Brambles Limited · ASX:BXB
Brambles — H1 2016 Earnings Presentation
51 slides from Brambles's earnings presentation, Feb 22, 2016
Slide 1: Half-Year 2016 Results
Half-Year 2016 Results 22 February 2016
Slide 2: Overview and Results Highlights
Overview and Results Highlights Tom Gorman, CEO 2
Slide 3: Group safety performance
Group safety performance Brambles Injury Frequency Rate 25 (per million man hours) 20 15 10 5 0 FY11 FY12 FY13 FY14 FY15 1H16 Continuing businesses 1 Reported 2 1 Operations owned continuously throughout FY11 to 1H16, excluding businesses acquired or divested during that period. 2 Includes restateme
Slide 4: Guidance raised after strong result
Guidance raised after strong result FY16 sales and Underlying Profit guidance raised to 8-10% growth (constant FX) Guidance translates to US$1,015-1,035M Underlying Profit (30 June 2015 FX) FY19 financial performance objectives reaffirmed 1H16 sales growth of 8% driven by new business and organic gr
Slide 5: Highlights of 1H16 result
Highlights of 1H16 result (Continuing operations) 1H16 result Change vs. 1H15 Actual FX Constant FX Sales revenue US$2,752M (2)% 8% Operating profit US$463M (1)% 12% Profit after tax US$291M 2% 14% Earnings per share US18.5¢ 1% 13% Underlying Profit1 US$474M (2)% 10% Underlying Profit after tax US$2
Slide 6: 1H16 growth trends by segment
1H16 growth trends by segment Change in constant FX Sales revenue Underlying Profit ROCI Pallets Americas 7% 14% 1.2pp 44% of Group sales revenue Pallets EMEA 6% 10% 0.3pp 25% of Group sales revenue Pallets Asia-Pacific 5% 9% 2.2pp 6% of Group sales revenue RPCs 15% 2% (0.7)pp 17% of Group sales rev
Slide 7: Increase to FY16 guidance
Increase to FY16 guidance FY16 guidance Previous Revised Sales revenue and Underlying 6-8% 8-10% Profit growth (constant FX) Underlying Profit US$1,000-1,020M US$1,015-1,035M (30 June 2015 FX) Interest costs (30 June 2015 FX) US$120-125M US$115-120M Effective tax rate 29% No change Growth capex (30
Slide 8: 1H16 sales growth drivers
1H16 sales growth drivers Impacted by decline in Ferguson like-for-like sales 40 Rentapack, 53 3 IFCO Japan, 91 extra two (274) months of 44 Ferguson Strong contribution from US market segmentation; continued growth in Europe and emerging markets 3,026 North America and Europe beverage sales; 2,795
Slide 9: CHEP North America sales up 7%
CHEP North America sales up 7% Market segmentation strategy identifying new targets, enabling lane expansion and driving conversions of smaller customers “This is the Supply Change” campaign and solutions portfolio repositioning CHEP and garnering positive response Targeted expansion of CHEP Recycli
Slide 10: Composition of Pallets sales growth
Composition of Pallets sales growth 6.9% 6.8% 0.3% 0.4% 0.9% 0.6% 5.5% 1.2% 0.5% 4.7% 1.6% 1.1% 0.1% 1.0% 1.4% 2.1% 2.0% 1.1% 3.5% 1.9% 2.1% 2.1% FY13 FY14 FY15 1H16 Net new business Like-for-like volumes Sales mix and price Recycled Acquisitions 10
Slide 11: Strongly defensive portfolio
Strongly defensive portfolio 1H16 sales revenue by region 1H16 sales revenue by sector Africa, India & Eastern Asia ex-Japan Packaging, Auto, 2.7% Oil & Gas, 2.0% Latin Middle East Europe 1.2% 2.0% 2.3% Other, Aero, 1.4% America 3.8% 5.0% General 6.8% retail, 2.1% Japan 0.3% Storage ANZ & Dist., 7.6
Slide 12: Financial Analysis
Financial Analysis Zlatko Todorcevski, CFO 12
Slide 13: Group profit analysis (US$M)
Group profit analysis (US$M) Efficiencies largely In line with capex to offsetting cost pressures support growth, in US pallets; network primarily in Pallets and inefficiencies in RPCs Europe RPCs North America Includes US$9M 7 (17) benefit from One Better (9) (6) (5) 77 (58) Reduced inflationary pr
Slide 14: Pallets Americas: result analysis
Pallets Americas: result analysis 1H16 Change vs. 1H15 Underlying Profit bridge Actual Constant (7) (US$M) FX FX (4) (6) (1) USA Pooled 727 7% 7% 45 (13) USA Recycled 224 5% 5% Canada 130 (10)% 7% North America 1,082 5% 7% Latin America 116 (14)% 11% 217 204 190 Lean Logistics 13 15% 16% Sales reven
Slide 15: Pallets EMEA: result analysis
Pallets EMEA: result analysis 1H16 Change vs. 1H15 Underlying Profit bridge Actual Constant (US$M) 4 (2) FX FX 1 (2) 1 Mid Europe 180 (9)% 5% 17 (26) UK & Ireland 176 (8)% (2)% Iberia 112 (10)% 5% France 75 (10)% 5% Cent & East Europe 54 (1)% 17% 202 Europe 597 (8)% 4% 183 176 Africa, India & M.E. 8
Slide 16: Pallets Asia-Pacific: results analysis
Pallets Asia-Pacific: results analysis 1H16 Change vs. 1H15 Underlying Profit bridge Actual Constant (US$M) (1) FX FX 4 Australia & (7) 136 (14)% 5% New Zealand Asia 22 (2)% 7% Sales revenue 158 (13)% 5% 39 36 32 Underlying Profit 32 (10)% 9% Margin 20.3% 0.5pp 0.8pp ROCI 20.5% 1.4pp 2.2pp 1H15 Volu
Slide 17: RPCs: results analysis
RPCs: results analysis 1H16 Change vs. 1H15 Underlying Profit bridge Actual Constant 4 (6) (US$M) FX FX (4) (3) 12 (1) Europe 302 (1)% 13% (11) North America 98 5% 5% Rest of world 82 12% 38% 67 69 Sales revenue 482 2% 15% 58 Underlying Profit 58 (13)% 2% Margin 12.1% (2.2)pp (1.7)pp ROCI 7.4% (1.2)
Slide 18: Containers: results analysis
Containers: results analysis 1H16 Change vs. 1H15 Underlying Profit bridge Actual Constant (US$M) FX FX (1) 2 (2) (2) Automotive 69 (7)% 5% (3) IBCs 63 (5)% 9% (4) Oil & Gas 53 (1)% 10% Aerospace 40 1% 7% 31 25 Sales revenue 224 (4)% 7% 21 Underlying Profit 21 (31)% (20)% Margin 9.4% (3.7)pp (3.3)pp
Slide 19: Cash flow reconciliation
Cash flow reconciliation (US$M) 1H16 1H15 Change EBITDA 745 763 (18) Capital expenditure (553) (521) (32) Proceeds from sale of property, plant and equipment 49 38 11 Working capital movement (11) (27) 16 IPEP expense 40 42 (2) Other (10) (27) 17 Cash Flow from Operations 260 269 (9) Significant Ite
Slide 20: Continued investment in our growth
Continued investment in our growth Growth capital expenditure on pooling equipment (US$M) 44 14 13 141 400- 88 400 300 300 11 151 450 13 120 52 83 188 150 140 102 97 91 FY12 FY13 FY14 FY15 FY16F FY17F FY18F FY19F 1H15 1H16 Pallets RPCs Containers Group 20
Slide 21: Balance sheet position
Balance sheet position December 2015 June 2015 Net debt US$2,658M US$2,689M Average term of committed facilities 4.4 years 3.9 years Undrawn committed facilities US$1.4B US$0.9B 1H16 1H15 EBITDA/net finance costs (x) 13.7 12.9 Net debt/EBITDA (x) 1.78 1.86 21
Slide 22: Closing Remarks
Closing Remarks Tom Gorman, CEO 22
Slide 23: Executing against our strategic goals
Executing against our strategic goals 1H16 progress Investing in network Growth capex to support customers and leverage network position advantage Brand and go-to-market investment Creation of BXB Digital; appointment of Prasad Srinivasamurthy Driving operational 1H16 progress and organisation
Slide 24: Commitment to higher returns
Commitment to higher returns 1H16 ROCI: 14.7% 1H16 ROCI: 16.1%1 1H16 ROCI: 16.8%2 FY19 ROCI: >20% QUALITY - US durability program - Mitigation of input cost pressures - Pricing and sales mix improvements Average Capital Average Capital - Direct cost efficiencies Invested (ACI): Invested (ACI): - One
Slide 25: Key points recap
Key points recap 1 Strong 1H16 result with good leverage from sales to profit 2 FY16 sales revenue and Underlying Profit guidance increased 3 Keen focus on effective capital allocation across all businesses 4 FY19 objectives reaffirmed 25
Slide 26: Half-Year 2016 Results
Half-Year 2016 Results 22 February 2016
Slide 27: Appendices
Appendices Brambles
Slide 28: 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 currency/FX Results translated into US dollars at the applicable actual monthly exchange rates ruling in each period. Average Capital Investe
Slide 29: 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: DIN The sum in a period of: - Depreciation expense; - Irrecoverable Pooling Equipment Provision expense; and - Net book value of compens
Slide 30: 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: 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 31: Summary of FY19 objectives
Appendix 2 Summary of FY19 objectives Average sales revenue growth (constant FX) “High single digits” (7-9%) US$100M by FY19 One Better indirect cost reductions (vs. FY14) (US$20M delivered to date) Average Underlying Profit growth (constant FX) Positive leverage on sales growth Growth capex (30 Jun
Slide 32: Underlying Profit currency reconciliation (US$M)
Appendix 3 Underlying Profit currency reconciliation (US$M) Revised FY16 1H16 result: 1H16 result: guidance actual FX constant FX Growth: 1,015 – 1,035 8-10% 524 – 501 501 Second 495 544 half 1H16 491 485 1H16 485 1H16 532 First 448 growth growth 474 growth half 10% (2)% 10% FY15 result FY16 guidanc
Slide 33: 1H16 currency mix
Appendix 4 1H16 currency mix (US$M) Total USD EUR GBP AUD CAD ZAR MXN CHF BRL Other1 Pallets 2,046 964 367 169 121 130 58 70 5 24 138 RPCs 482 98 220 39 38 - 10 - 29 5 43 Containers 224 38 68 40 26 6 5 - 13 1 27 Sales revenue 2,752 1,100 655 248 185 136 73 70 47 30 208 1H16 share 100% 40% 24% 9% 7%
Slide 34: Major currency exchange rates
Appendix 5 Major currency exchange rates1 USD exchange rate: USD EUR GBP AUD CAD MXN ZAR CHF BRL 1H16 1.0000 1.0979 1.5245 0.7179 0.7515 0.0597 0.0722 1.0147 0.2685 Average 1H15 1.0000 1.2759 1.6180 0.8832 0.8959 0.0736 0.0911 1.0572 0.4146 31 Dec 15 1.0000 1.0928 1.4809 0.7277 0.7205 0.0575 0.0643
Slide 35: Detailed reconciliation of Underlying to statutory earnings
Appendix 6 Detailed reconciliation of Underlying to statutory earnings (US$M, continuing 1H16 1H15 1H16 1H15 1H16 1H15 operations) Underlying Significant Items Statutory Profit before interest and 474 485 (11) (19) 463 466 tax Net finance and tax costs (178) (184) 6 4 (172) (180) Profit after tax 29
Slide 36: Return on Capital Invested (ROCI)
Appendix 7 Return on Capital Invested (ROCI) 25% 20% 15% 10% 5% 0% FY11 FY12 FY13 FY14 FY15 1H15 1H16 Pallets RPCs Containers Group 36
Slide 37: Trends in use of capital
Appendix 8 Trends in use of capital Use of capital FY11-FY15 average FY16 trend Replacement pooling ~US$560M p/a - Average five-year ROCI, ex intangibles, has capex been 22% - Incremental upside from asset utilisation, operating margin improvements Organic growth pooling ~US$250M p/a - Expected to d
Slide 38: Credit facilities and debt profile
Appendix 9 Credit facilities and debt profile Committed Uncommitted Maturity Type Debt drawn Headroom facilities facilities (US$B at 31 December 2015) <12 months Bank/USPP1/Other 0.3 0.3 0.2 0.4 1 to 2 years Bank/Other 0.8 - 0.1 0.7 2 to 3 years Bank/EMTN2/Other 0.8 - 0.6 0.2 3 to 4 years Bank/USPP1
Slide 39: Group: overhead costs/sales revenue
Appendix 10 Group: overhead costs/sales revenue 18% 17% 16% 15% 14% FY11 FY12 FY13 FY14 FY15 1H15 1H16 39
Slide 40: Pallets: net transport cost/sales revenue
Appendix 11 Pallets: net transport cost/sales revenue 20% 18% 16% 14% 12% FY11 FY12 FY13 FY14 FY15 1H15 1H16 Americas EMEA Asia-Pacific Total 40
Slide 41: Pallets: net plant costs/sales revenue
Appendix 12 Pallets: net plant costs/sales revenue 46% 42% 38% 34% 30% 26% 22% FY11 FY12 FY13 FY14 FY15 1H15 1H16 Americas EMEA Asia-Pacific Total 41
Slide 42: Pallets sales revenue/Average Capital Invested
Appendix 13 Pallets sales revenue/Average Capital Invested 120% 110% 100% 90% 80% FY11 FY12 FY13 FY14 FY15 1H15 1H16 Americas EMEA Asia-Pacific Total 42
Slide 43: Pallets replacement capital expenditure
Appendix 14 Pallets replacement capital expenditure 600 14% 500 12% 400 10% 8% 300 476 465 460 6% 448 452 200 4% 100 234 226 2% 0 0% FY11 FY12 FY13 FY14 FY15 1H15 1H16 Replacement capex (US$M, LHS) DIN/sales revenue (RHS) Note: data excluded USA recycled pallet operations 43
Slide 44: CHEP USA pallet productivity trends
Appendix 15a CHEP USA pallet productivity trends (B4840) Control ratio New equipment issue ratio (returns and recoveries/total issues) (pallets purchased/total issues) 100% 8% 98% 6% 96% 4% 94% 2% 92% 0% FY11 FY12 FY13 FY14 FY15 1H16 FY11 FY12 FY13 FY14 FY15 1H16 44
Slide 45: CHEP Europe pallet productivity trends
Appendix 15b CHEP Europe pallet productivity trends (B1210 and B1208) Control ratio New equipment issue ratio (returns and recoveries/total issues) (pallets purchased/total issues) 100% 8% 98% 6% 96% 4% 94% 2% 92% 0% FY11 FY12 FY13 FY14 FY15 1H16 FY11 FY12 FY13 FY14 FY15 1H16 45
Slide 46: US inventories and pallet demand
Appendix 16 US inventories and pallet demand US retail trade inventories/sales vs. CHEP USA plant stock 1.32 12 1.30 10 1.28 8 1.26 6 1.24 4 1.22 1.20 2 1.18 0 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Total retail trade inventories to sales ratio, excluding
Slide 47: Addressable opportunity: Pallets
Appendix 17a Addressable opportunity: Pallets Total opportunity: US$4.1B US$1.3B US$4.8B US$0.3B US$1.1B Notes: Addressable opportunity reflects Brambles’ estimate of addressable FMCG standard-size opportunity in currently served countries only. The opportunity reflects an assessment of the curren
Slide 48: IFCO RPCs: addressable opportunity
Appendix 17b IFCO RPCs: addressable opportunity Total US$3.7B Total: US$1.7B Total: US$62M Notes: Addressable opportunity: Brambles’ 22% estimates of fresh produce RPC opportunity (grocery sector only), 49% based on recollection volumes from 23% retailers. Opportunity includes served countries onl
Slide 49: 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 50: Investor Relations contacts
Investor Relations contacts James Hall Vice President, Investor Relations & Corporate Affairs james.hall@brambles.com +61 2 9256 5262 +61 401 524 645 Raluca Chiriacescu Manager, Investor Relations raluca.chiriacescu@brambles.com +61 2 9256 5211 +61 427 791 189 50
Slide 51: Half-Year 2016 Results
Half-Year 2016 Results 22 February 2016