Brambles said an 18% plunge in its share price Friday was a "dramatic overreaction" by the market to the company's announcement that its contract with Wal-Mart Stores, the world's largest retailer and its largest customer, might be at risk.

Brambles &ltBXB.AX>, the world's largest supplier of transport pallets, said earlier Friday that Wal-Mart is modifying its US pallet management, including its arrangements with the company's CHEP unit and other pallet pooling companies, but is still in negotiations over the role CHEP may play.

"Wal-Mart has indicated that it may contract directly with third party pallet management service providers to retrieve and sort pallets at its own facilities in the USA or provide such services itself," said Brambles in a statement earlier Friday.

Brambles shares fell as much as 18% in early trade Friday to a record low of $8.25, as analysts said the "vague statement" was difficult to quantify, before staging a cautious recovery after management said in a later statement the discussions with its largest customer would have "no impact on CHEP's issue volumes or sales revenue." Brambles shares closed 9.9% lower at $9.03 after Chief Executive Mike Ihlein clarified that CHEP's revenue is generated from manufacturers and suppliers who use CHEP's pallets and containers to make deliveries to retailers, and not from Wal-Mart directly.

Earlier, in a note to clients, Macquarie Research said that, while it is reviewing its Outperform recommendation on Brambles, it does not expect significant downgrades to its earnings forecasts.

"It is the sorting of the pallets that is at stake here, not the use of CHEP as a pallet provider to Wal-Mart," said Macquarie.

"The change should not have an impact on pallet volumes, which is the key driver of revenues in the business."

Some traders said the early fall in Brambles was probably an overreaction, with its shares off as much as 43% in six months and likely factoring in significant revenue loss from an expected US recession.

Sydney-based Brambles said CHEP currently provides its "Total Pallet Management" services at many Wal-Mart US facilities, including retrieving, sorting and other logistics, to cut costs through the more efficient use of pallets and reduced transportation costs.

Brambles gets 83% of group revenue from CHEP, and in the six months to Dec. 31, CHEP America operations contributed 44% of the division's US$1.75 billion in sales.

Another analyst at an international investment bank who declined to be named said that CHEP controlled "about half" of Wal-Mart's total pallet management business, and estimated that alongside its suppliers Wal-Mart accounts for about a quarter of CHEP Americas revenue.

Shaw Stockbroking analyst Brent Mitchell said while there's "always a risk" that other CHEP customers follow Wal-Mart's lead, there would be few others with sufficient scale to be able to undertake the services more efficiently.

"You need (pallet movement) volumes to make it profitable to set up for a smaller operator to come in and you need some supply of pallets to make it worthwhile," he said.

"I think people will take a cautious view and adjust earnings forecasts lower, but I couldn't quantify it at the moment," said Mitchell.

CHEP's other major US customers also include The Home Depot, Unilever, Coca-Cola Co. and Schweppes.

CHEP competes globally with Algeco SA's Le Pallet Rouge unit, Germany's IFCO Systems N.V., GE Capital's Loscam unit, PECO Pallet Inc., The Netherlands' IPP Logipal B.V. and Canadian Pallet Council.