Brambles Limited · ASX:BXB
Brambles — FY2019 Earnings Presentation
57 slides from Brambles's earnings presentation, Aug 21, 2019
Slide 1: Full-year 2019 results presentation
Full-year 2019 results presentation 21 August 2019
Slide 2: Results highlights
1 Results highlights Graham Chipchase, CEO 2
Slide 3: FY19 result: Key messages
FY19 result Key messages • Sales revenue growth of 7%1 reflecting favourable price realisation and strong volume growth despite slower organic growth, particularly in Europe • Underlying Profit up 2%1 as strong revenue growth offset: - Group-wide input-cost inflationary pressures; and - Continued ch
Slide 4: IFCO sale complete
IFCO sale complete Use of proceeds US$2.4 billion net proceeds1 ~US$1.65 billion ~US$0.3 billion ~US$0.4 billion On-market share buy back Capital return and special Debt reduction dividend • Commenced in June 2019 • Capital return of 12 AU cents per • Net debt to EBITDA is 0.08 times2 • 6 million sh
Slide 5: Dividend policy and capital structure
Dividend policy and capital structure Move to payout ratio based dividend policy • Following the sale of IFCO, Brambles’ Board reviewed its current progressive dividend policy • Starting with FY20 interim dividend, Brambles will move to a payout ratio based dividend policy in order to: - Align share
Slide 6: Operating landscape and FY20 outlook
Operating landscape and FY20 outlook Operating landscape • Large addressable opportunities in both developed and emerging markets • Competition in key markets remains strong but rational • Slowdown in major economies, particularly in Europe including Brexit impact • Trade wars may lead to a broader
Slide 7: Financial overview
2 Financial overview Nessa O’Sullivan, CFO 7
Slide 8: 2019 financial statements
2019 financial statements Accounting standard changes & treatment of IFCO • AASB 15: Revenue from contracts with customers - Effective 1 July 2018, issue fees are recognised over the estimated cycle time between the asset being issued and returned to Brambles - Income statement and balance sheet for
Slide 9: FY19 result: Summary
FY19 result Summary US$m FY19 Change vs. FY18 • Sales growth +7%, exceeding objective of Actual Constant mid-single digit revenue growth Continuing operations FX FX • Underlying Profit +2% sales contribution to Sales Revenue 4,595.3 3% 7% profit and productivity gains partly offset by cost inflation
Slide 10: FY19 sales growth
FY19 sales growth Strong volume growth & improved price realisation across the Group Growth across all segments Volume momentum despite increased pricing FY19 Sales revenue growth (US$m) Price/mix & volume contribution to growth +7% 16 142 185 +5% Improved price realisation to 3% offset inflation &
Slide 11: Group profit analysis (US$m)
Group profit analysis (US$m) Sales contribution partly offset by inflation and other cost pressures Transport inflation in all Increase in line with pool markets, increased relocations growth to support strong due to US service center volume growth across the capacity constraints, changes Group and
Slide 12: Market cost inflation
Market cost inflation Inflationary cost pressures persist Input-cost Cost recovery FY20 inflation trends mechanisms1 expectations FY18 Inflationary pressures and Transport (opex) pricing actions weighted to 2H18 • Inflation to continue in all markets with the rate of inflation • Transport & lumber:
Slide 13: CHEP Americas
CHEP Americas Cost challenges, including inflation, partially offset by higher price FY19 Change vs. FY18 FY19 performance reflects: • Strong sales revenue growth of 7% reflects price and Actual Constant volume growth across the region: (US$m) FX FX - US price growth +3% (effective pricing1 +4%); US
Slide 14: CHEP Americas
CHEP Americas Underlying Profit decline driven by cost pressures across all businesses Transport inflation throughout the region, additional relocations due to US network Contribution to CHEP Americas capacity constraints, changes in retailer & customer behaviour, inefficiencies margin decline assoc
Slide 15: Latin America
Latin America Increased pricing and improved asset efficiency delivered in FY19 Context FY19 actions to improve outcomes Outcomes delivered • History of long cycle times in 3-yr commercial & asset plan developed Plan delivering improved the region reflecting developing New leadership team and
Slide 16: US pallets revenue
US pallets revenue Improved price realisation and solid volume growth US pallets revenue growth FY19 revenue growth components: breakdown • Price/mix growth of 3%: effective price, which includes transport and lumber surcharges +5% recognised as an offset to direct costs, increased 4% in FY19 +4% •
Slide 17: US pallets margins
US pallets margins Initiatives on track to deliver 2-3pt margin improvement1 by FY22 Phasing of margin Mitigating actions Pressures improvement Progress FY20 FY21 FY22 Supply chain • Annual transport and network cost out optimisation exercise undertaken Cost inflation during the Year Pricing/ • Cont
Slide 18: US automation programme update
US automation programme update 3-year automation plan remains on track Overview of project Progress to date • ~US$160m capital investment • Plant automation project launched in 2H18 from FY19-FY21, ~5-year payback • Progress on track • Capital investment to be fully funded by the • FY19 automation o
Slide 19: CHEP EMEA
CHEP EMEA Strong financial result despite macro-economic headwinds FY19 Change vs. FY18 FY19 performance reflects: • Revenue +8% driven by strong volume growth and Actual Constant improved price realisation across the region (US$m) FX FX • Underlying Profit margins impacted by: Europe 1,353.2 1% 5%
Slide 20: EMEA sales growth
EMEA sales growth Slowing economic conditions impacting organic sales growth CHEP EMEA revenue growth FY19 revenue growth components: breakdown • Price/mix growth of 2% reflecting the inflationary cost environment throughout the region +8% +8% • Like-for-like volumes flat to FY18 with a slowdown in
Slide 21: CHEP Asia-Pacific
CHEP Asia-Pacific Strong Underlying Profit and ROCI performance FY19 performance reflects: FY19 Change vs. FY18 • Sales revenue growth of 3% reflecting solid pricing Actual Constant and volume growth in the Australian pallets (US$m) FX FX business • Underlying Profit leverage & margin expansion Pall
Slide 22: Significant Items
Significant Items IFCO-related items and asset provision in Latin America Post- Pre-tax tax charge charge US$m FY19 Tax FY19 Comments Discontinued Operations 959 (14) 946 IFCO gain on sale 959 (14) 946 • Proceeds received on 31 May 2019 Continuing Operations (63) 9 (54) IFCO-related restructuring •
Slide 23: Cash flow
Cash flow Free cash flow performance reflects US supply chain investments (US$m, actual FX) FY19 FY18 Change Performance reflects timing difference of proceeds from FY18 asset actions & reinvestment EBITDA 1,288.0 1,290.4 (2.4) in FY19: Capital expenditure (cash basis)1 (989.4) (935.6) (53.8) • Cash
Slide 24: Cash flow
Cash flow Normalised positive free cash flow in both FY18 and FY19 (US$m, actual FX) FY19 FY18 Free Cash Flow after dividends (reported) (90) 202 Adjustment Normalisation adjustments: Proceeds from HFG joint venture loan - (150) US supply chain efficiency investments 73 17 1 Timing difference betwee
Slide 25: Capital expenditure
Capital expenditure Investment to fund growth & supply chain programmes Change vs. FY18 FY19 Pooling Capex (constant FX) • Additional capex to support higher Brexit-related retailer stocking levels Total PP&E Capex of US$1.1 billion +US$91m +9% • Lumber inflation impacts on unit pallet costs of US$8
Slide 26: IFCO sale
IFCO sale Proceeds from divestment and FY20 financial implications Proceeds Net debt Net interest Proceeds received of U$2.4b FY20 net debt FY20 net interest expense (after costs & net of cash) impacted by: impacted by: • US$450m repayment of • Capital return US$0.3b in • Lower interest expense - ea
Slide 27: Balance sheet
Balance sheet IFCO sale provides added financial flexibility June 19 June 18 • FY19 net debt reduction reflects application of IFCO sale proceeds Net debt US$98m US$2,308m Note: cash deposits expected to Average term of progressively reduce to fund capital 4.0 years 4.5 years committed facilities ma
Slide 28: AASB 16: Leases
AASB 16: Leases FY20 impact of new accounting standard adoption • Applicable from 1 July 2019 it requires a lessee to recognise all qualifying leases on the balance sheet in the form of a lease liability and right-of-use asset • Straight-lined operating lease expense will be replaced by depreciation
Slide 29: FY20 outlook
FY20 outlook Including impact of AASB 16, Brambles expects: • Sales revenue growth to be at the lower end of its mid-single digit growth objective, at constant FX, taking into account the ongoing slowdown in global economies and automotive industry; • Underlying Profit growth in line with, or slight
Slide 30: Strategy update
3 Strategy update Graham Chipchase, CEO 30
Slide 31: Our purpose
Our purpose Brambles’ purpose is to connect people with life’s essentials every day Our assets form the invisible backbone of the global supply chain Through its share and reuse model, Brambles moves more goods to more people than any other organisation The world’s biggest brands trust us with the p
Slide 32: Consistent strategic priorities
Consistent strategic priorities Grow and strengthen our Delivering, through the cycle: network advantage • Sustainable growth at returns well in excess of the cost of capital: Deliver operational and - Mid-single digit revenue growth1; organisational efficiencies - Underlying Profit leverage1; and -
Slide 33: Progress against strategic agenda
Progress against strategic agenda Significant progress made – now ready for the next phase of growth Shaping our Future Deliver New opportunities as a focused company to: Invest for Operational and excellence commercial • Transform our value proposition; Fixing the performance Re-investing • Enhance
Slide 34: External market dynamics
External market dynamics Changing environment creates challenges and opportunities • Shifting landscape in core industries - Ongoing evolution of retail: rise of e-commerce and omni-channel - Major FMCG players facing growth of private label, small and local brands - Automotive OEMs1 restructuring a
Slide 35: Growth opportunities
Growth opportunities Positioned for sustainable growth over short, medium and long term 3 2 Create future models 1 Extend the core Enhance the core • Reshaping the pooling • Expansion in developing model for the connected • Organic growth + share gain markets – e.g. Latin America, digital era in cor
Slide 36: Creating new sources of value
Creating new sources of value Customer collaboration Innovation Partnering with customers to tackle Developing a portfolio of innovative shared supply chain challenges products and services “Plant of the future” Scaling digital Using advanced technology to drive Applying digital technology across a
Slide 37: Customer collaboration
Customer collaboration Through Zero Waste World, we are partnering with customers to meet shared supply chain challenges Eradicating empty Eliminating waste Cutting out inefficiency transport miles Helping customers: Connecting our customers to: Working with customers to: • Migrate to reusable packa
Slide 38: Innovative products and services
Innovative products and services New products, platforms & services to meet customers’ evolving needs • Blue Click™ functionality Innovative • 100% recyclable and certified carbon New European neutral platform products Quarter Pallet • Patented double stacking capability • Digital-ready for proximit
Slide 39: Scaling digital
Scaling digital Accelerating deployment of digital technology to create value for Brambles and our customers Progress in FY19 Launched BRIX tracking and analytics platform for internal/external use Large-scale tracking of full-size pallets in US; asset efficiency pilots in Europe; and customer p
Slide 40: "Plant of the future"
“Plant of the future” Using technology to increase operational efficiency Roll out underway: Automated and integrated pallet Increased plant Automated sorting and element removal; throughput and platform augmented reality for directed repairs improved pallet conditioning consistency In discovery p
Slide 41: Summary
Summary • Strong progress against core strategic agenda • Well positioned for sustainable growth over short, medium and long term • Setting ambitious direction to capitalise on the opportunities for Brambles as a focused global business • Partnering with customers to remove waste and inefficiencies
Slide 42: Shaping our future
Shaping our future Brambles
Slide 43: Appendix
4 appendix 43
Slide 44: ESG Recognitions
Appendix 1 ESG Recognitions • Sustainalytics is the leading independent global provider of ESG and corporate governance research Leader” Top 1% of and ratings to investors companies analysed • Data is used widely by many investors for risk management and comprehensive valuations Top 10% of companies
Slide 45: Sales revenue by region and sector
Appendix 2 Brambles: Sales revenue by region and sector FY19 sales revenue by region FY19 sales revenue by sector India, Middle Eastern Asia East, Turkey, Europe 1.2% Auto 3.9% Africa 3.2% Packaging Other Latin 6.0% 2.6% 11.6% America 6.8% General retail 2.3% USA & ANZ Canada Fast- 8.2% 43.0% Storag
Slide 46: Detailed reconciliation of Underlying Profit to statutory earnings
Appendix 3 Detailed reconciliation of Underlying Profit to statutory earnings Operating Earnings Continuing operations Profit Tax Profit after tax Per Share (US$m, actual FX) FY19 FY18 FY19 FY18 FY19 FY18 FY19 FY18 Underlying Profit 803.7 826.1 (207.3) (198.2) 507.9 524.5 31.9 33.0 Restructuring a
Slide 47: Major currency exchange rates
Appendix 4 Major currency exchange rates1 USD exchange rate: USD EUR GBP AUD CAD ZAR MXN BRL PLN NZD FY19 1.0000 1.1404 1.2943 0.7145 0.7555 0.0706 0.0517 0.2589 0.2660 0.6712 Average FY18 1.0000 1.1950 1.3465 0.7726 0.7855 0.0779 0.0533 0.3002 0.2818 0.7111 30 Jun 19 1.0000 1.1372 1.2673 0.7005 0.7
Slide 48: FY19 currency mix
Appendix 5 FY19 currency mix (US$m) Total USD EUR AUD GBP CAD MXN ZAR PLN BRL NZD Other1 Sales revenue 4,595 1,716 1,052 360 352 268 196 180 80 59 55 277 FY19 share 100% 37% 23% 8% 8% 6% 4% 4% 2% 1% 1% 6% FY18 share 100% 36% 23% 8% 8% 6% 4% 4% 2% 1% 1% 7% Net debt2 98 610 1,131 (1,909) 34 35 140 86
Slide 49: Credit facilities and debt profile
Appendix 6 Credit facilities and debt profile Committed Uncommitted Maturity Type Debt drawn Headroom facilities facilities (US$b at 30 June 2019) <12 months Bank/144A1 0.5 0.2 0.5 0.2 1 to 2 years Bank 0.6 - - 0.6 2 to 3 years Bank 0.5 - - 0.5 3 to 4 years Bank 0.2 - - 0.2 4 to 5 years Bank/EMTN2 0
Slide 50: 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 FY19 FY18 FY19 FY18 CHEP Americas 38.9% 38.4% 24.0% 23.4% CHEP EMEA 23.5% 23.1% 20.9% 20.9% CHEP Asia-Pacific 34.7% 35.2% 12.7% 12.5% Group 32.3% 32.0% 21.6% 21.3% 1 Results Highlight
Slide 51: CHEP EMEA: Underlying Profit analysis
Appendix 8a CHEP EMEA: Underlying Profit analysis (US$m) (18) (12) (9) (14) 73 (24) 466 446 442 FY18 Volume, price, Depreciation Net transport Net plant costs Other FY19 FX FY19 Underlying mix 1 costs Underlying Underlying Profit Profit Profit (constant FX) 1 Sales growth net of volume-related costs
Slide 52: CHEP Asia-Pacific: Underlying Profit analysis
Appendix 8b CHEP Asia-Pacific: Underlying Profit analysis (US$m) (2) (1) 4 (10) 15 128 112 118 FY18 Volume, Net transport Net plant costs Other FY19 FX FY19 1 Underlying price, mix costs Underlying Underlying Profit Profit Profit (constant FX) 1 Sales growth net of volume-related costs (excluding de
Slide 53: Capital expenditure on Property, Plant and Equipment
Appendix 9 Capital expenditure on Property, Plant and Equipment (Accruals basis, US$m)1 749 849 823 1,013 1,060 294 317 320 231 202 643 606 505 538 489 42 40 54 90 124 FY15 FY16 FY17 FY18 FY19 Other PP&E Replacement (DIN)2 Growth3 1 FY15-FY18 capex number have been restated for the IFCO divestment.
Slide 54: Glossary of terms and measures
Appendix 10 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 Invest
Slide 55: Glossary of terms and measures
Appendix 10 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 56: 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 57: 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 1 Results Highlights 2 Finan