Sydney – 23 October 2018: Brambles Limited has reported sales revenue from continuing operations of US$1,420.6 million for the first three months of the financial year ending 30 June 2019 (FY19), representing an increase of 3% on the prior corresponding period at actual FX rates and 6% at constant FX. The difference between actual and constant FX growth reflects the strengthening of the US dollar relative to all other operating currencies.
Group sales revenue growth of 6% is in line with Brambles’ stated objective of delivering annual mid-single digit revenue growth and reflects revenue momentum across all segments:
- CHEP Americas sales revenue growth of 5% was driven by volume growth and price realisation in the US, Canadian and Latin American pallet businesses;
- CHEP EMEA sales revenue growth of 8% reflects strong volume growth in most markets and increased pricing in response to inflationary cost increases over the last 12 months;
- CHEP Asia-Pacific sales revenue increased 1% as higher demand for pallets in Australia & New Zealand more than offset a 2 percentage point impact in the quarter due to the cycling of the final month of a large Australian RPC contract; and
- IFCO sales revenue growth of 5% was driven by strong volume growth across Europe, South America and Asia with volume declines in North America partially offset by price increases in the region.
Brambles’ CEO Graham Chipchase said: “Constant currency revenue growth was 6% in the first quarter, reflecting ongoing customer demand for our share and reuse logistics solutions. The business is, however, challenged by ongoing cost inflation across our major markets, including the US and Europe. Despite escalating costs, effective pricing which includes surcharges offset approximately two-thirds of the inflationary cost increases experienced during the quarter. In addition to pricing actions, we continue to look to our own operations for further opportunities to reduce costs.
“Given the exceptional cost pressures facing our business and the combination of higher compensations and lower costs in 1H18, Underlying Profit in 1H19 is expected to be broadly in line with the prior corresponding period, on a constant-currency basis. We expect constant-currency Underlying Profit growth to improve in 2H19 reflecting increased pricing growth, a higher cost base in the prior comparative period and the delivery of cost efficiencies across the Group. Our global automation and procurement programmes remain on track and are expected to deliver margin benefits over the medium term despite the current cost environment.”
2018 Brambles Results
Graham Chipchase commented on 2018 results at the Brambles Annual General Meeting, October 23, 2018:
Before addressing our results for FY18 and the first-quarter trading update for FY19, I believe it is important to outline the dynamic and challenging nature of the operating conditions we faced during FY18 and the first three months of FY19.
Since the beginning of FY18, we have experienced significant input-cost inflation, particularly in our US and European pallet businesses. At the same time, our customers are increasingly turning to us to deliver additional cost savings and efficiencies in their supply chains.
We have also actively defended ourselves against increasing competition and, in most regions, have had to offset structurally higher network costs. This included investing in innovation and digital, enhancing our service offering, improving our asset quality and delivering additional organisational and operational efficiencies.
FY18 financial performance
Looking at our financial performance, in FY18 we delivered constant-currency sales revenue growth of 6% reflecting ongoing expansion with new and existing customers in key CHEP pallet and IFCO markets, as well as price realisation in US pallets, emerging markets and IFCO North America.
Underlying Profit remained in line with the prior year despite inflationary cost pressures, direct cost challenges in CHEP Americas and the adverse impact of RPC and automotive contract losses in CHEP Australia, which we announced to the market in 2016. These contract losses as well as lower margins in CHEP Americas also impacted our Return on Capital Invested metric, which declined 0.9 percentage points to 16.1%.
Our cash flow generation improved significantly during the year as Cash Flow from Operations increased by US$300.9 million and we delivered positive Free Cash Flow after dividends for the first time since FY15. Profit after tax from continuing operations was US$773.5 million, up 67% at constant-currency, driven by the higher operating profit and a one-off, non-cash benefit to income tax expense of US$127.9 million associated with the lowering of the US tax rate from 35% to 21%, effective 1 January 2018.
Our balance sheet remains strong, as reflected in our two key financial ratios – net debt to EBITDA of 1.46 times and EBITDA interest cover of 15.0 times. Both metrics remain within the Company’s policy and well within the levels required by our banking covenants.