Brambles generated sales revenue of over US$5.5 billion from continuing operations in the 12 months ended June 30, 2016 (FY16), up 2 percent, including a foreign exchange translation impact associated with the strength of Brambles’ reporting currency, the US dollar, relative to the Group’s other reporting currencies.
“I am extremely proud of what our Company has achieved this year,” stated Tom Gorman, Brambles CEO. “We delivered accelerated revenue growth and strong operating leverage, despite macroeconomic uncertainty, industry headwinds and cost pressures in certain markets.
“I am delighted with the strength of our pooled Pallet operations in both developed and emerging markets. Revenue growth was particularly strong in North America, where our market segmentation strategy continues to drive new and existing customers to adopt pooled solutions in their supply chains. Operationally, this business delivered substantial supply-chain efficiencies which largely offset moderate plant and transport cost pressures.
“In Europe, our Pallets business continued to deliver exceptional operating leverage, reflecting the ongoing delivery of supply chain efficiencies in a low-inflationary environment. Constant currency revenue growth in emerging markets was 15 percent.
“Our North American recycled pallets business faced a number of operating and industry challenges during the year. Despite this underperformance, the business continues to be a key strategic part of our portfolio and we have identified a clear path for improving future performance. “In our European RPCs business, strong sales revenue growth and supply-chain efficiencies improved profitability, particularly in the second half of the year. While revenue growth in North America continues to be impacted by the loss of Safeway, it was encouraging to see early signs of improved profitability, resulting from specific actions we took to address the challenges facing this business.
“In our European RPCs business, strong sales revenue growth and supply-chain efficiencies improved profitability, particularly in the second half of the year. While revenue growth in North America continues to be impacted by the loss of Safeway, it was encouraging to see early signs of improved profitability, resulting from specific actions we took to address the challenges facing this business. “In Containers, solid
“In Containers, solid top-line growth and improved profitability was more than offset by challenges in our Oil & Gas business. Excluding our Oil & Gas business, Containers’ revenue growth was 8 percent and Underlying Profit growth was 27 percent, at constant currency.”
Constant-currency sales revenue growth of 8 percent was driven by strong net new business wins, robust like-for-like volume growth and modest pricing gains in developed market pooled Pallets operations. Sales revenue also benefited from strong retailer expansion in the European RPCs business, improved growth momentum in emerging market Pallets operations and the contribution of acquisitions.
Underlying profit, which excludes significant items, was $993 million, up 1 percent. Constant currency growth of 9 percent reflected: strong sales revenue growth; supply chain efficiencies in pooled Pallets operations in Europe and North America; direct cost efficiencies in the European RPCs business; and Group-wide, indirect cost savings of $23 million related to the One Better program. These positive drivers more than offset the impact of increased operating costs in the North American recycled pallets business, short-term network inefficiencies in the North American RPCs business and ongoing industry headwinds in the Oil & Gas business.
Statutory operating profit from continuing operations of $915 million was down 3 percent (up 5 percent at constant currency) and included Significant Items of $78 million largely relating to the $38 million impairment of goodwill in the Oil & Gas business and costs associated with the One Better program. Statutory profit after tax from continuing operations of $557 million was down 5 percent (up 2 percent at constant currency.)
Return on Capital Invested was 15.3 percent, down 0.5 percentage points (down 0.2 percentage points at constant currency) reflecting the impact of capital invested in acquisitions since the start of FY15. Excluding the impact of all acquisitions and foreign exchange movements since December 2013 (the basis on which Brambles is targeting Return on Capital Invested of 20 percent by FY19), Return on Capital Invested was 17.2 percent, up 0.1 percentage points (up 0.4 percentage points at constant currency), reflecting improved profitability in the Pallets segment.
Cash Flow from Operations was $513 million, down $215 million on the prior year, largely due to higher growth-related capital expenditure and adverse working capital movements. Within working capital, one-time changes to payment processes resulted in lower creditors. Free Cash Flow after dividends was negative at $33.4 million; however, this excludes the net proceeds from the divestment of LeanLogistics of $100 million.
Mr Gorman added: “We undertook a number of strategic actions during the 2016 calendar year, including the divestment of LeanLogistics in May 2016 and the announcement of our Oil & Gas Containers joint venture with Hoover, in August 2016. These actions are in line with the ongoing assessment of our portfolio to ensure all businesses can deliver sustainable long-term value.
“Consistent with our commitment to investing for growth and disciplined capital allocation, over $400 million of growth capital expenditure was deployed during FY16. This was primarily focused towards our well established, high returning Pallets and European RPCs businesses. Furthermore, we continued to invest in geographic expansion and the scale of our RPCs business through acquisitions in Japan, Chile and Colombia.
“We continue to see considerable opportunities to invest for growth at attractive rates of return, particularly in businesses where we can leverage the strength of existing customer relationships and our network advantage. Going forward, we expect to invest approximately US$1 billion between FY17 to FY19, primarily in our well-established businesses which serve the FMCG and fresh food sectors.
“In FY17, we expect to realize the benefit of the investment we have made to date in operational efficiencies, including the US Pallets durability program, which is expected to more than offset direct cost pressures.”