Brambles Limited · ASX:BXB
Brambles — H1 2018 Earnings Presentation
42 slides from Brambles's earnings presentation, Feb 19, 2018
Slide 1: Half-Year 2018 Results
Half-Year 2018 Results 19 February 2018
Slide 2: Results Highlights
Results Highlights Graham Chipchase
Slide 3: Key messages
Key messages Strong sales revenue growth of 5% at constant currency, in line with guidance for ‘mid-single digit growth’ Underlying Profit growth of 1% at constant currency, reflecting: Previously announced items relating to the HFG joint venture and Australian RPC and automotive contracts which red
Slide 4: Financial overview
Financial overview Nessa O’Sullivan
Slide 5: 1H18 result
1H18 result Summary US$m 1H18 Change on 1H17 Sales growth across the portfolio Actual Constant Operating Profit includes US$133.8m Continuing operations FX FX reduction in Significant Items – cycling US$120m impairment of HFG Sales Revenue 2,746.1 9% 5% JV in 1H17 Underlying Profit 493.7 5% 1% Net f
Slide 6: 1H18 sales growth
1H18 sales growth Strong volume growth across the portfolio, pricing broadly flat 1H18 Sales revenue growth 1H18 Sales revenue by segment1 (US$m)1 IFCO US$542.8m CHEP Americas (20% of Group) 91 US$1,082.3m (1H18 growth of 9%) (39% of Group) (1H18 growth of 5%) (12) 41 53 CHEP Asia-Pacific 2,746 US$2
Slide 7: Group profit analysis (US$m)
Group profit analysis (US$m) Profit growth despite cost pressures in North America and Europe Reflects the depreciation of the US dollar relative to other operating In line with higher equipment currencies, particularly the Euro balances to support strong Increased pallet repair & volume growth hand
Slide 8: Market cost inflation increases in 1H18
Market cost inflation increases in 1H18 Further acceleration noted in December and January Transport inflation Lumber inflation Increased economic activity, labour shortages and Improved economic activity in Europe, import regulatory changes reducing market capacity. tariffs and a resurgent housing
Slide 9: CHEP Americas
CHEP Americas Strong volume momentum offset by cost pressures in US pallets 1H18 Change vs. 1H17 1H18 performance reflects: Actual Constant Improved sales momentum in US pallets and overall (US$m) FX FX market share gains US 779.7 4% 4% Double-digit revenue growth in Latin America pallets Canada 132
Slide 10: US pallets
US pallets Return to historic levels of sales volume growth and market share gains US pallets revenue growth breakdown 1H18 +4% revenue growth Net new business wins driven by 1H18 +8% contract wins and contributions from contracts won in 2H17 Like-for-like volumes reflect growth with 4% existing cus
Slide 11: CHEP Americas
CHEP Americas Cost pressures in US pallets key driver of Underlying Profit decline Pallet repair & handling costs and other plant inefficiencies Mitigating actions to In line with pallet pool growth in US pallets address increased costs US$8m of transport inflation and (6) higher transport miles due
Slide 12: CHEP EMEA
CHEP EMEA Strong growth and margins maintained despite cost and competitive pressures 1H18 Change vs. 1H17 1H18 performance Strong volume growth across the region and price Actual Constant (US$m) FX FX increases in the Africa, India & Middle East pallet businesses Europe 671.6 13% 6% Europe pallets
Slide 13: CHEP Asia-Pacific
CHEP Asia-Pacific Profit growth and increased returns despite revenue decline 1H18 Change vs. 1H17 1H18 performance Actual Constant Sales revenue decline driven by the loss of a large (US$m) RPC contract and wind-down of the automotive FX FX industry in Australia Pallets 178.5 7% 4% Excluding the im
Slide 14: IFCO
IFCO Strong sales growth and improvement in returns 1H18 Change vs. 1H17 1H18 performance Actual Constant Strong sales revenue performance reflected: (US$m) FX FX Europe: growth with new and existing customers; Europe 387.8 16% 9% North America: primarily price and product mix benefits; and North Am
Slide 15: Corporate
Corporate Overhead cost reductions offset full six-month impact of HFG losses 1H18 1H17 1H18 performance Corporate cost reductions due to lower (US$m, actual FX) indirect costs including a reduction in share-based payments expense Corporate costs (10.7) (17.4) BXB Digital costs broadly in line with
Slide 16: Significant Items
Significant Items 1H18 after tax benefit of US$127.2m, including US$130.1m credit to tax expense (US$m, actual FX) 1H18 1H17 Pre tax Tax Post tax Pre tax Tax Post tax US tax rate change - 130.1 130.1 - - - Restructuring & integration costs (4.6) 1.8 (2.8) (17.9) 5.4 (12.5) Acquisition-related costs
Slide 17: Cash flow
Cash flow Material improvement in cash flow across the Group (US$m, actual FX) 1H18 1H17 Change 1H18 performance EBITDA 776.8 732.8 44.0 Cash capital expenditure increased due to timing of capex payments. On an Capital expenditure (569.2) (556.0) (13.2) accruals basis, capital expenditure at actual
Slide 18: Capital expenditure
Capital expenditure Cycle time improvements offset higher pallet costs Capex on Property Plant & Equipment (PP&E) (actual FX rates) 1H18 constant-currency capex on PP&E Year-on-year increase of US$65m including US$20m of FX increased US$45 million or 9% reflecting: US$592m Constant FX growth US$527m
Slide 19: US tax reform
US tax reform One-off benefit to 1H18 tax expense of US$130.1m FY18 implication One-off reduction in Group’s deferred tax liabilities following USA federal income tax rate reduction from 35% to 21% resulting in a Significant Item credit in 1H18 of US$130.1m As required under Accounting Standards, 1H
Slide 20: Balance sheet
Balance sheet Funding profile strengthened by €500m EMTN issue December 17 June 17 Strong balance sheet US$134.7m increase in net debt Net debt US$2,707m US$2,573m including US$84m driven by FX Average term of movements 4.7 years 3.7 years committed facilities €500m 10-year EMTN issued in Undrawn co
Slide 21: Strategic update
Strategic update Graham Chipchase
Slide 22: Focus on the core drivers of value
Focus on the core drivers of value Progress against strategic priorities Grow and strengthen our Deliver operational and Drive disciplined capital allocation network advantage organisational efficiencies and improved cash generation Continued to grow scale and density Network optimisation and Asset
Slide 23: Focus on the core drivers of value
Focus on the core drivers of value Progress against strategic priorities Innovate to create new value Develop world-class talent BXB Digital trials to evaluate Continuous improvement in safety opportunities to improve asset performance as part of our efficiency and create real value for commitment t
Slide 24: Outlook
Outlook By delivering against its strategic objectives, Brambles expects to deliver sustainable growth and returns well in excess of the Company’s cost of capital: Sales revenue growth is expected to be in the mid-single digits, primarily driven by growth with existing customers, the ongoing convers
Slide 25: Summary
Summary Key financial objectives 1H18 performance Sales revenue growth in the mid-single digits 5% growth Underlying Profit growth in excess of sales revenue growth 1% growth Free Cash Flow to fully fund capital expenditure and dividends up US$89m Return On Capital Invested in the mid-teens 16.2% 25
Slide 26: Half-Year 2018 Results
Half-Year 2018 Results 19 February 2018
Slide 27: Appendices
Appendices Brambles
Slide 28: Sales revenue by region and sector
Appendix 1 Sales revenue by region and sector 1H18 sales revenue by region 1H18 sales revenue by sector Eastern Africa, India & Asia ex-Japan Packaging Europe Auto 3.1% Latin Middle East 1.0% 2.1% Other 3.4% America 4.2% 9.3% 6.2% General retail 1.9% Japan 0.5% USA & Storage ANZ Canada & Dist. Fast-
Slide 29: Detailed reconciliation of Underlying Profit to statutory earnings
Appendix 2 Detailed reconciliation of Underlying Profit to statutory earnings Operating Earnings Per Continuing operations Tax Profit after tax Profit Share (US$m, actual FX) 1H18 1H17 1H18 1H17 1H18 1H17 1H18 1H17 Underlying Profit 493.7 470.6 (118.3) (123.4) 322.7 297.1 20.3 18.7 Change in US ta
Slide 30: Major currency exchange rates
Appendix 3 Major currency exchange rates1 USD exchange rate: USD EUR GBP AUD CAD ZAR MXN CHF BRL PLN 1H18 1.0000 1.1844 1.3254 0.7802 0.7922 0.0752 0.0540 1.0239 0.3111 0.2796 Average 1H17 1.0000 1.0969 1.2781 0.7522 0.7551 0.0720 0.0510 1.0127 0.3035 0.2516 31 Dec 17 1.0000 1.1940 1.3435 0.7795 0.7
Slide 31: 1H18 currency mix
Appendix 4 1H18 currency mix (US$m) Total USD EUR GBP AUD CAD ZAR MXN BRL PLN CHF Other1 Sales 2,746 906 805 220 188 150 84 83 40 36 35 199 revenue 1H18 share 100% 33% 29% 8% 7% 6% 3% 3% 2% 1% 1% 7% 1H17 share 100% 35% 28% 8% 8% 5% 3% 3% 2% 1% 1% 6% Net debt2 2,707 1,439 1,749 157 (1,018) 67 94 120
Slide 32: Credit facilities and debt profile
Appendix 5 Credit facilities and debt profile Committed Uncommitted Maturity Type Debt drawn Headroom facilities facilities (US$b at 31 December 2017) <12 months Bank/EMTN1/Other 0.6 0.3 0.7 0.2 1 to 2 years Bank/USPP2/Other 1.0 - - 1.0 2 to 3 years Bank/144A3/Other 1.0 - 0.5 0.5 3 to 4 years Bank/O
Slide 33: Capital expenditure on Property, Plant and Equipment
Appendix 6 Capital expenditure on Property, Plant and Equipment (Accruals basis, US$m) 1,061 1,023 973 886 89 58 140 84 231 320 164 202 592 527 46 54 157 663 127 568 571 590 321 350 70 60 62 71 25 39 FY14 FY15 FY16 FY17 1H17 1H18 1 Other PP&E Replacement (DIN) CHEP growth IFCO growth 1 Replacement c
Slide 34: Net plant and transport costs/sales revenue
Appendix 7 Net plant and transport costs/sales revenue Net plant cost/sales revenue Net transport cost/sales revenue 1H18 1H17 1H18 1H17 CHEP Americas 38.8% 37.4% 23.3% 21.7% CHEP EMEA 23.2% 23.2% 20.6% 19.7% CHEP Asia-Pacific 34.9% 34.8% 12.4% 11.8% IFCO 20.8% 21.6% 20.6% 21.1% Group 29.9% 29.8% 21
Slide 35: CHEP EMEA: Underlying Profit analysis (US$m)
Appendix 8a CHEP EMEA: Underlying Profit analysis (US$m) (6) (2) 13 (4) (1) 26 219 206 193 1H17 Volume, price, Depreciation Net plant costs Net transport Other 1H18 FX 1H18 Underlying mix costs Underlying Underlying Profit Profit Profit (constant FX) 35
Slide 36: CHEP Asia-Pacific: Underlying Profit analysis (US$m)
Appendix 8b CHEP Asia-Pacific: Underlying Profit analysis (US$m) 7 (10) 1 2 4 59 57 55 1H17 Volume, Depreciation Other AU Automotive 1H18 FX 1H18 Underlying price, mix & RPC contract Underlying Underlying Profit loss Profit Profit (constant FX) 36
Slide 37: IFCO: Underlying Profit analysis (US$m)
Appendix 8c IFCO: Underlying Profit analysis (US$m) (3) 9 (2) 3 (1) 64 61 58 1H17 Volume, price, Depreciation Net transport Other 1H18 FX 1H18 Underlying mix costs Underlying Underlying Profit Profit Profit (constant FX) 37
Slide 38: 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 39: 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/FX Current period results translated into US dollars at the actual monthly exchange rates applicable in the comparable
Slide 40: 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 41: 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 42: Investor Relations contacts
Investor Relations contacts Sean O’Sullivan Vice President, Investor Relations 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 42