Brambles Limited · ASX:BXB
Brambles — FY2010 Earnings Presentation
65 slides from Brambles's earnings presentation, Aug 19, 2010
Slide 1: 2010 full-year results presentation
2010 full-year results presentation 19 August 2010
Slide 2: Discussion topics
Discussion topics Business update Tom Gorman, CEO FY10 results analysis Greg Hayes, CFO Outlook Looking forward – growth Tom Gorman, CEO opportunities 2
Slide 3: Business update
Business update Tom Gorman, CEO
Slide 4: Key messages
Key messages Delivering on commitments • Quality improvement • Cost disciplines • Emerging market growth Stable, resilient business in volatile market conditions • Improvement in second-half performance Strong cash flow and balance sheet 4
Slide 5: Financial highlights
Financial highlights % change % change (actual (constant US$M FY10 FY09 FX rates) currency)* Sales revenue 4,146.8 4,018.6 3% – Statutory operating 724.5 718.2 1% (3%) profit Statutory profit after tax 443.9 434.0 2% (1%) Earnings per share (US 31.8 32.6 (2%) (6%) cents)** Free cash flow after div
Slide 6: Business unit highlights
Business unit highlights CHEP Americas • Achieving quality improvements • Positive sales momentum since Better Everyday • Improved operational controls CHEP EMEA • Strong growth in developing regions • Continuing to win business in established regions • Restructuring savings flowing through • On
Slide 7: Business unit highlights (continued)
Business unit highlights (continued) CHEP Asia-Pacific • Australia resilient and growing • Strong growth in China and India • Ongoing efficiency focus Recall • Robust profit growth • Strong sales pipeline • Improving margins and return on capital 7
Slide 8: Better Everyday progress
Better Everyday progress Quality • 100% of network issues at US Plus specification • Strong customer feedback Ease of doing business • 70% of customers using Portfolio+Plus • Roll out of simplified invoice in Q1 of FY11 Sales and marketing • 20+ new hires made; new structure in place • US$18M
Slide 9: CHEP USA quality costs
CHEP USA quality costs Ongoing Component FY10 FY11 FY12 US$M (per year) October ‘09 Pre-Better Everyday 37 - - - forecast Better Everyday fast-track 30 50 30 - Better Everyday ongoing 50 50 50 50 Total 117 100 80 50 FY10 outcome/ Total 108.5 95 55 25 revised forecast Reduction 8.5 5 25 25 9
Slide 10: Business wins
Business wins Sales revenue value of business wins (US$M) Net new business* FY10 annualised** CHEP Americas (9) 2 CHEP EMEA 30 39 CHEP Asia-Pacific 15 11 Recall 17 23 Brambles 53 75 * Net new business = change in sales revenue in the period resulting from business won or lost in the period and the p
Slide 11: Results analysis
Results analysis Greg Hayes, CFO
Slide 12: Results overview
Results overview Actual Constant currency FY10 FY10 FY09 Growth US$M US$M US$M % Sales revenue 4,146.8 4,015.4 4,018.6 – Underlying profit 733.4 703.4 900.6 (22) Statutory operating profit 724.5 694.0 718.2 (3) Profit before tax 614.9 585.9 597.3 (2) Profit after tax 443.9 427.6 434.0 (1) Statutory
Slide 13: Significant items
Significant items FY10 FY09 Actual rates US$M US$M Underlying profit 733.4 900.6 Items within ordinary activities, but unusual due to size and nature: CHEP USA pallet quality program - (77.4) Walmart net transition impact - (29.0) Items outside the ordinary course of business: Accelerated scrapping
Slide 14: CHEP
CHEP Brambles
Slide 15: CHEP – overview by region
CHEP – overview by region Actual Constant US$M FY10 FY10 FY09 Growth % Americas 1,533.6 1,510.3 1,556.9 (3) EMEA 1,482.6 1,470.8 1,452.6 1 Asia-Pacific 390.9 334.4 323.4 3 Sales revenue 3,407.1 3,315.5 3,332.9 (1) Statutory operating profit 637.9 609.1 573.4 6 Profit margin (%) 19 18 17 Growth % cal
Slide 16: Americas – sales revenue
Americas – sales revenue US$M 1,557 (24) (14) (9) 1,510 FY09 Price, mix Organic volume Net new business FY10 All numbers are calculated at constant currency 16
Slide 17: Americas – sales revenue highlights
Americas – sales revenue highlights US$M, actual rates Growth vs. FY09 58 USA 5% Canada 3% Latin America 5% Other 5% 1,471 Pallets RPC Automotive Other 96% <1% <1% 4% Growth % calculated on constant currency basis 17
Slide 18: Americas – statutory operating profit
Americas – statutory operating profit US$M 229 (42) 204 227 (108) (43) (13) FY09 Vol, price, mix Better Everyday Direct costs Other Significant FY10 items All numbers are calculated at constant currency 18
Slide 19: EMEA – sales revenue
EMEA – sales revenue US$M 30 1,471 11 (23) 1,453 FY09 Price, mix Organic volume Net new business FY10 All numbers are calculated at constant currency 19
Slide 20: EMEA – sales revenue highlights
EMEA – sales revenue highlights US$M, actual rates Growth vs. FY09 12 UK & Ireland 0% 99 Iberia 3% 109 France 2% CEE 25% MEA 12% Other 2% 1,263 Pallets RPC Automotive Other 85% 7% 7% 1% Growth % calculated on constant currency basis 20
Slide 21: EMEA – statutory operating profit
EMEA – statutory operating profit US$M 36 319 287 (1) (18) 2 13 FY09 Vol, price, mix Quality Direct costs Other Significant FY10 items All numbers are calculated at constant currency 21
Slide 22: Asia-Pacific – sales revenue
Asia-Pacific – sales revenue US$M 8 (12) 15 334 323 FY09 Price, mix Organic volume Net new business FY10 All numbers are calculated at constant currency 22
Slide 23: Asia-Pacific – sales revenue highlights
Asia-Pacific – sales revenue highlights US$M, actual rates Growth vs. FY09 33 Australia 1% 26 NZ 1% China 77% 63 Other 31% 269 Pallets RPC Automotive Other 69% 16% 7% 8% Growth % calculated on constant currency basis 23
Slide 24: Asia-Pacific – statutory operating profit
Asia-Pacific – statutory operating profit US$M 3 63 3 (1) 58 FY09 Vol, price, mix Direct costs Significant items FY10 All numbers are calculated at constant currency 24
Slide 25: Recall
Recall Brambles
Slide 26: Recall – overview
Recall – overview Actual Constant US$M FY10 FY10 FY09 Growth % Americas 335.3 326.1 313.3 4 Europe 188.7 187.4 188.9 (1) RoW 215.7 186.4 183.5 2 Sales revenue 739.7 699.9 685.7 2 Statutory operating profit 123.1 114.0 95.9 19 Profit margin (%) 17 16 14 Growth % calculated on constant currency basis
Slide 27: Recall – sales revenue
Recall – sales revenue US$M 17 700 8 (11) 686 FY09 Price, mix Organic vol Net new business FY10 All numbers are calculated at constant currency 27
Slide 28: Recall – sales revenue by service line
Recall – sales revenue by service line US$M, actual rates Growth vs. FY09 73 DMS 4% SDS 4% 146 DPS 1% 521 2H Growth vs. 2H09 DMS 5% SDS 10% DPS 3% DMS SDS DPS 70% 20% 10% Growth % calculated on constant currency basis 28
Slide 29: Recall – statutory operating profit
Recall – statutory operating profit US$M 8 (8) 7 114 11 96 FY09 Vol, price, mix Direct costs Other Significant items FY10 All numbers are calculated at constant currency 29
Slide 30: Cash flow and finance
Cash flow and finance Brambles
Slide 31: Cash flow strength
Cash flow strength US$M actual rates FY10 FY09 Change EBITDA 1,177.4 1,212.6 (35.2) Capital expenditure (496.5) (683.8) 187.3 Proceeds from disposals 88.0 104.6 (16.6) Working capital movement 14.7 25.8 (11.1) Irrecoverable pooling equipment provision 111.2 97.8 13.4 Provisions / other (12.5) (34.6)
Slide 32: Financial position
Financial position Actual rates Jun 10 Jun 09 Net debt (US$M) 1,759.3 2,143.4 Gearing* (%) 51.9 60.0 Actual rates FY10 FY09 Covenants EBITDA**/ net finance costs (x) 10.7 10.0 3.5 (min) Net debt/ EBITDA (x) 1.5 1.8 3.5 (max) Undrawn committed credit facilities of US$1,946.6M Inaugural US 144A bo
Slide 33: Outlook
Outlook Brambles
Slide 34: Outlook
Outlook FY11 guidance, subject to unforeseen circumstances and ongoing economic uncertainty • Sales growth in all business units • Continued quality investment, storage cost • Statutory operating profit: US$740M to US$780M* • Interest cost approximately US$115M • Lower ongoing tax rate of approxim
Slide 35: Looking forward – growth opportunities
Looking forward – growth opportunities Tom Gorman, CEO
Slide 36: Core strengths
Core strengths Global footprint Local networks Intellectual property Customer franchises Financial position 36
Slide 37: Current initiatives
Current initiatives Geographic expansion • Emerging markets CHEP USA continuous improvement • Small and mid-sized company opportunity Product scope expansion Global growth platforms • Automotive • LeanLogistics 37
Slide 38: Emerging markets
Emerging markets China and India • FY10 sales revenue up 92% 92% Latin America • FY10 sales revenue up 7% 7% • Brazil and Argentina strong Central & Eastern Europe • FY10 sales revenue up 24% 24% • Unilever, P&G agreements in Turkey Growth % shown at actual FX rates 38
Slide 39: CHEP USA pallet opportunity
CHEP USA pallet opportunity Source: Brambles internal estimates, June 2010 39
Slide 40: SME customer penetration
SME customer penetration CHEP USA – contracts won and lost in FY10 Annualised sales revenue impact (US$M) Issue Pre-Better Post-Better Total # contracts volumes Everyday Everyday won <100K 8.7 20.8 29.5 1,032 100K-250K 1.4 5.2 6.6 16 250K-500K 0.2 4.6 4.8 5 500K-1M - 11.4 11.4 4 1M+ - 9.6 9.6 1 Tota
Slide 41: Expanding product scope
Expanding product scope Outside of full-size pallets, CHEP is under-penetrated in other pooled platforms in all regions • Alternative pallet sizes • Reusable plastic containers • Intermediate bulk containers • Automotive • Other services The opportunity for expansion is potentially worth US$12BN
Slide 42: Served sectors – USA
Served sectors – USA Opportunity and penetration estimate ~US$12BN ~US$1.1BN ~US$12BN ~US$1.1BN Transport (1%) 5% Auto 13% Other 16% Industrial 13% Auto 11% FMCG 25% 60% IBCs 19% 100% Plastic bins 11% RPCs 23% Fresh 48% 33% Pallets 20% Market CHEP Market CHEP Source: Brambles internal estimates, Jun
Slide 43: Served sectors – Australia
Served sectors – Australia Opportunity and penetration estimate ~US$1BN ~US$0.3BN ~US$1BN ~US$0.3BN Transport (5%) 6% 6% 18% Auto 18% Other 6% 4% Industrial 17% 6% Auto (4%) 5% 11% IBCs 15% 22% Plastic bins 10% FMCG 41% RPCs 15% 30% 68% Pallets 38% Fresh 31% 24% Market CHEP Market CHEP Source: Bramb
Slide 44: Automotive opportunity
Automotive opportunity Industry restructuring driving outsourcing • CHEP’s core value proposition: help customers lower total supply chain costs through the use of returnable packaging Unique intellectual property in design of packaging and systems Opportunities • Penetrate major producing cou
Slide 45: Intercontinental automotive flows
Intercontinental automotive flows CHEP automotive penetration vs. assessed opportunity EMEA Light vehicle FY10 sales production, USA, Light vehicle revenue: US$99M production, 2016*: 10M Containers: 11M China, 2016*: 16M Americas FY10 sales Intercontinental Intercontinental revenue: US$3M flow: US$1
Slide 46: Global LeanLogistics opportunity
Global LeanLogistics opportunity Growth • 32% increase in sales revenue since 2008 acquisition by Brambles Key strategies • USA expansion • New geography development: Brazil, Canada, Australia, Europe • Conversion of CHEP global logistics network • Integrated CHEP/LeanLogistics service offerings
Slide 47: Myth of the “paperless office”
Myth of the “paperless office” Six key growth drivers: Global physical document • Regulation and oversight management opportunity*** • Outsourcing 6% • Identity theft and privacy concerns • Corporate sustainability 28% • Globalisation • Digitisation 1975: Xerox introduces the concept 66% of a pa
Slide 48: The bridge between paper and digital
The bridge between paper and digital Explosion of data presents opportunities: • Specialised business Digital process outsourcing Size is not measurable; Physical • Emerging technology new solutions come to 67% unvended to augment existing market every day services • Other complementary services 4
Slide 49: Summary
Summary Solid result, strong financial position CHEP opportunities • Global footprint • CHEP USA growth momentum • Product and platform expansion • Global automotive • LeanLogistics Recall opportunities • Strong growth in underlying business • Bridging paper and digital 49
Slide 50: Q&A
O&A Brambles
Slide 51: 2010 full-year results Analyst presentation
2010 full-year results Analyst presentation 19 August 2010
Slide 52: Disclaimer statement
Disclaimer statement The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about and observe such restrict
Slide 53: Contact details
Contact details Cathy Press Group Vice President, Capital Markets cathy.press@brambles.com +61 2 9256 5241 +61 419 290 745 James Hall Director, Investor Relations & External Communications james.hall@brambles.com +61 2 9256 5262 +61 401 524 645 53
Slide 54: Appendices
Appendices Brambles
Slide 55: Glossary of terms and measures
Appendix 1 Glossary of terms and measures Except where noted, common terms and measures used in this document are based upon the following definitions: Actual rates In the statutory financial statements, foreign currency results are translated into US dollars at the applicable actual monthly exchang
Slide 56: Glossary of terms and measures (continued)
Appendix 1 Glossary of terms and measures (continued) Except where noted, common terms and measures used in this document are based upon the following definitions: Continuing Continuing operations refers to CHEP, Recall and Brambles HQ. operations EPS Profit after tax, minority interests and Signifi
Slide 57: CHEP USA – plant operations and transportation trends
Appendix 2A CHEP USA – plant operations and transportation trends Plant cost ratio* Transportation cost ratio (Plant costs / Sales) (Transportation costs / Sales) 45% 33% 40% 35% 28% 30% 23% 25% 20% 18% 2 3 4 5 6 7 8 9 0 2 3 4 5 6 7 8 9 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 FY FY FY FY FY FY FY FY F
Slide 58: CHEP USA – productivity trends
Appendix 2B CHEP USA – productivity trends Control ratio New equipment issue ratio (Returns + Recoveries / Total issues) (Pallets purchased / Total issues) 100% 10% 8% 98% 6% 96% 4% 94% 2% 92% 0% Y 02 Y03 Y04 Y05 Y06 Y07 Y08 Y09 Y10 Y 02 Y03 Y04 Y05 Y06 Y07 Y08 Y09 Y10 F F F F F F F F F F F F F F F
Slide 59: CHEP Europe – plant operations and transportation trends
Appendix 3A CHEP Europe – plant operations and transportation trends Plant cost ratio Transportation cost ratio (Plant costs / sales) (Transportation costs / sales) 35% 28% 30% 24% 25% 20% 20% 16% 02 Y03 Y04 Y05 Y06 Y07 Y08 Y09 Y10 2 3 4 5 6 07 08 09 10 0 0 0 0 0 Y FY FY FY FY FY FY FY FY FY F F F F
Slide 60: CHEP Europe – productivity trends
Appendix 3B CHEP Europe – productivity trends Control ratio New equipment issue ratio (Returns + Recoveries / Total issues) (Pallets purchased / Total issues) 98% 10% 8% 96% 6% 94% 4% 92% 2% 90% 0% 02 Y03 Y04 Y05 Y06 Y07 Y08 Y09 Y10 2 3 4 5 6 7 8 9 0 0 0 0 0 0 0 0 0 1 Y FY FY FY FY FY FY FY FY FY F
Slide 61: Currency mix
Appendix 4 Currency mix FY10 Currency mix at Actual FX rates US$M Total USD EUR GBP AUD Other Sales revenue 4,146.8 1,366.2 1,058.1 395.4 501.6 825.5 Statutory operating 724.5 127.0 198.1 86.7 97.3 215.4 profit Net debt 1 1,759.3 1,581.2 266.8 (130.0) 34.3 7.0 1 Net debt shown after adjustments for
Slide 62: Effective tax rate
Appendix 5 Effective tax rate Actual rates FY10 FY09 US$M US$M Statutory Underlying Statutory Underlying Profit before tax 614.9 623.8 597.3 779.7 Tax expense 171.0 173.6 163.3 245.4 Tax rate 27.8% 27.8% 27.3% 31.5% 62
Slide 63: Credit facilities and debt profile
Appendix 6 Credit facilities and debt profile US$BN Committed Maturity Type Debt drawn Headroom facilities < 12 months Bank 0.3 0.2 0.1 1 – 2 years Bank/144A¹/USPP² 0.8 0.3 0.5 2 – 3 years Bank 0.7 0.1 0.6 3 – 4 years Bank 0.9 0.2 0.7 4 – 5 years 144A¹/USPP² 0.4 0.4 - > 5 years 144A¹/USPP² 0.7 0.7 -
Slide 64: Capital expenditure breakdown
Appendix 7 Capital expenditure breakdown US$M Actual rates Pallets 497 2 499 54 Containers 22% 17% Other 8% 70% 54 11% 72% 41 391 350 FY10 Cash Accrual FY10 Recall Land and P&E Pooling Containers Pallets Movement Additions 64
Slide 65: Paper prices – North America
Appendix 8 Paper prices – North America US$M Actual rates 250 210 Price per ton 170 130 90 50 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 65