Brambles Limited · ASX:BXB
Brambles — H1 2014 Earnings Presentation
47 slides from Brambles's earnings presentation, Feb 19, 2014
Slide 1: Half-Year Results
Half-Year Results 19 February 2014
Slide 2: Results Highlights
Results Highlights Tom Gorman, CEO
Slide 3: Key messages
Results Highlights Key messages • Modest improvement in economic conditions in key markets supports strong sales and profit result • Pallets: return on capital up on efficiency and asset utilisation gains • RPCs: volumes up in all regions; actions underway to drive sales and offset cost impacts in N
Slide 4: We are on track to deliver against our key objectives for the year
Results Highlights We are on track to deliver against our key objectives for the year Objective Progress Annual constant currency percentage sales revenue FY14 growth expected at growth in the high single digits approximately 7% Consistent incremental improvement in Group On track; small improvement
Slide 5: Key financial outcomes for the period reflected a solid Group result
Results Highlights Key financial outcomes for the period reflected a solid Group result (Continuing operations) 1H14 result Change vs. 1H13 Actual FX Constant FX Sales revenue US$2,669M 7% 8% Operating profit US$453M 11% 11% Profit after tax US$280M 11% 9% Basic earnings per share US18.0¢ 10% 8% Und
Slide 6: Diversification and improving operating conditions driving sales revenue
Results Highlights Diversification and improving operating conditions driving sales revenue Components of sales revenue growth (US$M) Sales revenue by operating segment1 (US$M) 33 (26) 18 186 33 (+37%) 81 441 44 (+8%) 2,695 2,669 273 1,769 (+15%) (+5%) 2,486 FX 1H13 1H14 actual 1H14 constant (ex. ac
Slide 7: Economic conditions enabling more selective approach to business growth
Results Highlights Economic conditions enabling more selective approach to business growth Composition of Pallets’ sales revenue growth Contribution from net new business wins by half-year period to Pallets’ 1H14 sales revenue 9% 35 8% Constant currency sales revenue growth 30 7% Gross wins during p
Slide 8: Pallets Americas result reflects sales, profit and ROCI improvements
Results Highlights Pallets Americas result reflects sales, profit and ROCI improvements (US$M) 1H14 Change vs. 1H13 • Organic and price growth and prior year rollover of net new Actual Constant FX FX wins contribute in all regions North America1 1,011 6% 7% • Strong profit growth despite higher CHEP
Slide 9: Strong efficiency improvements amid better organic conditions in Pallets EMEA
Results Highlights Strong efficiency improvements amid better organic conditions in Pallets EMEA (US$M) 1H14 Change vs. 1H13 • Improved organic conditions, expansion in emerging markets, Actual Constant FX FX continued progress in Germany Europe 646 8% 4% • Price and sales mix improvements, plus eff
Slide 10: Pallets Asia-Pacific delivers resilient result amid muted Australian organic conditions
Results Highlights Pallets Asia-Pacific delivers resilient result amid muted Australian organic conditions (US$M) 1H14 Change vs. 1H13 • Strong new platforms (e.g. display pallet, beverage tray) growth in Actual Constant FX FX Australia ANZ 159 (8)% 3% • Asian growth reflects focus on driving dynami
Slide 11: We are seeing positive trends for capex, asset utilisation and ROCI in Pallets
Results Highlights We are seeing positive trends for capex, asset utilisation and ROCI in Pallets Pallets: ratio of annualised sales revenue Pallets: maintenance vs. growth capex to Average Capital Invested 800 16% 1.2 700 14% Total Pallets capex (US$M) 600 12% 1.1 DIN/sales revenue 500 10% 400 8% 1
Slide 12: Mixed RPCs result reflecting strong volumes but increased cost pressures
Results Highlights Mixed RPCs result reflecting strong volumes but increased cost pressures (US$M) 1H14 Change vs. 1H13 • Volume growth in all regions Actual FX Constant FX • Profit decline from not fully offsetting: Europe 289 11% 7% – Higher depreciation costs (US$5M) North America 84 5% 5% – Nort
Slide 13: North American RPCs: mitigating actions underway but short-term challenges remain
Results Highlights North American RPCs: mitigating actions underway but short-term challenges remain IFCO North America sales volume growth • Volume growth remains strong, 200 reflecting increasing penetration 180 versus cardboard 160 • Pricing pressures and pool expansion drove challenging 140 pric
Slide 14: Pallecon contributes strongly to improved Containers sales and profit result
Results Highlights Pallecon contributes strongly to improved Containers sales and profit result (US$M) 1H14 Change vs. 1H13 • Pallecon acquisition drives Actual FX Constant strong sales growth FX CHEP Automotive 79 8% 8% • Improved organic sales and Solutions new wins in CCC, Europe Auto CHEP Pallec
Slide 15: Finance Update
Finance Update Zlatko Todorcevski, CFO
Slide 16: A solid financial performance, can be built upon with actions on costs
Finance Update A solid financial performance, can be built upon with actions on costs • Strong first-half operating profit despite cost headwinds • Progress shown in line with key initiatives – Continued capital efficiency supporting ROCI growth – Solid cash-flow performance – Detailed planning unde
Slide 17: Strong 11% increase in operating profit vs. prior corresponding period
Finance Update Strong 11% increase in operating profit vs. prior corresponding period Group operating profit bridge (US$M, continuing operations) 6 13 (44) 79 (10) (1) 1 452 453 409 price/mix 1H14 actual acquisition Direct costs PMS synergies Significant Other FX 1H13 efficiencies/ Volume/ 1H14 Pall
Slide 18: Cost headwinds in Pallets largely offset through pricing and efficiencies
Finance Update Cost headwinds in Pallets largely offset through pricing and efficiencies Net transport costs to sales revenue Plant costs to sales revenue 22% 44% 42% 20% 40% 38% 18% 36% 16% 34% 32% 14% 30% 28% 12% 26% 10% 24% FY09 FY10 FY11 FY12 FY13 1H13 1H14 FY09 FY10 FY11 FY12 FY13 1H13 1H14 Ame
Slide 19: Group ROCI improvement consistent with long-term 20% objective
Finance Update Group ROCI improvement consistent with long-term 20% objective ROCI by operating segment Adjusted ROCI (excluding impact of intangibles)1 25% 20% 15% 10% 5% FY09 FY10 FY11 FY12 FY13 1H13 1H14 Pallets RPCs Containers Group Note: FY09 costs includes Significant Items within ordinary act
Slide 20: We are now in the detailed planning phase with our overheads program
Finance Update We are now in the detailed planning phase with our overheads program • Program to be delivered over five-year period to FY19 – Commitment to reduce overhead spending by US$100M from FY14 levels – Additional opportunity for management of currently planned future increases – while suppo
Slide 21: Cash Flow from Operations showed a solid improvement in the half
Finance Update Cash Flow from Operations showed a solid improvement in the half (US$M) 1H14 1H13 Change EBITDA 719 664 55 Capital expenditure (433) (422) (11) Proceeds from sale of PP&E 34 35 (1) Working capital movement 27 (16) 43 IPEP expense 50 54 (4) Provisions/other (21) (20) (1) Cash Flow from
Slide 22: Outlook & Summary
Outlook & Summary Tom Gorman, CEO
Slide 23: We are confirming our FY14 outlook in line with our previous guidance
Outlook & Summary We are confirming our FY14 outlook in line with our previous guidance1 • Continuing operations – Constant-currency sales revenue growth of approximately 7% – Underlying Profit of US$930M to US$965M (30 June 2013 FX)2 • Net finance costs at approximately US$110M (30 June 2013 FX) •
Slide 24: Key messages
Outlook & Summary Key messages • Modest improvement in economic conditions in key markets supports strong sales and profit result • Pallets: return on capital up on efficiency and asset utilisation gains • RPCs: volumes up in all regions; actions underway to drive sales and offset cost impacts in No
Slide 25: Q&A
Brambles Q&A
Slide 26: Disclaimer
Disclaimer The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about and observe such restrictions. This
Slide 27: Investor Relations contacts
Investor Relations contacts Cathy Press Group Vice President, Capital Markets cathy.press@brambles.com +61 2 9256 5241 +61 419 290 745 James Hall Senior Director, Investor Relations & Corporate Affairs james.hall@brambles.com +61 2 9256 5262 +61 401 524 645 27
Slide 28: Appendices
Brambles Appendices
Slide 29: Appendix 1: Glossary of terms and measures
Appendices Appendix 1: Glossary of terms and measures Except where noted, common terms and measures used in this document are based upon the following definitions: Actual currency/FX In the statutory financial statements, Brambles translates foreign currency results into US dollars at the applicable
Slide 30: Appendix 1: Glossary of terms and measures (continued)
Appendices Appendix 1: Glossary of terms and measures (continued) Except where noted, common terms and measures used in this document are based upon the following definitions: Net new business Brambles defines net new business wins as the change in sales revenue in the reporting period resulting fro
Slide 31: Appendix 2: 1H14 currency mix
Appendices Appendix 2: 1H14 currency mix (US$M) Total USD EUR GBP AUD Other Pallets 2,042.2 865.6 412.8 178.2 141.3 444.3 RPCs 440.9 84.4 214.2 28.1 40.0 74.2 Containers 186.2 31.9 70.3 16.4 27.4 40.2 Sales revenue 2,669.3 981.9 697.3 222.7 208.7 558.7 Operating Profit 452.9 121.0 131.6 39.0 47.2 11
Slide 32: Appendix 3: Major currency exchange rates
Appendices Appendix 3: Major currency exchange rates USD exchange rate: USD EUR GBP AUD CAD MXN ZAR 1H14 1.0000 1.3488 1.5923 0.9115 0.9546 0.0765 0.0984 Average 1H13 1.0000 1.2785 1.5981 1.0397 1.0058 0.0764 0.1177 31 December 13 1.0000 1.3807 1.6494 0.8924 0.9394 0.0765 0.0959 As at 30 June 13 1.0
Slide 33: Appendix 4: Significant Items
Appendices Appendix 4: Significant Items Continuing operations (US$M) 1H14 1H13 Underlying Profit 458.1 417.6 Significant Items: Acquisition-related costs - (4.5) Restructuring & integration costs (5.2) (4.1) Subtotal (5.2) (8.6) Operating profit 452.9 409.0 33
Slide 34: Appendix 5: Reconciliation of profit for the period
Appendices Appendix 5: Reconciliation of profit for the period (US$M) 1H14 1H13 Profit after tax – continuing operations 280.4 252.9 Discontinued operations: Operating profit 53.8 72.4 Net finance costs (0.5) (0.1) Profit on demerger 663.7 - Profit before tax 717.0 72.3 Tax expense (38.4) (22.7) Pro
Slide 35: Appendix 6: Effective tax rate
Appendices Appendix 6: Effective tax rate 1H14 1H13 Continuing operations (US$M) Statutory Underlying Statutory Underlying Profit before tax 396.0 401.2 354.4 363.0 Tax expense 115.6 117.1 101.5 102.8 Effective tax rate 29.2% 29.2% 28.6% 28.3% 35
Slide 36: Appendix 7: Key balance sheet ratios
Appendices Appendix 7: Key balance sheet ratios December 2013 June 2013 Net debt (US$M) 2,392 2,714 Net debt to net debt plus equity (%) 48.0 47.3 1H141 1H13 EBITDA/net finance costs (x) 12.6 14.0 Net debt/EBITDA (x) 1.66 1.74 1 Shown for continuing operations only. 36
Slide 37: Appendix 8: Credit facilities and debt profile
Appendices Appendix 8: Credit facilities and debt profile US$B at 31 December 2013 Committed Uncommitted Maturity Type Debt drawn Headroom facilities facilities <12 months Bank/USPP1/Other 0.2 0.2 0.2 0.2 1 to 2 years Bank/144A2/Other 0.7 - 0.3 0.4 2 to 3 years Bank/USPP1/Other 1.0 - 0.7 0.3 3 to 4
Slide 38: Appendix 9: US lumber prices
Appendices Appendix 9: US lumber prices 500 450 US$ per thousand board feet 400 350 300 250 200 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Source: Random Lengths 38
Slide 39: Appendix 10a: Pallets Americas operating profit reconciliation
Appendices Appendix 10a: Pallets Americas operating profit reconciliation (US$M) 10 (27) 32 4 (2) (3) 208 205 191 1H13 Volume/ Efficiencies/ Direct Other Significant 1H14 FX 1H14 price/mix synergies costs Items actual Constant currency 39
Slide 40: Appendix 10b: Pallets EMEA operating profit reconciliation
Appendices Appendix 10b: Pallets EMEA operating profit reconciliation (US$M) 3 (2) (2) 21 1 1 156 157 135 1H13 Volume/ Efficiencies Direct Other Significant 1H14 FX 1H14 price/mix costs Items actual Constant currency 40
Slide 41: Appendix 10c: Pallets Asia-Pacific operating profit reconciliation
Appendices Appendix 10c: Pallets Asia-Pacific operating profit reconciliation (US$M) 6 (3) (4) 37 34 33 1H13 Volume/ Direct 1H14 FX 1H14 price/mix costs actual Constant currency 41
Slide 42: Appendix 10d: RPCs operating profit reconciliation
Appendices Appendix 10d: RPCs operating profit reconciliation (US$M) 11 (9) (12) 68 58 1H13 Volume/ Direct costs Other 1H14 price/mix 42
Slide 43: Appendix 10e: Containers operating profit reconciliation
Appendices Appendix 10e: Containers operating profit reconciliation (US$M) 6 9 (3) (2) 18 8 1H13 Volume/ Direct costs Other Pallecon acquisition 1H14 price/mix 43
Slide 44: Appendix 11a: CHEP USA pallet productivity trends
Appendices Appendix 11a: CHEP USA pallet productivity trends (B4840) Control ratio New equipment issue ratio (Returns + recoveries/total issues) (Pallets purchased/total issues) 100% 8% 98% 6% 96% 4% 94% 2% 92% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1H14 FY02 FY03 FY04 FY05 F
Slide 45: Appendix 11b: CHEP Europe pallet productivity trends
Appendices Appendix 11b: CHEP Europe pallet productivity trends (B1210 and B1208) Control ratio New equipment issue ratio (Returns + recoveries/total issues) (Pallets purchased/total issues) 100% 10% 98% 8% 96% 6% 94% 4% 92% 2% 90% 0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 1H14
Slide 46: Appendix 12: Capital expenditure breakdown by nature
Appendices Appendix 12: Capital expenditure breakdown by nature (accruals basis) 1H13: total US$449M 1H14: total US$443M 30 38 15 24 106 78 298 303 Pallets RPCs Containers Other PP&E Note: Property, plant and equipment cash capex in 1H14 was US$433M compared with US$422M in 1H13 46
Slide 47: www.brambles.com
Brambles www.brambles.com