Brambles Limited · ASX:BXB
Brambles — FY2018 Earnings Presentation
53 slides from Brambles's earnings presentation, Aug 24, 2018
Slide 1: Full-Year 2018 Results
Full-Year 2018 Results 24 August 2018
Slide 2: Results highlights
Results highlights Graham Chipchase
Slide 3: Key messages
Key messages Strong revenue growth, dividends fully funded by Free Cash Flow Sales revenue growth of 6%1: Volume momentum in key markets with price realisation in US pallets, emerging markets and IFCO North America Underlying Profit in line with FY171: Profit growth in CHEP EMEA and IFCO offset by:
Slide 4: FY18 progress
FY18 progress Setting foundations for long-term sustainable growth & returns Price increases, lumber & transport surcharges in response to inflationary pressures Addressing US pallets Highest quality investment in pallet pool in 5 years performance 3-year automation programme on track and on b
Slide 5: Financial overview
Financial overview Nessa O’Sullivan
Slide 6: FY18 result
FY18 result Summary US$m FY18 Change vs. FY17 Sales growth in key CHEP & IFCO businesses Underlying Profit reflects strong performances Actual Constant Continuing operations in CHEP EMEA and IFCO offset by high levels of FX FX global inflation, lower margins in CHEP Americas Sales Revenue 5,596.6 10
Slide 7: FY18 sales growth
FY18 sales growth Strong volume growth and price realisation in both CHEP & IFCO FY18 Sales revenue growth (US$m) CHEP +5% growth1 IFCO +8% growth1 80% of Group revenue 20% of Group revenue CHEP 203 (35) 73 133 42 77 2% 5,597 5,394 1% 5,104 6% 4% Price/Mix contract losses IFCO FY17 Like-for-like gro
Slide 8: Group profit analysis (US$m)
Group profit analysis (US$m) Strong sales contribution to profit offset by cost headwinds Plant inefficiencies, increased pallet repair & handling costs in Reflects the CHEP Americas and quality Impact of RPC and depreciation of the investment in US pallets automotive contract US dollar relative to
Slide 9: Market cost inflation increases in FY18
Market cost inflation increases in FY18 Approx. two-thirds of inflation recovered by price FY18 impact Exit-rate market FY19 in US and Europe inflation expectations US$52m Labour, lumber and transport inflation rates expected to Transport remain elevated US$33m USA: +10% Surcharges, indexation a
Slide 10: CHEP Americas
CHEP Americas Solid volume growth, ongoing inflation and cost headwinds FY18 Change vs. FY17 FY18 performance reflects: Volume growth with price realisation across the region Actual Constant Margin decline of 3.3pts driven by: (US$m) FX FX CHEP USA: 2.4pts of segment decline comprising: 2pts due to
Slide 11: CHEP Americas
CHEP Americas Underlying Profit decline driven by inflation & other cost pressures Components of margin decline: CHEP USA (2.4)pts CHEP Canada (0.6)pts US$25m of transport inflation, higher transport miles due to capacity constraints CHEP Latin America (0.3)pts and changing retailer & customer In li
Slide 12: US pallets
US pallets Solid volume growth and +2% effective price realisation in 2H18 US pallets revenue growth breakdown FY18 revenue growth components: Price/mix growth of 1%: Effective price, +8% which includes transport and lumber surcharges recognised as an offset to direct costs, increased US$17m or 2% i
Slide 13: US pallets margins
US pallets margins Initiatives in place to progressively deliver 2-3pp margin improvement Phasing of margin Pressures Mitigating actions improvement Progress in FY18 FY18 FY19 FY20 FY21 FY22 Supply chain Annual transport and network cost out optimisation exercise undertaken during the year Cost infl
Slide 14: US automation programme update
US automation programme update On track with 3-year automation plan Overview of project Progress to date US$150-US$160m capital investment Automation team in place, training in progress from FY19-FY21, 4-year payback Plant automation project launched in 2H18 Capital investment to be fully funded by
Slide 15: CHEP EMEA
CHEP EMEA Strong volume growth and margins despite inflationary pressures FY18 Change vs. FY17 FY18 performance reflects: Europe pallets: volume growth of 6% and flat price Actual Constant as indexation benefits offset strategic pricing (US$m) FX FX initiatives AIME pallets: volume growth and price/
Slide 16: CHEP Asia-Pacific
CHEP Asia-Pacific Strong revenue growth in pallets and margin improvement FY18 Change vs. FY17 FY18 performance reflects: CHEP Australia RPC and automotive contract losses Actual Constant announced in 2016 which reduced Underlying Profit (US$m) FX FX by US$22m Pallets 354.4 7% 4% Excluding these ite
Slide 17: IFCO
IFCO Ongoing volume momentum, US price growth & ROCI improvement FY18 Change vs. FY17 FY18 performance reflects: Sales revenue growth of 8% driven by: Actual Constant (US$m) FX FX Like-for-like volume growth in Europe Price actions and product mix benefits in North America Europe 790.0 17% 9% Volume
Slide 18: Corporate
Corporate Corporate costs broadly flat to prior year FY18 performance reflects: FY18 FY17 Corporate segment costs broadly in line with FY17. FY18 cost of US$53.9m at constant currency was (US$m, actual FX) 1% below prior year and $56.9m at actual FX rates Corporate costs (33.5) (31.6) Increased inve
Slide 19: Significant Items
Significant Items Post-tax items include US$127.9m one-off, non-cash tax benefit (US$m, actual FX) FY18 FY17 Pre tax Tax Post tax Pre tax Tax Post tax US tax reform - 127.9 127.9 - - - Impairment of HFG joint venture - - - (120.0) - (120.0) Restructuring & integration costs (12.1) 2.7 (9.4) (65.3) 1
Slide 20: Cash flow
Cash flow Dividends fully funded by strong Free Cash Flow (US$m, actual FX) FY18 FY17 Change FY18 performance: EBITDA 1,576.2 1,484.2 92.0 Strong Free Cash Flow (before inclusion of US$150m HFG JV loan proceeds) fully funded Capital expenditure (cash basis) (1,135.6) (1,060.1) (75.5) dividends and c
Slide 21: Cash generation initiatives
Cash generation initiatives Progress in FY18, further improvement opportunities FY18 Area Initiatives FY19 – FY21 opportunities progress Capital efficiency Focus on asset efficiency to reduce pooling Asset efficiency gains in and allocation capital intensity major markets Disciplined capital allocat
Slide 22: Capital expenditure
Capital expenditure Investment in growth, new market entry and automation FY18 FY18 Pooling Capex up 10% capex/sales Constant FX growth New market development comprising ratio investments in Kegstar, Automotive and new pallet markets FY18 Pooling Capex 19.5% +US$105m +10% Unit pallet costs increased
Slide 23: Balance sheet
Balance sheet Funding profile strengthened by €500m 10-year EMTN issue June 18 June 171 Strong balance sheet with investment grade ratings maintained (BBB+/Baa1) Net debt US$2,308m US$2,573m US$265m decrease in net debt reflects surplus Free Cash Flow after dividends, Average term of cash inflow of
Slide 24: New accounting standards: FY19 & FY20
New accounting standards: FY19 & FY20 AASB 15: Revenue and AASB 16: Leases AASB 15: Issue fees to be recognised over the estimated cycle times period between the asset being issued and returned to Brambles Impact on FY18 restated comparatives Opening balance sheet to be adjusted via equity to reflec
Slide 25: Summary
Summary Meaningful progress made against strategic priorities Improved cash generation Cycle time improvement in major markets Increased investment in asset quality and capabilities Operational initiatives implemented Accelerated automation programme and global procurement initiatives; and Price rea
Slide 26: Separation of IFCO
Separation of IFCO Graham Chipchase
Slide 27: Announcement highlights
Announcement highlights Brambles intends to separate its IFCO RPC business resulting in two stand- alone, world-class businesses IFCO, a fast growing RPC pooling services provider with a strong financial position and significant growth opportunities Brambles (post demerger), a global platform poolin
Slide 28: Separation rationale
Separation rationale Creating greater focus in both Brambles and IFCO Why separate? FY18 contributions to Underlying Profit CHEP and IFCO are distinct businesses with different customer bases, offerings, financial profiles and value propositions IFCO No meaningful operational overlap or customer-rel
Slide 29: IFCO post separation
IFCO post separation Increased flexibility to pursue growth opportunities Number 1 position in most major markets FY18 key Market leader 280+ million RPCs with unmatched Servicing 300+ retailers and 13,500+ producers worldwide metrics1 scale and network 75+ service centres in 35 countries
Slide 30: IFCO: world leader in RPC pooling
IFCO: world leader in RPC pooling Strong track record and substantial growth opportunities Track record of sustained growth: Significant pipeline of growth Revenue growth (CAGR 12.2%)1 opportunities Ongoing conversion of new verticals with 17.4% existing retailers 11.9% 12.0% Winning and expanding w
Slide 31: Brambles post separation
Brambles post separation Increased focus on enhancing and extending core business #1 in most major markets FY18 key Market leader in 300+ million pallets, crates and containers and 750+ service centres platform pooling in over 55 countries metrics1 with unmatched Unrivalled ability to partner with c
Slide 32: Brambles: strong growth pipeline
Brambles: strong growth pipeline Consistent overall growth in mid-single digits Strong track record of sustainable growth: Developed markets Revenue growth (CAGR 5.6%)1 Growth with existing customers Increased penetration through conversion of one- way platforms to pooled solutions 7.8% Significant
Slide 33: Brambles' investor value proposition
Brambles’ investor value proposition Delivering long-term value and attractive shareholder returns Brambles’ ambition is to: And to deliver: Be the global leader in platform pooling Sustainable growth at returns well in excess solutions with the number one market share of the cost of capital: in all
Slide 34: Brambles' strategic priorities
Brambles’ strategic priorities Reaffirming commitment to 5 core drivers of value Grow and Increase penetration in existing markets and geographic expansion strengthen our Use technology to enhance customer experience network advantage Increased investment in pallet quality Invest in plant automation
Slide 35: Concluding comments
Concluding comments Solid FY18 financial results and decisive portfolio actions FY18 result delivered: Strong sales revenue performance Underlying Profit in-line with FY17 and EPS growth of 3% Meaningful improvement in cash flow Significant progress on strategic priorities Good progress in sustainab
Slide 36: Full-Year 2018 Results
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Slide 37: Appendices
Appendices Brambles
Slide 38: Appendix 1a: Sales revenue by region and sector
Appendix 1a Brambles: Sales revenue by region and sector FY18 sales revenue by region FY18 sales revenue by sector Africa, India & Eastern Europe Asia ex-Japan Packaging Auto 3.1% Latin Middle East 2.4% 1.0% 2.1% Other America 4.3% 9.5% 6.3% General retail 1.8% Japan 0.5% USA & Storage ANZ & Dist. C
Slide 39: Appendix 1b: Brambles Ex-IFCO sales revenue by region and sector
Appendix 1b Brambles Ex-IFCO: Sales revenue by region and sector FY18 sales revenue by region FY18 sales revenue by sector Eastern Africa, India & Asia ex-Japan Europe Auto 3.9% Latin Middle East 1.2% 2.3% Other 5.4% Packaging America 2.6% 11.8% 6.7% General retail 2.3% USA & ANZ Canada 9.4% 42.2% S
Slide 40: Reconciliation of Underlying Profit to statutory earnings
Appendix 2 Detailed reconciliation of Underlying Profit to statutory earnings Operating Earnings Continuing operations Tax Profit after tax Profit Per Share (US$m, actual FX) FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 Underlying Profit 996.7 957.5 (236.0) (247.4) 655.9 611.4 41.2 38.5 USA tax reform
Slide 41: Major currency exchange rates
Appendix 3 Major currency exchange rates1 USD exchange rate: USD EUR GBP AUD CAD ZAR MXN CHF BRL PLN FY18 1.0000 1.1950 1.3465 0.7726 0.7855 0.0779 0.0533 1.0292 0.3002 0.2818 Average FY17 1.0000 1.0950 1.2732 0.7540 0.7526 0.0737 0.0516 1.0133 0.3083 0.2545 30 Jun 18 1.0000 1.1564 1.3076 0.7348 0.7
Slide 42: FY18 currency mix
Appendix 4 FY18 currency mix (US$m) Total USD EUR GBP AUD CAD ZAR MXN BRL PLN CHF Other1 Sales revenue 5,596 1,835 1,658 449 373 297 179 175 77 78 67 408 FY18 share 100% 33% 30% 8% 7% 5% 3% 3% 1% 1% 1% 8% FY17 share 100% 35% 28% 8% 7% 5% 3% 3% 2% 1% 1% 7% Net debt2 2,308 1,255 1,618 50 (905) 46 75 1
Slide 43: Credit facilities and debt profile
Appendix 5 Credit facilities and debt profile Committed Uncommitted Maturity Type Debt drawn Headroom facilities facilities (US$b at 30 June 2018) <12 months Bank/USPP1/Other 0.1 0.3 0.1 0.3 1 to 2 years Bank/144A2/Other 1.1 - 0.5 0.6 2 to 3 years Bank/Other 0.7 - 0.2 0.5 3 to 4 years Bank/Other 0.2
Slide 44: Capital expenditure on Property, Plant and Equipment
Appendix 6 Capital expenditure on Property, Plant and Equipment (Accruals basis, US$m) 886 973 1,061 1,023 1,192 33 89 58 317 140 84 231 320 164 202 742 663 568 571 590 70 60 62 71 100 FY14 FY15 FY16 FY17 FY18 1 Other PP&E Replacement (DIN) CHEP growth IFCO growth 1 Replacement capex is the sum in a
Slide 45: Net plant and transport costs/sales revenue
Appendix 7 Net plant and transport costs/sales revenue Net plant cost/sales revenue Net transport cost/sales revenue FY18 FY17 FY18 FY17 CHEP Americas 38.4% 37.8% 23.4% 21.5% CHEP EMEA 23.1% 23.4% 20.9% 20.3% CHEP Asia-Pacific 35.2% 36.4% 12.5% 11.8% IFCO 20.4% 21.4% 20.6% 21.3% Group 29.6% 30.1% 21
Slide 46: CHEP EMEA: Underlying Profit analysis
Appendix 8a CHEP EMEA: Underlying Profit analysis (US$m) (12) (4) (8) (18) 32 78 455 423 387 FY17 Volume, price, Depreciation Net plant costs Net transport Other FY18 FX FY18 Underlying mix costs Underlying Underlying Profit Profit Profit (constant FX) 46
Slide 47: CHEP Asia-Pacific: Underlying Profit analysis
Appendix 8b CHEP Asia-Pacific: Underlying Profit analysis (US$m) 3 4 1 (2) 13 (22) 3 112 109 112 FY17 Volume, Depreciation Net plant costs Asset Other AU FY18 FX FY18 Underlying price, mix compensations Automotive Underlying Underlying Profit & RPC Profit Profit contract (constant FX) loss 47
Slide 48: IFCO: Underlying Profit analysis
Appendix 8c IFCO: Underlying Profit analysis (US$m) (10) 4 (5) (3) 7 26 137 130 118 FY17 Volume, price, Depreciation Net plant costs Net transport Other FY18 FX FY18 Underlying mix costs Underlying Underlying Profit Profit Profit (constant FX) 48
Slide 49: Glossary of terms and measures
Appendix 9 Glossary of terms and measures Except where noted, common terms and measures used in this document are based upon the following definitions: Actual currency/FX Results translated into US dollars at the applicable actual monthly exchange rates ruling in each period. Average Capital Investe
Slide 50: Glossary of terms and measures (continued)
Appendix 9 Glossary of terms and measures (continued) Except where noted, common terms and measures used in this document are based upon the following definitions: Constant currency/ Current period results translated into US dollars at the actual monthly exchange rates applicable in the Constant FX
Slide 51: Glossary of terms and measures (continued)
Appendix 9 Glossary of terms and measures (continued) Except where noted, common terms and measures used in this document are based upon the following definitions: Net new business The sales revenue impact in the reporting period from business won or lost in that period and over the previous financi
Slide 52: Disclaimer
Disclaimer 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 restrictions. This
Slide 53: Investor Relations contacts
Investor Relations contacts Sean O’Sullivan Vice President, Investor Relations & Corporate Affairs sean.osullivan@brambles.com +61 2 9256 5262 +61 412 139 711 Raluca Chiriacescu Director, Investor Relations raluca.chiriacescu@brambles.com +44 20 3880 9412 +44 7810 658044 53