Brambles Reports Strong Half-Year Results

Brambles, the pallet supplier based in Australia, has announced a significant increase in its first-half profit, leading to a raise in its dividend and full-year outlook. The company saw a 21% growth in profit, attributed to price hikes, decreased lumber costs, and enhanced supply chain efficiencies.

Financial Highlights

• Profit Increase: Brambles reported an underlying profit of $664.7 million for the six months ending in December, marking a 19% increase when adjusted for currency fluctuations.
• Revenue Growth: Sales revenue from continuing operations climbed by 12% to $3.28 billion on a constant-currency basis.
• Net Profit: The company's statutory net profit stood at $391.3 million, up 15% year-on-year at constant FX rates.

Analyst Expectations

Analysts had initially forecasted a lower statutory net profit of $384.9 million from revenue of $3.27 billion. However, Brambles exceeded these estimates, surpassing expectations set by FactSet's data compilation.

Updated Projections

For the full fiscal year of 2024, Brambles anticipates a 6-8% increase in revenue on a constant currency basis. Moreover, the company now expects an underlying profit growth of 13-15% at constant currency rates, a hike from the previously projected 9-12% rise. Additionally, the guidance for positive free cash flow before dividends has been raised to $700 million-$800 million, compared to the earlier range of $450 million-$550 million.

Corporate Performance

Brambles witnessed an 11% surge in prices compared to the previous year, mainly driven by adjustments made in fiscal 2023. Despite this, like-for-like volumes experienced a slight 1% decline due to enhanced inventory management practices across retailer and manufacturer supply chains.

These results reflect Brambles' strong performance and strategic financial management, showcasing its resilience in navigating market challenges and driving sustainable growth.

Brambles Sees Flat Net Business Volumes with Strong Growth Pipelines

Overview

Net new business volumes remained flat as Brambles reported modest new contract wins in Europe pallets, Canada pallets, and North America automotive businesses. However, this was offset by net losses in U.S. pallets. The company attributed this to lower prices for whitewood pallets, causing some companies to delay the transition to Brambles' rental model.

CEO Perspective

Chief Executive Graham Chipchase emphasized the focus on driving profitable volume growth, highlighting active engagement in North America and Europe with strong new business pipelines. Jefferies analyst Anthony Moulder expressed interest in net new customer wins as evidence that higher prices were not hindering growth in return on invested capital.

Financial Performance

Brambles saw a rise in return on invested capital to 21.8% in the December half, up from 19.8% a year earlier. This growth was supported by underlying profit growth, which offset an 8% increase in average capital invested. Additionally, the return of 8 million additional pallets helped reduce capital expenditure significantly.

Regional Sales Performance

• CHEP Americas: Sales increased by 10% to $1.80 billion, or by 8% in constant-currency terms. Strong volume growth in Canada and Latin America countered lower volumes in the U.S.
• Europe, Middle East, and Africa: Revenue rose by 16% to $1.21 billion, or by 11% in constant currency terms.
• Asia-Pacific: Revenue grew by 8% to $273.0 million, or by 11% in constant currency terms. This region holds sentimental value for Brambles as they first started their pallet business here in 1958.

As Brambles continues to navigate varying market conditions globally, they maintain a strong commitment to driving growth and innovation.