Brambles Posts Postive 1H Results on Strength of Strong Pallets Performance

Brambles 1H16 Underlying Profit1 up 10 percent at constant currency on strong Pallets performance; FY16 sales and Underlying Profit guidance lifted

Shares jump 9 percent on the strength of surprising results and a bullish outlook for 2H.


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Sales revenue up 8% at constant currency, driven by new business wins, sales mix and like-for-like volume growth in Pallets globally, and expansion with new and existing retailers in European RPCs

Strong profit growth reflects margin improvement in Pallets operations worldwide: Statutory operating profit up 12% at constant currency
Statutory profit after tax up 14% at constant currency
Underlying Profit up 10% at constant currency

Disciplined capital allocation across the portfolio:
Growth capital expenditure primarily supporting well-established Pallets and European RPCs businesses Lower new investment elsewhere: total FY16 growth CapEx to be below US$500 million previously forecast Focus on all business units’ ability to deliver satisfactory scale and returns

Interim dividend increased to 14.5 Australian cents per share, up 0.5 Australian cents, 25% franked4: Non-underwritten Dividend Reinvestment Plan to remain in place at 1.5% discount

Guidance increased for FY16 sales revenue and Underlying Profit growth:
Growth now expected of 8%-10%, at constant currency, compared with previous range of 6%-8%
New guidance translates to Underlying Profit of US$1,015-1,035 million at 30 June 2015 exchange rate

CEO Commentary

“We are very pleased with this first-half result, which reflects our strategy of investing in our strong network position to drive growth, as well as the delivery of indirect cost and supply chain efficiencies and a lessening of some external cost pressures,” stated Brambles’ CEO Tom Gorman.

“We continue to see considerable opportunities to invest for growth at attractive rates of return, where we can leverage the strength of our existing customer relationships, intellectual property, and embedded network scale. As such, we continue to anticipate growth capital expenditure during FY17 to FY19 of approximately US$1 billion.

“In Pallets, we are leveraging our market-leading portfolio of solutions to generate continued new business wins, while pricing and like-for-like volume growth trends have continued to improve in developed markets. Constant- currency sales revenue growth in emerging markets of 16% remains robust despite some economic uncertainty.

“The strong profit growth in Pallets reflected sales mix benefits on new business, the continued delivery of direct cost efficiencies, the delivery of overhead savings under the One Better business improvement program, and the lessening of plant and transport cost pressures in the USA.

“In RPCs, the ongoing adoption of our solutions by existing and new retailers continues to enable us to expand our market leadership position, in particular in Europe and Australia. In North America, we remain focused on achieving increased penetration and scale.

“Our Containers business units are experiencing mixed market conditions. The Intermediate Bulk Containers, Automotive, Aerospace, and Catalysts & Chemical Containers businesses delivered increased sales. However, Ferguson’s result was impacted by the severe downturn in conditions in the oil and gas sector.

“We are focused on the effective and efficient deployment of capital across our entire portfolio and continue to evaluate all our business units relative to their ability to deliver the returns and scale we require within a timeframe acceptable to shareholders.”