Brambles reports strong sales revenue momentum, a return to profit growth and increased cash flow generation

Brambles delivered a return to positive underlying profit growth and strong revenue growth in the first half of 2018, enjoying improved volume growth in North America and a continued momentum in its European operations, in line with good economic growth in these regions.

“I was pleased to see a strengthening of the top line in North America with volume growth returning to historic levels,” ’ said Graham Chipchase, Brambles CEO. “We saw an expansion with both new and existing customers, notably in the beverage and grocery sectors. We, however, continue to face structural cost challenges partly due to changes in commercial arrangements which are increasing transport and handling costs. The impact of these changes was especially evident in the first half due to accelerating transport and other cost inflation. Our teams are implementing a number of mitigating actions including increased plant automation and other commercial initiatives.

“As the invisible backbone of the supply chain, Brambles has a unique insight into the way the world now makes, moves and sells goods. We know that our customers are under cost pressure, so we are seeking to collaborate with them – drawing on the depth of our global operations to offer insights into how they can take costs out of their operations.

“Our share and reuse model gives us a great opportunity to meet the needs of our customers in the most sustainable way. As we continue to build our network, adding new customers and entering new markets, our aim is to use our assets even more efficiently. This will be better for our customers, consumers and the environment – and help us deliver sustainable growth and returns well in excess of the cost of capital.”

Highlights

  • Strong sales revenue performance in line with guidance for ‘mid-single digit growth’. Constant-currency growth of 5% primarily driven by strong volume growth in North America, Europe and Latin America pallets and ongoing expansion in IFCO RPC businesses.
  • Underlying Profit growth of 1% at constant currency was impacted by previously announced items relating to the HFG joint venture and the loss of a large RPC contract and cessation of a number of automotive contracts in CHEP Australia which reduced growth by 3 percentage points. These items and cost pressures in North America pallets were more than offset by the sales contribution to profit, increased collection of asset compensations and lower Corporate costs.
  • Material increase in cash flow from operations, up US$98.1m, reflecting both increased profitability and improved cash flow management.
  • Return on capital invested of 16.2%, down 0.9pts at constant currency, with the full six-month inclusion of the HFG joint venture and cessation of contracts in CHEP Australia contributing 0.7pts to the decline.
  • Interim dividend of AU14.5 cents per share with franking of 30%, in line with the 2017 final dividend.
  • Sale of CHEP Recycled completed on 14 February 2018. Proceeds were broadly in line with carrying value and the related cash inflow will be reflected in 2H18.

See Brambles 1H 2018 results here.

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