Brambles reported strong sales revenue in its first-half results for the fiscal year 2018, although dealing with cost pressures in North America. Its growth of 5% was primarily driven by strong volume growth in North America, Europe and Latin America pallets and ongoing expansion in its IFCO RPC businesses. Results were negatively impacted by the loss of a large RPC contract, cessation of a number of automotive contracts in CHEP Australia and cost pressures in North American pallets. These, however, were offset by increased sales and lower corporate costs.
“We delivered a return to positive Underlying Profit growth and strong revenue growth in the first half,” said Graham Chipchase, Brambles CEO. “We saw improved volume growth in North America and continued momentum in our 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,” Chipchase continued. “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.”
Transportation pressure is a factor facing the North American logistics sector in general, and for a transportation-centric business such as pallet pooling (transportation cost representing more than 23% of revenue), it is of key importance. As noted in Pallet Profile Weekly, Brambles may be forced to negotiate some sort of transportation index into future contractual arrangements as they come due or reintroduce a fuel surcharge. Collaboration with trading partners to eliminate empty miles and reduce transportation costs will be more important than ever.
“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,” Chipchase said.
“Our share and reuse model gives us a great opportunity to meet the needs of our customers in the most sustainable way,” he concluded. “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.”