Transformation driving strong FY23 financial performance. Continued focus on customer, digital and operational initiatives to support momentum in FY24.
Brambles reported a 14% rise in sales revenue for FY23 in its latest annual results. This rise was attributed to both price growth and commercial discipline, allowing the company to absorb operating and capital cost-to-serve increases across regions. While this growth was noteworthy, there was a 2% decline in volumes, influenced by pallet availability issues in the first half of the fiscal year, as well as factors like softer consumer demand and inventory optimization impacts. However, these negative impacts were partly offset by the contributions from wins in the current and preceding years.
The company’s underlying profit showed a 19% uptick, a result of pricing actions that balanced input-cost inflation and various other costs. These include higher cycle times, pallet prices, and other associated costs. There was also a noticeable decline in capital expenditure by approximately US$160 million, attributed to the purchase of around 8 million fewer pallets and an enhanced return of roughly 5 million pallets due to inventory optimization in the latter half of FY23.
An area of significance was the return on capital invested, standing at 18.5%, marking an increase of 0.5 points. This was despite an augmentation in average capital invested by 16%, majorly driven by investments in higher-cost pallets.
Brambles’ liquidity position was evident in its free cash flow, which, after dividends, rose by US$398.1 million. Additionally, the FY23 final dividend amounted to 14.00 US cents, bringing the total dividend for the year to 26.25 US cents per share.
CEO Insights on FY23
Brambles’ CEO, Graham Chipchase, provided a detailed reflection on the company’s year. He noted, “In a year marked by macroeconomic uncertainty, we are extremely proud of our achievements across all aspects of the business.” He emphasized the company’s resilience amidst challenges, stating, “We kept our customers’ goods moving through supply chains while delivering another year of outstanding financial and operational outcomes and investing for the future.”
He further shed light on the “Shaping Our Future” transformation program, indicating its role in bolstering the company’s performance in FY23. “The transformation programme has improved the performance and resilience of our business,” said Chipchase, “setting the foundation to enhance our customer value proposition and our commercial business model by better aligning pricing with the cost-to-serve and increasing both operational and asset efficiency.”
Digital and Operational Initiatives
A noteworthy aspect of Brambles’ FY23 strategy was its investment in digital and operational endeavors. Chipchase mentioned, “We continue to progress our digital transformation including scaling our continuous diagnostics pilot in North America and our serialisation+ trial in Chile. These pilots are providing valuable data points and learnings.”
In the U.S., the continuous diagnostics pilot serves as a testament to the company’s commitment to harnessing technology for operational efficiency. “In addition to progressing with asset digitisation,” Chipchase stated, “we have also improved our advanced analytics capabilities and machine learning solutions during the year, which have underpinned our asset productivity initiatives. Approximately 10 million pallets were recovered and salvaged from these initiatives in FY23, and we have also seen an additional ~5 million pallets returned as manufacturers and retailers progressively optimise inventory levels in our major markets. Combined with the ongoing investment in the pallet pool, we have substantially improved pallet availability which is leading to early signs of improvement in our customer engagement and satisfaction scores. ”
The projections for FY24 show an anticipated sales revenue growth of between 6-8% and an Underlying Profit growth of between 9-12%.
Apart from financial and operational goals, Brambles also marked its stand on sustainability. “We are particularly proud to have strengthened our global leadership position in sustainability,” Chipchase remarked. The company achieved significant milestones in its sustainability journey, including a 5.2% reduction in greenhouse gas emissions.