Brambles Limited · ASX:BXB
Brambles — H1 FY2020 Earnings Presentation
43 slides from Brambles's earnings presentation, Feb 17, 2020
Slide 1: Half-year 2020 results presentation
Half-year 2020 results presentation 17 February 2020
Slide 2: Results highlights
1 Results highlights Graham Chipchase, CEO
Slide 3: 1H20 highlights
1H20 highlights • Sales revenue and earnings growth across all segments o Sales revenue growth of 7%1 reflecting volume growth across the Group, continued price realisation in the US and resilience in our EMEA business despite economic and cost headwinds in Europe o Underlying Profit up 5% (includin
Slide 4: Dividends and capital management
Dividends and capital management • Dividend payout ratio consistent with prior year o Interim dividend of US9.0 cents declared, converted and paid as AU13.38 cents and franked at 30% o The interim dividend represents a payout ratio of 50% within our targeted payout ratio range of 45-60% • Substantia
Slide 5: Leading in sustainability
Leading in sustainability Recognised as a global leader in sustainability: Rated #1 most sustainable international company Top 1% of companies analysed Maximum AAA rating 96% percentile in industry category On track to achieve ambitious 2020 sustainability goals: Better Gender Customer Better Zero D
Slide 6: Australian bushfire crisis
Australian bushfire crisis Brambles’ support for bushfire affected communities • Our Australian team is providing emergency relief, including significant in-kind support for our charitable partner Foodbank, which is providing food to affected communities CHEP’s Supply Chain team worked through • A$5
Slide 7: US customer plastic pallet trials
US customer plastic pallet trials • Ongoing plastic pallet trials to test operational functionality, asset management, pricing and overall economics • Total flows from this retailer represent less than 3.5% of Brambles global pallet flows • All major US competitors participating in trials • Trials i
Slide 8: Operating landscape and FY20 outlook
Operating landscape and FY20 outlook Operating landscape • Large addressable opportunities in both developed and emerging markets • Competition in key markets remains strong but rational • Ongoing economic uncertainty and political instability in Europe • Transport and lumber inflation in the US bus
Slide 9: Financial overview
2 Financial overview Nessa O’Sullivan, CFO
Slide 10: 1H20 results
1H20 results Summary US$m 1H20 Change vs. 1H19 • Sales growth +7% at the high end of the Group’s mid-single digit revenue growth objective Actual Constant Continuing operations • Underlying Profit +5% includes +3pt benefit FX FX from AASB 16; sales contribution to profit, Sales revenue 2,397.6 4% 7%
Slide 11: AASB 16: Leases
AASB 16: Leases 1H20 impact of new accounting standard adoption Overview 1H20 impact • Effective for Brambles on 1 July 2019 (pre-tax) • All qualifying leases recognised on balance Underlying Profit +US$12m or 3pts sheet as lease liability and right-of-use leased assets Cash Flow from • Modified ret
Slide 12: 1H20 Group sales growth
1H20 Group sales growth Volume growth and price realisation in all segments Growth across all segments Volume momentum despite increased pricing 1H20 Sales revenue growth (US$m) Price/mix and volume contribution to growth +7% +7% 4 40 54 Improved price realisation in response to inflation & higher 3
Slide 13: Group profit analysis (US$m)
Group profit analysis (US$m) Strong sales contribution more than offset direct and indirect cost increases Growth in asset pool and investment in US supply Labour and property inflation in chain programme North America, additional handling and inspection costs in Europe and anticipated US inefficien
Slide 14: CHEP Americas
CHEP Americas Strong volume growth and price realisation; US margins +1pt in 1H20 Including AASB 16 1H20 Change vs. 1H19 1H20 performance: Actual Constant • Strong sales growth +9% reflecting improved (US$m) FX FX price realisation and volume growth across the region: US 899.5 8% 8% o US +8%: Equal
Slide 15: CHEP Americas margins
CHEP Americas margins US margin increase offset by margin pressure in Canada & Latin America 1H20 contribution Key drivers of FY20 margin to CHEP Americas 1H20 margin performance outlook margin +0.2pt increase +1pt margin improvement equates to +0.6pt of segment margin Consistent with 1H • Improved
Slide 16: US pallets revenue
US pallets revenue Improved price realisation and volume growth US pallets revenue growth 1H20 revenue growth components: breakdown • Price/mix growth of 4% reflecting pricing initiatives to recover higher cost-to-serve +8% • Effective price1 +3% reflecting lower surcharge contributions in line with
Slide 17: US pallets margins
US pallets margins 1pt margin improvement delivered in 1H20; Initiatives on track to deliver 2-3pt margin improvement1 by FY22 Phasing of margin Pressures Mitigating actions improvement Progress 1H20 FY20 FY21 FY22 Supply chain cost • Annual transport and network Cost inflation out optimisation exer
Slide 18: CHEP EMEA
CHEP EMEA Strong margins and returns despite macroeconomic and cost headwinds 1H20 performance reflects: Including AASB 16 1H20 Change vs. 1H19 • Pallets revenue +5%: Solid net new wins and price Actual Constant realisation, like-for-like volumes in line with 1H19 due (US$m) FX FX to challenging eco
Slide 19: EMEA sales growth
EMEA sales growth Revenue growth of 4% despite macroeconomic headwinds CHEP EMEA revenue growth 1H20 revenue growth components: breakdown • Price/mix growth of 1% reflecting contract indexation in line with inflationary cost environment +8% +8% throughout the region 1% • Like-for-like volumes flat t
Slide 20: CHEP Asia-Pacific
CHEP Asia-Pacific Pallets growth and cost control offset impact of RPC contract loss Including AASB 16 1H20 Change vs. 1H19 1H20 performance reflects: Overall sales growth +2%: Actual Constant • Pallets revenue +4% driven by like-for-like volume (US$m) FX FX growth and price realisation in Australia
Slide 21: Cash flow
Cash flow Significant increase in Free Cash Flow before special dividend (US$m, actual FX) 1H20 1H19 Change Free Cash Flow (before special dividend) up US$108.1m reflecting: EBITDA1 812.9 717.5 95.4 • +US$56m year-on-year increase from Capital expenditure (cash basis)2 (504.1) (523.4) 19.3 AASB 16.
Slide 22: Capital expenditure
Capital expenditure Lower capital investment driven by asset efficiency and timing of non- pooling capex Change vs. 1H19 Accruals basis 1H20 (constant FX) Pooling capex to sales ratio of 19.6% in 1H20 Pooling Capex US$469m US$(11)m down from 21.4% in 1H19 Pooling capex decreased US$11m despite stron
Slide 23: Balance sheet
Balance sheet Balance sheet remains strong; Financial policy updated for AASB 16 Dec 191 Jun 192 • Increase in net debt at 31 December 2019 reflects US$718m of lease liabilities brought to account under AASB16 and Net debt US$1,535m US$98m US$674m of capital management transactions in 1H204 Average
Slide 24: Summary
Summary Strong financial performance reflects delivery of operational initiatives and defensive nature of business • Resilient revenue growth despite macroeconomic uncertainty • Initiatives underway and on track to deliver operational and financial improvements in CHEP Americas • Strong improvement
Slide 25: Half-year 2020 results presentation
Half-year 2020 results presentation 17 February 2020
Slide 26: Appendix
@) appendix
Slide 27: ESG Recognitions
Appendix 1 ESG Recognitions Rated Brambles as the • Barron’s is a highly regarded financial magazine #1 most sustainable covering US financial markets. Published by Dow Jones international company in 2019 & Company and affiliated with the Wall Street Journal • Sustainalytics is the leading independe
Slide 28: US automation programme update
Appendix 2 US automation programme update Overview of project Progress to date • ~US$160m capital investment • Plant automation project launched in 2H18 from FY19-FY21, ~5-year payback • Progress on track to meet automation • Capital investment to be fully funded by the objectives: proceeds from the
Slide 29: AASB 16: Leases - 1H20 pre-tax impact
Appendix 3a AASB 16: Leases - 1H20 pre-tax impact 1H20 pre-tax impact of AASB 16 on the Income Statement, Balance Sheet, Cashflow & ROCI Additional depreciation charge of US$57m Income Underlying Profit +US$12m Replaces operating lease charge US$(69)m statement Interest expense US$(14)m Additional i
Slide 30: FY20 AASB segment impacts
Appendix 3b FY20 AASB 16 segment impacts Underlying Cash Flow from Average Capital (US$m) Profit EBITDA Operations Invested Americas 7.0 36.2 36.2 347.4 EMEA 2.8 22.7 22.7 117.9 Asia-Pacific 2.6 9.4 9.4 82.1 Group 12.4 69.0 69.0 555.1 30
Slide 31: Sales revenue by region and sector
Appendix 4 Brambles: Sales revenue by region and sector 1H20 sales revenue by region 1H20 sales revenue by sector India, Middle Eastern Asia East, Turkey, Europe 1.2% Auto 3.8% Packaging Latin Africa 3.3% Other 2.6% America 5.7% 11.3% 7.0% General retail 2.2% USA & ANZ Canada Storage Fast- 8.3% 44.7
Slide 32: Major currency exchange rates
Appendix 5 Major currency exchange rates1 USD exchange rate: USD EUR GBP AUD CAD ZAR MXN BRL PLN NZD 1H20 1.0000 1.1070 1.2598 0.6823 0.7569 0.0675 0.0514 0.2460 0.2563 0.6455 Average 1H19 1.0000 1.1520 1.2929 0.7231 0.7593 0.0708 0.0515 0.2574 0.2683 0.6702 31 Dec 19 1.0000 1.1201 1.3111 0.6996 0.7
Slide 33: 1H20 currency mix
Appendix 6 1H20 currency mix (US$m) Total USD EUR GBP AUD CAD MXN ZAR PLN BRL NZD Other1 Sales revenue 2,398 926 533 176 171 145 111 92 42 30 28 144 1H20 share 100% 39% 22% 7% 7% 6% 5% 4% 2% 1% 1% 6% 1H19 share 100% 37% 23% 8% 8% 6% 4% 4% 2% 1% 1% 6% Net debt2 1,535 1,060 1,076 (68) (885) 50 157 117
Slide 34: Credit facilities and debt profile
Appendix 7 Credit facilities and debt profile Committed Uncommitted Maturity Type1 Debt drawn Headroom facilities facilities (US$b at 31 December 2019) <12 months Bank - 0.3 0.1 0.2 1 to 2 years Bank 0.7 - 0.1 0.6 2 to 3 years Bank 0.1 - - 0.1 3 to 4 years Bank 0.4 - - 0.4 4 to 5 years Bank/EMTN2 0.
Slide 35: Net plant and transport costs/sales revenue
Appendix 8 Net plant and transport costs/sales revenue Net transport cost/sales Net plant cost/sales revenue revenue 1H20 1H20 1H19 1H20 1H19 Ex. AASB 161 CHEP Americas 37.4% 37.9% 37.8% 23.5% 24.1% CHEP EMEA 23.3% 23.6% 23.0% 20.5% 20.4% CHEP Asia-Pacific 32.9% 33.9% 35.3% 12.7% 12.9% Group 31.5% 3
Slide 36: CHEP Americas: Underlying Profit analysis (US$m)
Appendix 9a CHEP Americas: Underlying Profit analysis (US$m) (5) (4) (18) (26) 63 7 (1) 185 184 168 1H19 Volume, Depreciation Net transport Net plant Other AASB 16 1H20 FX 1H20 Underlying price, mix 1 costs costs Underlying Underlying Profit Profit Profit (constant FX) 1 Sales growth net of volume-r
Slide 37: CHEP EMEA: Underlying Profit analysis (US$m)
Appendix 9b CHEP EMEA: Underlying Profit analysis (US$m) (8) (2) (9) 28 (8) 3 (9) 227 231 222 1H19 Volume, Depreciation Net transport Net plant Other AASB 16 1H20 FX 1H20 Underlying price, mix 1 costs costs Underlying Underlying Profit Profit Profit (constant FX) 1 Sales growth net of volume-related
Slide 38: CHEP Asia-Pacific: Underlying Profit analysis (US$m)
Appendix 9c CHEP Asia-Pacific: Underlying Profit analysis (US$m) (1) 3 (2) 2 (3) 3 62 59 57 1H19 Volume, Net transport Net plant costs Other AASB 16 1H20 FX 1H20 Underlying price, mix 1 costs Underlying Underlying Profit Profit Profit (constant FX) 1 Sales growth net of volume-related costs (excludi
Slide 39: Capital expenditure on Property, Plant and Equipment
Appendix 10 Capital expenditure on Property, Plant and Equipment (Accruals basis, US$m) 1,060 1,013 849 823 294 317 320 231 548 511 643 185 132 606 538 489 306 337 40 54 90 123 57 42 FY16 FY17 FY18 FY19 1H19 1H20 1 2 Other PP&E Replacement (DIN) Growth 1 Replacement capex in a period is the sum of D
Slide 40: Glossary of terms and measures
Appendix 11 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 41: Glossary of terms and measures
Appendix 11 Glossary of terms and measures 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 financial year, in
Slide 42: 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 43: 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 43