term measures designed to support customer demand and restore service performance while we implement initiatives to structurally increase network capacity and resilience. To increase repair capacity, we have introduced additional shifts and overtime at existing service centers and increased rates to attract and retain labor across our network. We have also developed an orderly transition plan for the sites affected by subcontractor turnover. To improve pallet availability in the short term, we have increased pallet relocations across our network and invested in new pallet purchases, adding 1.3 million pallets in the fourth quarter and expecting to add another 2 million during the first half of FY '27. Importantly, these actions are already delivering results. As we return back to normal service levels with no missed customer orders since mid-June. This improvement reflects increased pallet availability from new pallet purchases, lower customer demand from peak levels and early improvements in repair capacity. As operational performance continues to improve, we are also focused on strengthening our customer relationships and reaccelerating growth. This includes delivering consistently on our customer value proposition, restarting new business conversions and providing additional sources of value to customers, including through our digital offering. Having addressed the immediate actions to restore service levels, this slide outlines the initiatives underway to structurally increase network capacity, strength and resilience and provide the headroom required to support our growth ambitions. Within our subcontractor network, we are progressing the transition of 15 service centers with 3 sites already transitioned to new subcontractor management in the fourth quarter of FY '26. We expect the remaining 12 sites to transition primarily to subcontractors by the end of FY '27, and can confirm there have been no further subcontractor exits from our network since April. As part of this transition process, we will take the opportunity to diversify our subcontractor base and reduce concentration across the network. We are also revising our strategic approach to subcontractors towards value sharing relationships that better support our safety, quality and productivity priorities. Initiatives are also in place to expand repair capacity by FY '28. As shown on the chart, we expect to increase repair capacity by about 20% against the FY '26 baseline supported by additional capacity at existing service centers and 8 new service centers added to our network. These new sites will include a mix of subcontractor and CHEP operated facilities providing greater flexibility across the network. The 8 new service centers are expected to require total investment of around USD 25 million, which remains comfortably within our existing medium-term non-pooling CapEx guidance of USD 200 million to USD 300 million per annum, excluding investment in serialization+. Beyond FY '28, we will continue expanding repair capacity in line with our growth expectations while maintaining sufficient headroom to support future demand and operational stability. Automation and technology will also play an important role in improving agility and throughput across the network. This includes progressing our Service Center of the Future Program towards touchless repair and using AI and machine learning to improve demand planning, collections processes and capacity management across the network. Finally, we are establishing specialist teams that can be deployed quickly during operational challenges and network disruptions, improving our ability to respond and sustain customer service levels when issues arise. Taken together, these initiatives will help ensure the U.S. business is better positioned to support customer demand, capture future growth opportunities and respond more effectively to operational disruption. We continue to see quality as a key source of competitive advantage in the U.S. market and an increasingly important differentiator as customer and retailer supply chains become more automated. You will see that we have a broad range of initiatives underway, focused on repair consistency and pallet durability. Together, these initiatives are designed to ensure our pallets meet the tighter tolerances required in an automated environment while maintaining pallet performance across customer supply chains and reducing repair intensity over time. I don't propose to go through every initiative, but we are confident we have the right road map to meet our customers' evolving needs. Two particular highlights are the rollout of end-of-line inspections to cover 50% of repaired volumes by the end of FY '28 as well as the adoption of more rigorous quality measures. Looking further ahead, the experience of the past several months has underscored the importance of the investments we are making to move towards a touchless plant through our Service Center of the Future Program. Beyond quality benefits, this has the potential to improve safety and efficiency and reshape how our network operates. During the year, we took the next step in this program by signing a lease for the facility that will be our global automation and technology center. From this dedicated hub, our teams will develop and test technologies with a view to rolling out modular automation solutions in the next 3 years with the potential for a fully touchless plant thereafter. Importantly, we expect to fund these quality initiatives within our existing non-pooling CapEx framework while still targeting to deliver our investor value proposition of total value creation of more than 10% per year over the medium term. Let's now turn to Brambles of the future. During this first year under our new strategy, we have made meaningful progress across each strategic priority. Starting with our customers, we continue to improve their experience by reducing the complexity involved in their interactions with us. Upgrades to the myCHEP portal have now allowed customers to more easily track and manage their queries. Notwithstanding the challenges in the U.S., this focus on the customer experience has seen us continue to increase both our NPS and collection metrics across the group. Next is part of our work to illuminate supply networks. FY '26 saw us continue to develop our portfolio of digital customer solutions towards standardized approaches that support scaling for customers. This includes 2 of our flagship products, end-to-end quality assurance and promo insights, which generate actionable insights for customers to protect product quality through temperature monitoring and to improve promotional execution. We have now expanded DCS pilots in multiple markets with growing retailer engagement and advocacy also helping to identify and convert customers to recurring subscriptions. Turning to operational excellence. We achieved a 10% improvement in our safety performance as measured by lost time injury frequency rate. We are proud of the safety culture we've built, which has driven successive years of improvements and delivered our best-ever safety performance. We also continued to drive operational improvements through network optimization initiatives together with the rollout of standardized operating procedures across our service center network. We are pleased to have made early progress against our 2030 sustainability targets. This included initiating regeneration activities across approximately 10,000 hectares through partnership with Wild Trust in South Africa with the aim to protect and manage 75,000 hectares during our 5-year program. In decarbonization, we remain ahead of the minimum requirements of our 2030 science-based target trajectory. Our Scope 1 and 2 emissions decreased by 5% as a result of ongoing electrification of forklift trucks and fleet vehicles. Scope 3 emissions were 1% higher in FY '26 due to new pallet purchases in the U.S. and increased downstream transport emissions resulting from pallet relocations. Finally, we established a baseline Employee Experience Index score of 87 out of a possible 100; providing a new measure of our progress in strengthening diversity, equity and inclusion across our organization. We'll move now to serialization+, with an update on our rollout in Chile and the work underway to inform our decision on a potential rollout in the U.S. During the year, we reached an important milestone in Chile, with all customers now benefiting from the effortless service offer. This offer has significantly reduced customers' administrative burden, which was reflected in the 9-point increase to our Net Promoter Score in FY '26. In addition to improving the customer experience, we have seen benefits to growth with the effortless service offer contributing to 15 net new customer wins and lane expansions. As the rollout in Chile has matured, serialization+ continues to demonstrate additional sources of value. These include improved visibility of pallet movements, greater insight into network inefficiencies and increased opportunities to monetize pallet reuse and other noncompliant flows. Although we are confident in the multiple sources of value, there are still some key areas we want to understand more fully before deciding on a potential rollout in the U.S. The most important of these is understanding the customer response to dynamic pricing. We're also excited about the opportunities to explore how serialization data can be used to improve network efficiency and customer outcomes, including identifying drivers of higher damage rates, longer dwell times and other cost to serve opportunities across the supply chain. Finally, we continue to focus on reducing the cost of implementation through lower cost tracking technology and improved tagging solutions. We remain on track to communicate a decision on a U.S. rollout in the third quarter of FY '27. Looking ahead to FY '27, we expected to deliver underlying profit growth and strong free cash flow as we resolve our operational challenges in the U.S. during the first half. For the full year, we expect sales revenue growth of 2% to 4% with underlying profit to increase 2% to 6%. Our outlook for cash flow generation before dividends is in the range of USD 800 million to USD 950 million, and we expect our dividend payout ratio to remain within our payout policy of 50% to 70% of underlying profit. Together with the additional USD 400 million on-market share buyback announced in May, we continue to target total value creation of 10% for shareholders, in line with our investor value proposition. I'll now hand over to Joaquin to take you through our financial performance in greater detail.

Thanks, Graham, and good morning, everyone. Starting with the financial highlights on Slide 15. In FY '26, we delivered volume growth, expanded margins and generated strong free cash flow while managing the impact of repair capacity constraints in our U.S. business. We achieved strong net new business growth of 3% and continued to recover input cost inflation through price realization. These, together with productivity improvements and cost management initiatives delivered underlying profit growth of 4% and margin expansion of 0.6 percentage points after the $90 million underlying profit impact associated with U.S. repair capacity constraints. Excluding these impacts, underlying profit increased 11% and margin expansion was 1.8 percentage points. We maintain the structural improvements in asset efficiency achieved in recent years, which supported free cash flow generation of more than $1 billion. As a result, we delivered total value creation of 9% for the year, comprising 6% EPS growth from continuing operations and a 3% dividend yield. Turning now to Slide 16 for the overview of our full year results. I will focus on profit after tax and EPS with revenue and underlying profit covered in the slides that follow. Profit after tax from continuing operations increased 5%, ahead of underlying profit growth of 4% as lower than net finance costs more than offset the impact from higher tax expense and the increased hyperinflation charge. Our underlying effective tax rate of 29.3% is broadly in line with FY '25. EPS growth from continuing operations increased 6%, including a 2 percentage point benefit from the on-market share buybacks completed in FY '26. Finally, our disciplined approach to capital allocation and focus on productivity improvements resulted in ROCE increasing 0.4 percentage points to 22.6%. Moving to Slide 17. Before stepping through revenue and underlying profit in more detail, I want to take a moment to outline the impact of U.S. repair capacity constraints on our underlying profit performance. As noted earlier, the impact of U.S. repair capacity constraints reduced underlying profit growth by 7 percentage points this year, with an underlying profit impact of $90 million. This primarily reflected short-term revenue and costs associated with pallet availability constraints and the actions we have taken to increase pallet availability and increased repair capacity across our network. Starting at the top of the P&L. Revenue impacts reduced ULP by $25 million. This reflected a $45 million reduction in revenue, driven by our inability to fully service customer demand together with an adverse customer mix impact on price realization. From a cost perspective, we incurred an additional $20 million of plant costs associated with the extra shifts, over time and incentives we have introduced to increase temporary repair throughput while we structurally increase repair capacity across the network. Transport costs increased $35 million as we relocated more pallets to access available repair capacity in our network and meet customer demand. These unplanned movements increased our reliance on the spot transport market, which experienced significant inflation in the fourth quarter. Finally, IPEP expense increased by $10 million as pallet scarcity led to higher levels of unauthorized reuse of our pallets in customer and retailer supply chains. This $90 million earnings impact was $30 million higher than the expectations we outlined in our May trading update, in part driven by actions to accelerate customer service improvements including $15 million of additional pallet relocations. Turning to Slide 18, and looking at the incremental year-on-year impact. We expect U.S. repair capacity constraints to have an underlying profit in FY '27. We've separated these impacts into 2 categories. The first relates to short-term costs associated with the actions already underway to increase repair capacity and improve pallet availability. These costs are largely temporary and are expected to unwind as the constraints resolve by the end of the first half. The second category relates to structural increases in supply chain costs reflecting investments we are making to structurally increase capacity and strengthen the resilience of our network. Starting with the short-term costs. We estimate a $10 million to $20 million adverse year-on-year impact to underlying profit in FY '27. In the first half, this impact is expected to be between $70 million to $80 million and primarily driven by the same plant, transport and uncompensated asset loss impact that affected our performance in the fourth quarter of FY '26. We also expect a negative year-on-year revenue impact, reflecting lower volumes and some residual adverse price/mix. As repair constraints resolve, these impacts are expected to reduce progressively through the first half, resulting in an estimated year-on-year benefit of $55 million to $65 million in the second half as we cycle the elevated costs incurred in the fourth quarter of FY '26. This improvement reflects a recovery in volumes and associated customer mix benefit as well as reduced reliance on overtime and additional shifts, lower pallet relocations and spot transport rates and lower IPEP expense as pallet availability improves. Turning to the ongoing investments we are making to build greater resilience into the network. These will see a structural increase in supply chain costs, primarily associated with higher labor rates in response to inflation, additional repair capacity across our network, the specialist resources to manage any potential future disruptions and depreciation on incremental pallet purchases. These costs are expected to reduce FY '27 earnings by $25 million to $35 million with the impact recognized in the first half. From the second half, we expect pricing and efficiency initiatives to fully offset these higher costs, meaning there should be no ongoing earnings impact beyond FY '27. In summary, we expect the total adverse year-on-year UOP impact in FY '27 to be between $35 million to $55 million. Turning now to the FY '26 results and group sales revenue growth performance. Group sales revenue increased 2%, with strong new business growth and price realization, more than offsetting lower like-for-like volumes across the group. Price realization was 1% as pricing increases to recover inflation were partly offset by efficiency benefits shared with customers and the adverse mix impacts from pallet availability challenges caused by U.S. repair constraints. As you'll see throughout the presentation, price realization varied by region, largely due to inflation and benefit sharing with customers in each market. Net new business growth was 3%, driven by the U.S. and European pallet businesses with both delivering 3% volume growth with new customers. Momentum accelerated across the European pallets businesses in the second half of '26, while the U.S. maintained strong new business growth for the year, despite repair capacity constraints limiting our ability to onboard new customers in the fourth quarter. Like-for-like volumes declined 2%, reflecting subdued consumer demand across several key markets and inventory optimization in Australia, partly offset by the benefit of cycling weaker second half 2025 comparatives. In the U.S., repair capacity constraints limited our ability to fully service the temporary spiking custom demand seen in the fourth quarter. Excluding the $45 million revenue impact from pallet availability challenges as a result of U.S. repair capacity constraints, group sales revenue growth would have been 3%. Turning now to Slide 20. Underlying profit increased by 4% and included the $90 million adverse earnings impact from U.S. repair capacity constraints outlined earlier, which is shown separately in the bridge. Excluding this impact, underlying profit increased 11%, reflecting the benefit of overhead restructuring, other cost management initiatives undertaken in the year and operating leverage from sales growth and pricing. Sales revenue growth contributed $156 million to profit, while North American surcharge income increased by $25 million, in line with changes in fuel, transport and lumber market indices. Plant and transport costs collectively increased by $66 million, driven by input cost inflation, higher pallet damage rates in the U.S., increased pallet relocations in EMEA and APAC and incremental investment in quality and digital initiatives. These increases were partly offset by $145 million of savings from network optimization, operational excellence and procurement initiatives. Depreciation increased by $31 million due to pooling equipment purchases and investments in automation and other nonpooling assets. While IPEP increased by $9 million due to higher uncompensated losses and increase in the FIFO unit cost of pallets written off in Europe. Other costs reduced by $40 million, driven by overhead restructuring activity and cost management initiatives. These benefits were partly offset by wage inflation and $21 million of one-off restructuring costs. Finally, central transformation costs decreased by $33 million reflecting the benefit of research and development incentives and the capitalization of serialization+ equipment following increased confidence in the scalability of the technology and the commercial model. Turning to margin performance on Slide 21. As shown on this slide, we continue to make strong progress towards our FY '28 margin improvement target with margin expansion of 0.6 percentage points in FY '26 or 1.9 percentage points compared to the FY '24 baseline. Excluding the impact of the U.S. repair capacity constraints, margin expansion would have been 3.1 percentage points versus FY '24. Progress has been driven by overhead productivity and asset efficiency with supply chain productivity, representing the largest opportunity for margin improvement. Supply chain productivity, as measured by the group's net plant and transport cost to sales ratio has decreased margins by 1.3 percentage points since FY '24, with the decline primarily reflecting the increased costs associated with U.S. repair constraints. Moving forward, we have a number of initiatives to drive efficiencies within our supply chain operations including the use of data, AI and insights from our digital assets to improve demand planning, collection processes and capacity management throughout our network. We will continue to drive automation, pallet durability and procurement initiatives, and we also expect to see reduced inefficiencies in FY '28 from a reduction in excess plant stock in the U.S. Moving on to overhead productivity, which has provided 2.1 percentage points of margin expansion versus FY '24 due to the benefits from streamlining operations, process improvements enabled by technology and the FY '26 restructuring program. Lastly, asset efficiency initiatives contributed 1.1 percentage points of margin expansion versus FY '24 through a range of sustained structural improvements including enhanced data analytics and improved pallet visibility enabled by our digital capabilities. Turning to Slide 22, our 2 key measures of asset efficiency, the group pooling capital expenditure to sales ratio and IPEP to sales ratio continue to demonstrate the strength of our asset control initiatives and the sustained reduction in capital intensity over the past few years. The pooling capital expenditures to sales ratio increased by 0.6 percentage points to 12.9% in FY '26, well below historical averages. This was driven by the increased weighted average cost of a new pallet and 1.4 million additional pallet purchases, both largely reflecting the fourth quarter pallet purchases in the U.S. During the fourth quarter, the U.S. business also utilized 0.6 million excess pallets held in storage, which resulted in a capital expenditure holiday of $20 million. Excluding this, FY '26 pooling CapEx to sales would have been 13.2%. We have conducted audits of the remaining 3.4 million excess pallets held in storage and confirmed they are suitable for repair and reuse within the network when required. The FY '26 IPEP to sales ratio of 1.7% was a 0.3 percentage point increase on the FY '25 ratio, due to higher uncompensated losses in the U.S. and Europe. However, it remains well below historical averages, reflecting the sustained improvements we have made in asset productivity and the recovery of our assets. The result includes the impact of a higher FIFO unit cost of pallets written off in Europe and a $10 million impact from higher unauthorized reuse due to pallet availability challenges in the U.S. Moving to our cash flow performance on Slide 23. Pleasingly, we delivered free cash flow before dividends of over $1 billion for the second consecutive year, which highlights the progress we have made in structurally improving the capital intensity of our business. During the period, earnings growth and favorable working capital movements were more than offset by a $165 million increase in cash capital expenditure, a $61 million increase in net financing and tax payments, largely reflecting higher tax payments in line with earnings growth, and a $62 million adverse movement in other cash flow items, primarily reflecting changes in employee benefits provisions and increased technology investment. Turning now to Slide 24. Let's look at the segment performance, starting with CHEP Americas. Revenue increased 2%, with balanced contributions from price and volume. Price realization of 1% was driven by Latin America and Canada. U.S. price realization was flat as inflation recovery was offset by sharing efficiency improvements with customers and the adverse mix impacts from repair capacity constraints. Volume growth was 1% and included a 3% increase in net new business, partly offset by a 2% decline in like-for-like volumes, reflecting lower consumer demand in the U.S. and Latin America as well as the impact of U.S. repair capacity constraints in the fourth quarter. Margins reduced by 0.2 percentage points, largely driven by the short-term underlying profit impact in the U.S. as discussed earlier. Adjusting for these, margins improved by 2 percentage points, driven by a range of productivity benefits across supply chain and overheads, which more than offset additional costs from higher damage rates in the U.S. and the continued investment in poor quality and digital initiatives to enhance the customer experience across the region. Excluding U.S. repair capacity constraints, ROCE improved 2 percentage points due to underlying profit growth, partly offset by a 3% increase in average capital invested, reflecting pallet purchases in the region, investment in service center automation and higher lease service center assets. Turning to CHEP EMEA, where we reported strong net new business momentum while ROCE and margins were impacted by short-term supply chain headwinds. Revenue increased 2% with equal contributions from price and volume. Pleasingly, net new business wins increased 2%, driven by the European pallets business, where new business growth increased to 4% in the fourth quarter giving us strong momentum into FY '27. Growth in the region was partly offset by net contract losses in the South African pallets business and a contract loss in the automotive business. Like-for-like volumes decreased 1% due to lower consumer demand across the automotive business and the pallets businesses in Europe and South Africa. Margins declined by 0.6 percentage points as productivity initiatives were more than offset by short-term supply chain headwinds, including higher relocation costs and inefficiencies associated with lower volumes in the South African pallets business as well as higher IPEP expense in Europe. Return on capital invested decreased 0.8 percentage points, reflecting a 2% increase in average capital invested as underlying profit remained in line with the prior year. Moving to CHEP Asia Pacific, where revenue increased 3%, reflecting price realization of 4%, offset by a 1% decline in volumes. Volume performance was driven by a 3% decline in like-for-like volumes, reflecting a lower average number of pallets on hire due to inventory optimization at retailers and manufacturers in Australia. This was partly offset by contract wins across the region. Underlying profit margin improved by 1.8 percentage points as benefits from supply chain and overhead productivity initiatives were partly offset by investments to enhance customer service and quality as well as increased repair, handling and relocation costs associated with inventory optimization by retailers and manufacturers. ROCE increased 2.9 percentage points, reflecting profit growth as ACI remained in line with FY '25. Moving to the Corporate segment on Slide 27, where central transformation costs decreased by $33 million. As I mentioned earlier, this was primarily driven by the incremental benefit from research and development incentives and the capitalization of serialization+ equipment following increased confidence in the scalability of the technology, equipment and commercial model. Other corporate costs decreased $11 million due to restructuring benefits and a range of cost management initiatives, which more than offset wage inflation and one-off restructuring costs. Turning to our FY '27 outlook considerations on Slide 28. We expect sales revenue growth of between 2% and 4%, including equal contributions from price and volume with growth expected to be weighted to the second half due to the impact of U.S. repair capacity constraints. Continued momentum is expected in net new wins in Europe, while U.S. net new business growth is likely to be slightly below FY '26 levels. Like-for-like volumes are expected to be broadly flat subject to consumer demand trends. Underlying profit is expected to grow between 2% to 6%, with efficiencies expected to offset the impact of U.S. repair capacity constraints and continued investment in strategic initiatives. We expect a mid- to high-single-digit profit decline in the first half, followed by low double-digit growth in the second half. A modest improvement in the underlying profit margin is expected versus FY '26 with improvement in EMEA, a modest decline in APAC and broadly flat margins in the Americas despite a $35 million to $55 million adverse year-on-year impact from U.S. repair capacity constraints. The plant and transport cost ratio is expected to be broadly flat to slightly unfavorable with an elevated cost ratio in the first half, offset by improvements in the second half, reflecting costs associated with U.S. repair capacity constraints, largely offset by supply chain productivity benefits. We expect a modest improvement in the IPEP sales ratio from ongoing asset control initiatives. Lastly, overhead and other costs as a percentage of sales is expected to be broadly in line with FY '26 with labor inflation, higher depreciation and strategic investments, offset by productivity initiatives including a net $40 million benefit from the FY '26 restructuring program. Moving to Slide 29. In FY '27, we expect free cash flow before dividends of $800 million to $950 million, with a pooling CapEx to sales ratio of between 13% to 15%. Higher pooling CapEx reflects increased pallet prices and additional pallet purchases to support growth and address U.S. repair capacity constraints, partly offset by asset productivity benefits. FY '27 cash outflows include $40 million relating to pallets purchased in the fourth quarter of '26 and $60 million for an additional 2 million pallets expected to be purchased in 1H '27. These investments support the resolution of customer impacts from U.S. repair capacity constraints. Nonpooling capital expenditure is expected to be between $350 million and $400 million including accelerated investment in supply chain initiatives, such as end-of-line quality control and automated digital inspection. Digital CapEx is expected to be $120 million including $110 million of spend on serialization+, with spend weighted to the second half given the expected timing of the North America rollout decision. We also expect net finance costs to increase by $30 million and dividend franking to reduce to 15% from the current 20%. In summary, in FY '26, we delivered earnings growth, margin expansion and strong free cash flow generation in a challenging operating environment. We achieved strong new business growth across the group, while efficiency initiatives helped to offset the short-term earnings impact of the U.S. repair capacity challenges. Strong free cash flow generation enabled us to continue investing in the future of the business, while returning $1.2 billion to shareholders through dividends and share buybacks. Looking ahead to FY '27, our focus remains on resolving the U.S. repair capacity challenges, building greater resilience in our network and delivering further efficiency benefits across the group. We expect these actions to support underlying profit growth, further progress towards our FY '28 margin target and sustainable free cash flow generation while maintaining investment in our strategic priorities. I will now hand over to the operator for Q&A.

[Operator Instructions] Your first question comes from Niraj Shah with Goldman Sachs.

Just a couple for me. Firstly, can you help us quantify how much your repair capacity was kind of reduced by versus normal in the fourth quarter and also the magnitude of demand uplift that you guys saw?

Niraj, thanks for the questions. In terms of your question, the first one was around quantifying the impact on repair capacity.

Yes, in the U.S.

In the U.S. Obviously, varies by region, but we gave a guide of somewhere between, let's say, 5% to 10% was the impact on repair capacity. And then the magnitude of demand was your question again vary significantly by region. But again, what we said was that we saw a significant lift versus what we'd already forecast. So obviously, in some areas, we saw high single digits demand growth, if that helps.

That does. And secondly, just keen to get an understanding of what gives you, I guess, confidence in being able to offset those structural costs from fiscal '27. And holding on to the productivity benefits just given how subdued the end demand backdrop is currently?

Yes. I mean I think, Niraj, one of the things here is I think it's very clear that we recognize that to the extent this is self-inflicted, we have to eat it. But to the extent this is now structural costs, which initially when we talked back in May, no one believed us that there were big problems with labor availability in the U.S., but now more and more people are recognizing that this is not just a Brambles issue. I think that lends -- gives some confidence that it will be part of the normal inflationary related cost to serve increases, which we've had, I think, several years, if not many years now, of structurally being able to recover that through our contracts. So I think that what gives us confidence. So it is a general issue, which everyone is going to have to address. But I think specifically, we have got very clear plans with the U.S. team around how do we go about both the pricing element of offsetting the cost but also the productivity piece. This is not just about going to customers and getting it all through pricing. We have got to be very clear about the productivity plans. And of course, as you would expect, we have a lot of detailed plans with milestones and resources against that to ensure that we attack both bits of that solution.

Your next question comes from Samuel Seow with Citi.

I just want to ask on the underlying EBIT growth you're expecting in your business, excluding the repair costs. It looks like in FY '27, if I adjust out those supply costs you're expecting ULP growth around 4% to 5%. I just want to know -- is that correct? And then two, it appears slightly lower than the value proposition, I guess, is that a function of lower like-for-likes or just any additional color there, please?

Yes. Sam, just coming back to your first point, the way I look at it is we've guided underlying profit growth of between 2% to 6%. And then if you look at the total year-on-year impact in FY '27 of U.S. repair capacity -- repair constraints, that's $35 million to $55 million. So I'll be adding that back to the number. Does that help you?

Got it. Yes, yes, that's helpful. And then maybe and the like-for-likes. I mean, as it relates to your repair capacity constraints, counterintuitively almost, do you actually want a soft double or declining like-for-like environment to help you with the recovery? And any just -- and maybe just any color on the environment that will help with the repair recovery. And anything that you don't want to see per se, like the spike in demand.

Yes. So I think I'd go back to what we said around the Q4 environment, which is we already were planning for an increase in like-for-likes, and we had this additional spike on top driven by things like the World Cup and the 250th 4th of July celebration. So we don't need the like-for-like to be any softer than we currently think they're going to be. And if you look at what everyone is saying, Nielsen have come out fairly recently with what's going on in the U.S., it is pretty soft still, but that's what we were planning for. We don't need it to be softer because we have got the plans already to now to recover the capacity point -- part of the issue by the time we get to December. And I don't think I would prefer stronger like-for-likes to be honest, because that's what drives our business. So I don't think we need any additional help from what we've already planned for.

Your next question comes from Andre Fromyhr with UBS.

Just following up on the costs associated with the repair constraints. What can -- I appreciate the disclosure splitting out short-term impacts and structural costs. Am I right in understanding because the numbers are quoted as year-on-year, but and the improvement in the second half, not fully recovering the $90 million that you've just recorded in second half '26 that there's also sort of a $30-odd million run rate second half or like a, let's say, a full year run rate of about $60 million of structural costs expected?

Yes. So Andre, let me just have a go and see I can cover that. So you're right in terms of what the second half '27 short-term cost you will pay, what we're saying the benefit is $55 million to $65 million and you're right, we don't fully reverse the $90 million that we incurred in FY '26. Part of that is because, obviously, the volume impact takes time to recover. So it's not a like-for-like. So you can see we said the price volume impact on earnings is $25 million in FY '26. And then we're saying in the second half, it's a $10 million benefit. And so that's because, obviously, it's about building relationships with customers again and converting those customers or lanes back to us. And then what we've tried to be clear on is that at the end of the first half '27, essentially, there are no more short-term costs. And then there are the structural costs or investments, and that ends up being $25 million to $35 million that we don't cover in the first half. But then as we go forward, so from the second half onwards, as Graham just outlined, we recovered those through other productivity initiatives and through price realization.

Okay. So the -- what's reflected there is sort of net expectation after things like pricing recovery and the cost efficiencies as well, which, of course, will full year impacts than once you get into '28?

Exactly. So the way I would think about it is, essentially, you have the half 1 '27 and full year impact. And then in FY '28, you're back to sort of business as normal.

Okay. Cool. And then just another one about the nonpooling CapEx budget for FY '27. It's quite a step-up from the run rate that we've seen in previous years. And I understand there might be heightened urgency to get the automation equipment rolled out given the circumstances of the U.S. operations. But how much risk is there to the timing of getting the equipment and deployment that you want on those initiatives? And then, I guess, related is $110 million S+, just a very firm signal that you're leaning towards proceeding with that initiative?

So thanks again, Andre. I think that's a good point that I just wanted to make sure everyone was clear on while you do see that step up in nonpooling CapEx. There is that step up in digital that you talked about of that $110 million for serialization. So you sort of have to adjust the numbers when you think about run rate, I would adjust it by that $110 million because as we gave that range of $200 million to $300 million, that was before spend on S+. So that brings us back to a more normalized level. I think if you adjust for that, you're running at about $240 million of non-high stock. And then your question, I think, then was followed about the risk of timing of automation end of line those pieces of equipment that we're putting in. Look, we have a really detailed plan. The team have done a good job of delivering against that plan more at times what may change is the timing of payments at some point with suppliers, et cetera, et cetera. So we would like to spend all of that non-high stock CapEx, let me be clear because what we're trying to do is set the business up for the long term.

Your next question comes from Owen Birrell with RBC.

I just wanted to, I guess, follow up on Sam's question around the, I guess, the underlying operating leverage ex the service center issues. You're guiding sales of 2% to 4%. You had a 1 percentage point impact in FY '26. So let's assume that happens again in '27. So we have underlying sales of 3% to 5%. Your EBIT guide is 2% to 6%. Adjusting for the net impact that you referred to there we should be getting somewhere between 5% and 9%. But as you just highlighted for '26, you had 11% EBIT growth on an underlying basis. So it looks like there's, call it, 2%, 3% or 4% delta on your operating leverage in '27 on '26. Can I just ask, is the vast majority of that an inability to reclaim that structural cost impact that you've referred to, I think it's $25 million to $35 million additional cost in '27?

Look, for me, it's more about -- obviously, as we've been restoring service levels in the U.S., it impacts, for example, your ability to chase new business. So as we pointed out, we expect sort of U.S. net new wins to be lower in FY '27 than they were in FY '26 because essentially, we're not converting new business until the second half, if that helps. And then also when you think about supply chain and efficiency initiatives, obviously, the focus in the U.S. is against restoring service levels. And so some of those efficiency initiatives will take longer to execute than we had originally planned.

There's very much a volume issue in terms of that like-for-like coming backwards.

That I think in terms of like-for-like, that's based on what we think consumer demand will look like in the market. And that's what we've tried to be really clear on the ranges is to say this is a range based on consumer demand, so people can make their own decisions around that. And also inflation obviously impacts pricing depending on how you consider that. So I mean that's how I'd more think about the comparison year-on-year, if that's okay.

Okay. And then just in terms of, I guess, what you saw in the fourth quarter on that consumer demand issue. You've mentioned that like-for-like volumes in FY '27 was down 2%, you saw underlying -- subdued underlying consumer demand. But then you also talk about peak demand from U.S. customers in the fourth quarter. Just trying to marry up those comments. Was that fourth quarter just a one-off pull forward of demand that you're effectively going to have to cycle as you roll through into FY '27?

Yes, it's really driven by those big consumption events, which won't repeat next year, I suspect, i.e., the World Cup. And the fact that because the 4th July of this year was for the 250th anniversary, it was almost a weeklong celebration rather than a day or two. So that's what we -- and whilst we were obviously knew about the World Cup, it does happen every 4 years, and we knew it was in the U.S., and we planned for an increase based on the forecast we're getting from customers. The actual demand was much higher, but it was in certain customers, certain segments, wasn't across the board in the U.S. So next year, depending on what happens to the economy generally and consumption generally, which hopefully will be better than it was in '26, but you never know. The actual -- those specific events won't repeat, so you will be having to cycle them. But remember, we didn't actually fulfill all of that spike in the first place. So hopefully, the cycling impact will not be as great as it would have been if we'd actually met all the sales.

Understood. Just 1 last question for me. I guess on that -- those structural cost impacts that you're sort of guiding to for '27. I just look into the appendixes, the plant costs in the U.S. have incrementally stepped up. I'm just wondering if you can give us a sense of where you think those plant costs should land in '27 as a ratio of sales given this additional structural cost. How much of that is going to be net offset by productivity? Or should we just be assuming that at the moment?

So in terms of when the outlook considerations, what we've talked about, that's Slide 28, is that we expect net plant and transport cost ratio to be broadly flat or slightly deteriorate in FY '27, but obviously that includes the impact of U.S. repair capacity constraint. So essentially, what I do -- that's why we tried to break it out as plant and transport for you. So if you want to see the underlying, I would add those costs back.

Your next question comes from Jakob Cakarnis with Jarden.

Just going to start on Slide 19 with the group sales growth, if I could, please. Just the half-on-half momentum, it looks like the price you had in the first half up to -- and then the implied price mix in the second half was flat, so 0 to get to the 1% that's on the slide. Can you just help me understand what dynamic has gone on there at the group level, please?

Yes. So again, 1 of the things is price realization is around, I guess, recovery of cost to serve, taking away what I would say is the short-term costs that we feel we're not recoverable from customers. I think the other thing that I would think about is obviously in our pricing surcharges in the U.S. are not included in that price realization. So I think I wouldn't quite look at it as that being the only way that we've recovered cost to serve increases in the market.

Just to carry that logic on though, you're getting us to think in the second half of '27 that there's some recovery mechanisms available. I'm just wondering how that plays through, given that profile that we've seen through FY '26?

How I think about this, Jakob, is that we're very disciplined about recovering that cost to serve. So if I give you a different example, but you think about the spike that happened in or the increase in fuel cost that's happened, where our recovery mechanisms weren't going to recover at all. So that's in Europe and Latin America, we put in fuel surcharges or the equivalent of that to recover. So I think the team are very clear where it's a structural increase in costs, then we will recover that cost to serve in the pricing mechanisms or other mechanisms that we have available.

Okay. And then just a second one. Slide 21. I read it as though still committing to the 300 points of margin expansion relative to FY '24 by FY '28. But you've told us that FY '27, you're going to have modest underlying expansion. So you're starting from $190 million, call it relative to '24 by FY '26 base and then modest next year. How do we reconcile the kind of $50 million to $100 million that you need to do in FY '28. And I guess, in a challenging environment for everyone from your customers to yourselves. How do we think about the ability to realize that? Is that more from internal rather than external mechanisms, please?

Yes. A couple of things I would say there, Jakob. I think the first point is, I think of the starting point as being the underlying performance business. So obviously, the $1.9 million you quoted is impacted by the U.S. fourth quarter and those costs coming into FY '27. So if you think of underlying at the end of FY '26, we're running at 3.1, right? And we did say 3 points plus. And then as I look at that opportunity, that first sort of supply chain productivity, if you adjusted that for the impact of U.S. repair capacity would essentially be flat over 2 years. So we haven't made any margin improvement there. So that's the opportunity area also things, for example, we're still storing excess pallets in the U.S. So we'll work our way through that, which will give us a tailwind into FY '28. And then obviously, there's still opportunity in overhead productivity and asset efficiency. So I think the easiest way to look at this is to look at underlying as opposed to taking sort of the headline number.

I appreciate that. But the U.S. has happened, and it's in the company's earnings now. So I guess what it could have been -- but I'm just trying to reconcile how will all bridge to FY '29? Obviously, you've said [ $300 million ] plus, I think some others are reflecting that. So yes, I get that what you're saying is that it's a one-off, but there are now structural changes that you guys are flagging that we wouldn't have foreseen when this was issued. So I'm just trying to bridge the 2.

But I think I'd separate it a little bit because it's not like we're trying to help people read through. It's not that we're excluding an event that doesn't reverse in terms of sort of costs. And then as per the answers on a couple of other questions, those structural costs we're saying we will recover in the second half and onwards. So look, I think you're right, Jakob, everyone confirm their own view. What we're trying to do is put the numbers and our assumptions out there. but recognize that people may have a different view on that.

Your next question comes from Anthony Moulder with Jefferies.

If I can go back to that pricing recovery that of the -- would have reduced the 25% to 35%, how much of that is price you're expecting to recover through second half '27, please?

Anthony, how I would look at that is -- and I think Graham touched on this earlier. Our first priority is to drive efficiencies within the business to offset that. And then obviously, then the -- where we can't, then that flows through to pricing to customers, right? But I think what our customers would expect us to do is to look for efficiencies in our own business first.

Sure. It sounds like you could open contracts. You don't have to wait like COVID over 3 years. You can push through pricing increases for these structural costs in a shorter time frame. Is that what we're hearing.

I mean, I think, Anthony, what I would say is the fact that labor inflation is an issue for everybody, every business sector in the U.S. implies that it might be a bit easier to do than it just being a Bramble specific problem. So I think that would be my take on it.

Yes. If I switch to the corporate costs that were down. It looks like it's capitalized some OpEx going forward. So how have you come to that decision because it doesn't look like that was part of the guidance that you gave even back in May for that kind of a reduction in corporate costs through FY '26. Just help me understand is at what point you came to the decision to capitalize some of their OpEx, please?

Yes. So just so I'm clear, Anthony, a couple of things. So firstly, in the corporate segment from corporate costs, there was an $11 million roughly decrease, and that's due to the restructuring program that we did in cost management. Then I think what you're referring to here is essentially the digital transformation costs, and it's a couple of items. One is there are research and development incentives that we get for the work we do in digital. So that's included. And then we had, as you'd expect us to do to be conservative on where we're testing equipment related to serialization+, our philosophy has been that we will take the provision against that until we are comfortable that the equipment has a useful life and that we're actually going to execute it. And as Graham touched on, we've had very encouraging signs both from the Chile S+ rollout. And then we've been testing equipment in the U.S., and we're comfortable now that, that equipment will either use for S+ or we can use it for other areas of our business. But I think look, it looks like a large quantum, I think about it differently because in a way, you take a provision, let's say, last year and you -- and then if you release it this year, you've almost got to halve that number, Anthony, so it's not like it was a huge capitalization that we then release.

Right. But when -- I guess the question is, when did you come to that decision? It looks like it's clearly post the 18th of May.

I think a couple of things to note. One is that if you look at the first half of FY '26, we already had research and development incentives. And we had also released the S+ in Chile equipment provision that we've taken. So it's not like it was a reaction to -- it's just progressively like you'd expect us to do. We review our provisions every half.

Okay. And lastly, if I can, on overhead. It looks like overhead was scaled higher through second half of '26 as well if I'm reading this correctly, it looks like you haven't changed the quantum of overhead reduction expected through '27. Is that how I should think about overhead?

No. I think all we might need to line numbers here, but from what I can see, we slightly overdelivered on our restructuring benefits in the full year. So as you think about FY '27, there is a $40 million benefit from restructuring initiatives, which is what we committed to at the start of FY '26.

Yes. So that's no change, I guess, is the 1 you've dragged higher provisions or higher overhead reductions through to make the FY '26 numbers.

No, that's not how I think about it, Anthony, what I'd say is we've done the restructuring initiative and the benefits are being delivered. But what we have done is we've taken the cost of restructuring above the line, essentially, right? So that's how you get to the $40 million. And then we've covered the R&D and the serialization+ in the earlier reply. But I think this isn't a case of -- sorry, let me just reply a little bit more there, Anthony. I think you can see that we are doing the right thing for the business. So if this was about protecting earnings, we wouldn't be making the investments that we're making in the U.S. business, right? So priority #1 is our customers, and then the results will be what the short term, it's about making sure that we're setting the business up for long-term success.

Yes. Lastly, if I could then on EMEA, a bit of a weaker result, but I appreciate parts of the continent are not performing and even the U.K. not performing as well, you've lost the -- or push the head of the U.K. business out. How do you think about EMEA through '27, the growth that you're expecting through that business, please? Pretty important business from a margin perspective and growth?

So Anthony, on the EMEA result, a challenging environment, as you've said, Also, as we talked about in the May trading update, again, changes in volume demand have impacted relocation costs and also changes in volume have impacted sort of fixed cost recovery within supply chain. So we've had some supply chain headwinds. And then also in terms of asset productivity, we had higher uncompensated losses in Europe and also an increase in FIFO. So when we're thinking about both of those, as we're building our FY '27 plan, there are 2 key areas that we're tackling. So we've put in additional asset productivity measures in, and we've upweighted our supply chain efficiencies.

Your next question comes from Lee Power with JPMorgan.

How should we take the mix of subcontractor versus internalized repair capacity going forward? It looks like I think about what you said you'll roll out to '28, it's kind of like a 50-50 split versus what you've been doing kind of 85% subcontract currently? And just your view? And does that make it kind of easier or harder from a cost perspective to kind of manage given the labor issues don't seem like they're going away from an inflation point.

I mean, I think they're trying to come up with the -- what's the optimum mix between subcontracted and in-house is quite tricky. Clearly, I would say what we've learned over the last 3 or 4 months is that we need to develop more of a partnership approach with some of the subcontractors so that we are jointly investing in capability to ensure we're consistently delivering the repair quality. So it doesn't really matter whether it's in-house or ex or subcontracted at that point. It also -- one of the other lessons we've learned in the U.S. is that we do need to ensure that the capacity is not concentrated with certain groups of subcontractors in certain regions. So one of the objectives over the next couple of years is to sort of dilute that concentration effect, but some of our subcontracted plants are performing as highly as our own one. So I think it's more about where do you want the ability to variabilize the cost a little bit more and have that flexibility, but I think going forward, I think I would look at the development of what we might do around touchless repair capacity. So this plant for the future, service center of the future, we've been talking about when you start developing those, clearly, with a lot of technology and it's a lot of IP in it, you can more like to have those as being in-house plants. And to get the scale benefits, they will handle much higher percentage of the repair capacity. So I suspect, over time, you'll see the 80-odd percent coming down, but I have no idea what it will come down to whether it's 50%, 60%, 40%. It doesn't really matter as long as we're getting consistent performance out of both the subcontracted plants and the in-house plants. And again, to the point about the labor costs, over time, what we're trying to do is reduce the percentage of the cost base, which is driven by labor and have it more driven by things like automation and robotics. So that's the sort of direction of travel.

Okay. And then Slide 7. So 35% of the fulfillment improvement and lower demand. I take your comments earlier, but it's still -- it would be good to get any additional color in what you've actually seen in your business from a demand perspective in July and August? Because it feels like everyone saw a little bit of a bump, but we get very mixed commentary around whether that's continued to FY '27, regardless of what the Nielsen data says it like what have you actually kind of seen you today in your business? And how has that progression kind of looked?

Well, I think we've seen what we thought we might see when we talked back in May, which is that demand was going to normalize, and it is quite mixed between categories. So you've got to think a little bit about the fresh produce season, which is peak time in sort of mid of the summer in the U.S., which is now, of course, dropping off a little bit. The beverages were definitely impacted by the World Cup and now -- we've have now normalized. But then against that, you've got to start looking at what's the underlying macroeconomic direction in the U.S., which appears to be getting slightly better, but it's not really dropping into the consumption numbers yet, and that's what Nielsen is showing. And -- but again, even if at Nielsen, you've got to look so carefully across the categories and even within the categories, the drinks companies, they were very different performance between the big beverage companies. So it's hard to give you a definitive answer, but our view is that consumption has definitely normalized. And the big question is, well, what's it going to do going forward in terms of the macroeconomics.

Okay. And then just one more, if I can. The S+ side, like it feels like going from, I think, Andre's comment earlier, it feels like your you're more likely than not to push out regardless of the pricing piece. What does that actually get you? Like what do we assume if we've got that in '27 like what's a sensible assumption in '28? And do we run a similar non-pooling CapEx number into '28 regardless of your longer-term numbers guidance unchanged?

Let me do the what do you get bit first and we'll let backing do the '28 impact. So I think the first thing to say is we are going to stick to our communication around the fact that we will make a decision about the rollout in February or March next year because there are still things we want to check out. But the reason that we can still be confident about the investment is that we know that even if we don't roll out S+ in the U.S., the equipment and the smart pallets that we would use, we get value from using them anyway. So we're going to -- we put those into the system and get value back. The only other sort of high-level thing I would say is we've been very consistent in saying we expect a 5-year payback from those sorts of investments, and we would still stick with that from what we've seen so far in Chile. So Joaquin do you want to do a bit more of the '28?

Yes. And I think it was something we talked a little bit about internally. The reason we've given you a serialization+ sort of CapEx number for FY '27 is should we decide to roll out, we didn't want to take you by surprise, right? So to have a major change in our cash flow forecast. So that's why we have included it. And then as you think about it, if or as part of making that decision, we will take you through the detail in terms of what are the returns we expect, what are the timing of those returns, et cetera. So I would treat the investment more as a placeholder in the numbers at this stage.

Your next question comes from Scott Ryall with Rimor Equity Research.

Just a real quick question on the corporate costs. And I'm only talking to corporate, not the transformation costs here. Do you think they can go down much further?

Scott, I think the way I think about it more is looking at our sort of overhead cost across the business rather than a specific element. I think what we work through is what's best done locally, what's best done centrally. So I would look at it more in totality than just the transformation costs as a one item. And then in general, do I think there is more productivity that the business can grow without adding the same level of overheads at the same rate? I think that's an opportunity for us.

Okay. I'll take that as a half answer. Then Graham, on -- first of all, I think it's great that the STI mechanisms recognized the issues in North America in particular. So that was really good. My question is actually on the LTI and the change in structure going forward. Can you just -- you talked in the presentation in so many years that the value creation framework and targeting the -- well, having a 10% plus as your kind of threshold. So I read the new LTI structure as management will only earn a relatively small proportion of the LTI is you deliver 10% of the threshold. But actually, you really get incentivized when you get to 14% of the target or 17% is your maximum. And do you want to talk about that a little bit more in the context of why the changes are made, please?

Yes, sure. So as we've discussed over the years, I think the LTI being split between TSR or RTSR, and then this grid between sales revenue growth and ROCE was potentially incentivizing people to do the wrong thing in terms of maximizing the ROCE when in fact, we should have been reinvesting in the business. So that was the sort of the background to it and recognizing also that I personally don't believe that revenue growth drives the share price. I believe that cash flow generation and how you distribute it back to shareholders, drives the share price. So if we're looking to align long-term incentives with the experience of our shareholders, then we -- clearly, I think given that we've told the shareholders that we are committed to delivering 10% plus year in total value. We needed to change the structure of the LTI. So that's one good thing. I think the things that we've also tried to manage because there have been varying comments about this is, one, we haven't dropped any measure of sales growth in the incentive structure. It comes back into the STI structure. So there's still incentive around that split between total revenue growth and net new business win growth. So that's covered that bit. And there's also a floor on the LTI paying out related to ROCE. So we haven't kind of given up on having to keep the ROCE at a high level as well. So then you go back to your point, which is it's around this total value creation, and it is very much skewed towards out delivery at the upper end rather than just hitting 10%. And again, I think that's appropriate because we're also asking for the opportunity to go up as well. And I think we should be getting paid more if we deliver exceptional amounts. And that's how we've tried to structure it.

Yes. Okay. Great. And just for confirmation, if the 20% ROCE to underpin, right?

Yes, yes.

Your next question comes from Cameron McDonald with E&P.

Just wanted to unpick the revenue impact of the pallet availability issues. So the $25 million impact in that fourth quarter, if I look at how many -- and then put that forward, annualized, it's $100 million run rate, you're making about $25 million -- $25 an issue in the U.S. per pallet per year. So for the full year, it's 4 million pallets, but you've got turns. So you're looking -- it looks to me as if you're somewhere between 1.5 million to 1 million pallets sort of shortfall. Is that math correct? And then how does that relate back to the pallet purchases that you've announced?

So just a couple of comments, Cameron, to make sure we're just aligned here. So what I would say is that $25 million includes both volume and price. So we've talked about it's an adverse customer mix. So I wouldn't relate at all to volume, which I think is how I heard your maths, if that helped.

Okay. Well, that did make the pallet shortage even less if it's got prices -- price attached to that as well.

Yes, yes.

So what I'm trying to get to is if you only short of 1 million pallets, why are you buying through?

So I think a couple of things that I would think about there is, one, obviously, we're continuing to do improve the consistency of repairs across the network, so making sure we have capacity as we do that. We're obviously transitioning some contractors or some subcos. And then obviously, we're looking to set ourselves up for growth as soon as we can. So it's a combination of all those elements that I would think about.

Yes, but that's the point of the question is so break that back down, how many pallets do you need to purchase just because of the availability issue that you highlighted in May not to invest in further growth, not for anything else, just that particular issue.

So I guess how I'd look at it is we've said we bought 1.3 million issues in the quarter or pallets that we purchased, they paid for in FY '27. And you can see that we've not shorted any customers essentially. So we've not missed any customer orders. And then we've given a forecast for the first half of '27, which is 2 million pallets. So that tells you we're using those pallets to service demand and make sure that also as we improve repair consistency and we transition that we have enough buffer stock to make sure that we continue to service our customers.

Okay. That's where I was somewhat hitting, right? So yes. But the 2 -- no, that was good. I mean the $2 million is effectively additional pallets that you -- but is not specifically tied to that pallet availability issue that you've tried to solve. So that's fine. Just -- and then just on that back in -- the back in the May number and sort of going back to the -- particularly the guidance that you've given around this. The initial guidance was $60 million. You've missed that by 50%. That's 8 weeks ago before not even 6 weeks to the end of the financial year. Why aren't you going to be 50% out on the full year basis in '27 when that's looking forward 12 months?

Yes. I think about that a little differently. So if you think about that made trading update, we had not expected to not be shorting customers at this point in time. So what we were able to do was invest faster to resolve the issue for customers, and that's why essentially we've spent that additional $30 million. There is a portion of that we did not foresee, which was the increased losses as pallet availability has become more challenging. Recyclers, et cetera, it's been more difficult to get pallets back. But I would say, obviously, the bulk of that $30 million relates to resolving the issue faster for customers. It's not our forecasting era for one of a better word.

Your next question comes from Matt Ryan with Barrenjoey.

Just look at Slide 18, down the bottom, you've got the total year-on-year profit impact from capacity constraints of $35 million to $55 million. Are these the 2 numbers that you're putting into your guidance of 2% to 6% of the group, so the $35 million and the $55 million goes into that range?

Yes, that's right, Matt.

Okay. So I guess the midpoint of that would be, I don't know, a little bit over 1% to EBIT. So in effect, I guess, 3 out of the 4 points of your range does not relate to the capacity issues. Just interested in your thoughts on the moving parts there and the like-for-like volumes, sort of the biggest area of uncertainty? Or maybe you could just talk a little bit about how you sort of the high and the low end of the range playing out?

Yes. So just to make sure, if I don't answer your question, Matt, then just let me know. But in terms of thinking of the variance in the range, I guess the first key factor that we think about is consumer demand. Obviously, very variable, as we've talked about, various views of what's going to happen to that. So we wanted to make sure people understood that's a cornerstone of sales revenue, that range as we talked about, and also inflation. So we recover cost to serve increases if inflation varies, then our price realization varies. And then obviously, you have a sort of wider spread of both of those items when you think about profit because of 1 point of revenue is roughly $70 million, whereas 1 point of profit is roughly $14 million. Does that kind of answer?

Yes. So I mean a lot of it does come back to that sort of like-for-like inflation.

Exactly.

Rather than pricing and new business wins and things like that. And then obviously, getting FY '28 guidance, but you said that these issues are sort of resolved. So I guess the most important number of most of our models is that plant cost to sales ratio. I think you've sort of said that you've had improvement with the relocations, so maybe we sort of put the transport cost to one side. Are we sort of to, I guess, summarize your mitigation of these issues to say that you're back into that historical range of plant cost of sales ratios in the U.S. in FY '28?

Answering this one carefully, Matt, because we're obviously not giving FY '20 guidance. But maybe if I think we're trying to help you with what the underlying plant to transport ratio is in FY '27. And then more how I would think about it is that we are looking to deliver on our investor value proposition in FY '28. So obviously, that would be high single digits UOP is how we would look at that. I think the other thing is while we went to some detail in the slides, and I know they aren't quite detailed, but was to split out things like plant and transport costs, so you could adjust the ratio accordingly. So does that help without giving FY '28 guidance?

Yes. I mean I think the summary is you're sort of going to incur higher rates for service centers, but then you sort of cost to serve initiatives are what kicks in thereafter to get you back to that number in '28.

Exactly right, or also where efficiencies don't offset the increase in cost to serve, they will deliver price realization to offset that.

Your next question comes from Peter Steyn with Macquarie.

Just tying a few things together. Graham particularly interested in your perspective around utilization of capacity in the network and your expectations of having to potentially have more latency in the network on a structural basis over the next number of years, how you think about that playing into returns, particularly if you get to a place where more of it is going to be on your own balance sheet and potentially diluting your ROCE outcomes ever so slightly. Maybe just frame that up for us, please.

Yes. I mean I think the sort of problem that has arisen in the U.S. has been twofold. One is that we've had a number of years of very low organic growth. And therefore, people were comfortable with low latency in capacity. And secondly, I think the other thing to think about is that the volatility of demand has changed dramatically over the last few years. So you put those together, I think there is definitely, to your point, a need to increase the latency around our repair capacity. But I think the way to do that is not just -- we shouldn't assume that the solution for the future is the same as the solution in the past. And what I mean by that is I think the investments we're making now in things like automation technology, but more important, I think going forward because we've obviously always done a bit around automation is the adoption of tools based on AI. It's not just an AI play. I think it's more about how we manage better the data we've already got to do the demand and supply panic planning better and to be more effective in how we're relocating pallets around the network. I think all of those will allow you to increase your ability to withstand demand spikes better without having to add a lot more capacity. So I don't see it as a risk to the balance sheet. I see it's more a risk that we have to get -- pull our finger out a little bit and get on with the technology changes that we're already planning to do around plant for the future and also make sure that we are adopting and rolling out some of the quite clever stuff that's around AI now in demand and supply planning. That would be my sort of reaction to that sort of question.

Your next question comes from Justin Barratt with CLSA.

Maybe a question for Joaquin, I guess a bit of a follow-up on some previous questions. Can you give us an idea of what you think the total short-term underlying profit impact is from the pallet shortages that you've incurred recently. I guess you're sort of looking at the $90 million in FY '26, $70 million to $80 million in the first half. But again, it does look like you're not fully recouping the $90 million back into the second half. So I just wanted to see if you can give us an idea of how much that impact is? And is that impact higher than what you thought back in May?

Thanks, Justin. I think the way -- if I understand your question correctly, that we've been doing it is you have the reported numbers or our guidance numbers and then adding back the U.S. to look at what the underlying profit would be. So for example, as you said, in the FY '26 result, you could add back $90 million. And then when you look at FY '27, you would add back doing year-on-year, the cumulative of the $90 million and then the $35 million to $55 million range.

Yes. I think from mine, like the way that you described it back in May was that the impact in the last quarter of '26 would be $60 million. And then as we look to try and size it up into '27, it would be sort of in the range of $60 million per quarter and that the impact would be largely resolved by the end. Is that sort of still a better top line or more broadly how we should be thinking about it. But obviously, the $30 million has been brought forward into FY '26.

Exactly, exactly right. And then there's some structural costs that are not those short-term costs that then impact the first half that we don't recover and then we recover them in the second half. So exactly how you're thinking about it is the right way, and the costs exactly are broadly in line with the comments we made in May, but there is that $30 million that has come through earlier to deliver better service to our customers.

And then so sorry, then how do I understand the second half with the growth being sort of $55 million to $65 million, but the $90 million impact within the second half of last year.

So I guess a couple of things. One is, we talked about it a little earlier, but the sort of the impact in FY '26, that $25 million of customer mix and volume, our view is that it will take time to recover that. So essentially, when you think of the second half '27, we're saying it will take time to build relationships and convert some of those customers or lanes back to us. So that's why, in essence, there's $15 million in just that, that you don't recover.

And so then isn't the EBIT impact then larger than what you sort of described back in May if it's going to take a while to recover that lost revenue.

I guess what I would say is we didn't necessarily give a number in May, but I know people did the math, which was to say exactly what you said. We flagged a $60 million impact in the quarter. What people, I think, did was double that number because you had a half and then say, but there will be some recovery. So net-net, where people may have ended up. I think, obviously, it is difficult to predict things like transport spot rates, fuel at the moment, et cetera. So this is our best estimate now. I think it's reasonably close to what we thought in May, but there is a bit of variability.

Understood. And then maybe one for you, Graham. Just wanted to sort of get an update on how your conversations are going with potential converters to your offering from, I guess, a whitewood offering. That's where you've been getting most of your new business wins. I guess from my perspective, before I was a whitewood user potentially thinking about moving to a pool option would have a bit of a pause for concern given the recent update where they might have been caught short pallets, if I guess?

Yes. So I think what we said back in May has turned out to be pretty accurate, which is clearly, we've let some of those SME type customers down who are existing customers, and we were in the process of talking to ones who wanted to convert and we had to basically go back to them and say, look, we can't convert you right now, but -- and this is when we think we can convert you the second half. I would say, with the exception of one, they've all been fine with that. So we had one customer who decided no, they didn't want to wait, and they've gone back to white. The one thing I would say, though, is what we're seeing in the market in the U.S. is that the availability of good whitewood pallets is extremely tight at the moment. So that's helping the conversation a little bit, which is, again, it's a bit like what we did a few years ago. If you're with us, we can guarantee, that's part of our value prop is to make sure that we have got pallets when you need them. And the signs that we are spending money on new pallets in the U.S. to ensure that we've got that availability I think, allows us to give a bit more confidence to those people who are thinking about converting together with the tightness on whitewood. And people are increasingly interested in and engaged in the other benefits of a pooled solution versus white, which is a sustainability one. So it is becoming more of an attraction people realize that the benefits of a circular solution outweighed out of a one-way solution. So I think all those things are helping us. But we have disappointed people and as Joaquin said earlier, we have spent a bit of time getting that trust back before we convert. So not a term as far as I'm concerned. Great. I think we're finished with the questions. I don't normally do this, but I would just like to sort of say we've given a lot of numbers and detail in the pack. So if I could just step back from that a little bit and just give a few comments. I think the first thing is we've delivered a really good set of results in '26, even after the impact of what's happened in the U.S. in Q4. I hope you now see it really was a perfect storm. We're no longer falling short of customer orders, and we have a clear plan to fix the issues relating to the repair capacity by December of this year. We're going to continue to invest in quality and the resilience to support our customers and make sure we can -- we service future growth in the U.S. And we fully expect to exit FY '27 in strong shape as we're recovering the structural increases in cost to serve through both productivity and pricing. I know we'll be speaking to you a lot over the next few days and weeks. So I look forward to all the conversations around H1, H2 and next year, but Joaquin looking forward to it even more than I am. But thanks very much for joining the call already.

Thanks.