Brambles Limited · ASX:BXB
Brambles — H1 2019 Earnings Presentation
43 slides from Brambles's earnings presentation, Feb 18, 2019
Slide 1: Half-Year 2019 Results
Half-Year 2019 Results 18 February 2019
Slide 2: Results highlights
Results highlights Graham Chipchase
Slide 3: Key messages
Key messages Sales revenue growth of 7%1 reflecting strong volume momentum across all segments and improved price realisation in both developed and emerging markets Underlying Profit up 1%1 as strong global sales revenue and pricing actions offset: Global inflationary input-cost pressures Continued
Slide 4: 1H19 progress
1H19 progress USA: Successful implementation of surcharges and contractual price increases to align pricing with the cost-to-serve. Effective price increased 5%1 Sales revenue growth of 5% at the higher end of the historical range Americas Accelerated automation programme on schedule with 10 install
Slide 5: Brexit
Brexit Preparation processes well advanced Key potential risks: Brexit taskforce created Access to pallet and timber supply; Change in customer demand patterns; Specific Brexit outcomes Labour shortages; and remain unknown Increased/altered trade & custom regulations (e.g. mandatory Extensive scenar
Slide 6: IFCO separation update
IFCO separation update Dual-track process on track for completion in CY2019 IFCO separation pursued via dual-track demerger and sale process Process not yet sufficiently advanced to determine the method of separation Brambles’ capital structure will be evaluated as part of the IFCO separation proces
Slide 7: Financial overview
Financial overview Nessa O’Sullivan
Slide 8: 1H19 results
1H19 results Overview US$m (actual FX rates) 1H19 Change vs. 1H18 Sales growth across all operating segments Actual Constant Underlying Profit +1% as strong sales Continuing operations FX FX contribution to profit offset elevated levels of global input-cost inflation and ongoing cost challenges in S
Slide 9: 1H19 sales growth
1H19 sales growth Strong revenue momentum across CHEP & IFCO 1H19 Sales revenue growth (US$m) Group CHEP IFCO CHEP +7% growth1 +7% growth1 +5% growth1 81% of Group 19% of Group 26 revenue revenue 60 96 35 2% 60 3% 2,952 2,856 6% 5% 2,771 4% -1% IFCO 1H18 Price/Mix Like-for-like growth (constant FX)
Slide 10: Group profit analysis (US$m)
Group profit analysis (US$m) Strong sales contribution offset by ongoing cost pressures In line with Transport inflation and additional Higher cost-to-serve in Latin America, growth in the pool transport miles due to US network Canada & EMEA and increased costs capacity constraints & changing to sup
Slide 11: Transport & lumber inflation
Transport & lumber inflation ~75% of inflation recovered through indexation & surcharges Progressive cost inflation 1H19 market 2H19 recovery through inflation considerations2 indexation & surcharges1 Transport Transport Costs expected to increase in USA: +9% US and Europe, although rate of increase
Slide 12: CHEP Americas
CHEP Americas Inflation & other cost challenges partially offset by price realisation US$m 1H19 Change vs. 1H18 1H19 performance Actual Constant Strong price realisation & volume growth in US FX FX pallets US 831.7 5% 5% Effective price (including transport and fuel surcharges recognised as an offse
Slide 13: CHEP Americas
CHEP Americas Components of Underlying Profit margin decline of (2.6)pts CHEP USA CHEP Canada CHEP Latin America Total Contribution to margin decline (1.7)pts (0.5)pts (0.4)pts (2.6)pts Elevated levels of input-cost inflation Network capacity Transition from stringer Higher cost-to-serve due to cons
Slide 14: US pallets margins
US pallets margins Despite ongoing inflationary pressures, initiatives are in place to progressively deliver 2-3% margin uplift from 1H18 levels Phasing of margin On Pressures Mitigating actions improvement track Progress in 1H19 FY19 FY20 FY21 FY22 Supply chain Transport and network cost out optimi
Slide 15: CHEP EMEA
CHEP EMEA Strong margins & ROCI despite cost inflation & investment for growth US$m 1H19 Change vs. 1H18 1H19 performance Europe: Volume growth +5% driven by market share Actual Constant gains & modest like-for-like volume growth. Price FX FX growth of +1% driven by contractual indexation Europe 687
Slide 16: CHEP Asia-Pacific
CHEP Asia-Pacific Revenue and Underlying Profit growth US$m 1H19 Change vs. 1H18 1H19 performance: Actual Constant Volume growth and modest price gains in FX FX Australian pallets Pallets 172.7 (3)% 3% Successful RPC contract renewal in New Zealand & volume growth in South-East Asian Automotive RPCs
Slide 17: IFCO
IFCO Growth & efficiencies in Europe; price realisation in North America US$m 1H19 Change vs. 1H18 1H19 performance: Europe: revenue growth +7% with strong volume Actual Constant FX FX growth partially offset by contract wins with lower revenue/lower cost-to-serve customers which Europe 402.0 4% 7%
Slide 18: Corporate
Corporate Innovation, compliance & advisory fees drove higher corporate costs 1H19 performance: US$m (actual FX) 1H19 1H18 Increases in Corporate costs relate to Corporate costs (14.3) (10.7) innovation, compliance including advisory fees in relation to US tax reform and other costs BXB Digital (6.6
Slide 19: Cash flow
Cash flow Decline in prior period due to previously advised items US$m (actual FX) 1H19 1H18 Change 1H19 performance: Underlying EBITDA 795.9 801.2 (5.3) Cash Flow from Operations decline of US$73.8m includes: Capital expenditure (cash basis) (615.9) (569.2) (46.7) US$31m investment in US supply cha
Slide 20: Capital expenditure
Capital expenditure Ongoing investment in growth & US supply chain programmes Constant FX growth 1H19 Pooling Capex up 9% New market development comprises the 1H19 Pooling Capex investment in the EMEA Automotive business +US$51m +9% Pooling capex/sales: 20.2% (1H18: 20.0%) Lumber inflation impacts o
Slide 21: Balance sheet
Balance sheet Conservative balance sheet position maintained Strong balance sheet with investment 1H19 1H18 grade ratings maintained (BBB+/Baa1) EBITDA/net finance Net debt/EBITDA of 1.51x well within 17.9x 15.2x costs1 policy of <1.75x. Reduction in net debt/EBITDA due to receipt of funds from Net
Slide 22: New accounting standards: FY19 & FY20
New accounting standards: FY19 & FY20 AASB 15: Revenue from Contract with Customers and AASB 16: Leases FY19 - AASB 15: Revenue from Contracts with Customers Issue fees are now recognised over the estimated cycle time between the asset being issued and returned to Brambles Restatement of 1H18 and FY
Slide 23: Summary
Summary 1H19 results Strong sales revenue performance across all segments Improved price realisation in both EMEA and US pallets businesses IFCO demerger and sale process on schedule to complete in CY19 Interim dividend of AU 14.5 cents with one-off increased franking of 65% Outlook Cash generation
Slide 24: Half-Year 2019 Results
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Slide 25: Appendices
Appendices Brambles
Slide 26: Sales revenue by region and sector
Appendix 1a Brambles: Sales revenue by region and sector 1H19 sales revenue by region 1H19 sales revenue by sector Africa, India & Eastern Europe Asia ex-Japan Packaging Auto 3.1% Latin Middle East 2.4% 1.0% 2.1% Other America 4.2% 9.3% 6.1% General retail 1.8% Japan 0.4% USA & Storage ANZ Canada &
Slide 27: Brambles Ex-IFCO: Sales revenue by region and sector
Appendix 1b Brambles Ex-IFCO: Sales revenue by region and sector 1H19 sales revenue by region 1H19 sales revenue by sector Africa, India & Eastern Latin Middle East Europe Auto 3.9% America 4.5% 0.8% Asia ex-Japan Packaging Other 4.3% 1.0% 2.6% 11.6% Japan General 0.4% retail 2.3% ANZ 8.8% USA & Can
Slide 28: Reconciliation of Underlying Profit to statutory earnings
Appendix 2 Detailed reconciliation of Underlying Profit to statutory earnings Operating Earnings US$m (actual FX) Tax Profit after tax profit Per Share Continuing operations 1H19 1H18 1H19 1H18 1H19 1H18 1H19 1H18 Underlying Profit 504.4 518.1 (133.3) (125.9) 326.7 339.5 20.5 21.3 IFCO transaction
Slide 29: Major currency exchange rates
Appendix 3 Major currency exchange rates1 USD exchange rate: USD EUR GBP AUD CAD ZAR MXN CHF BRL PLN 1H19 1.0000 1.1520 1.2929 0.7231 0.7593 0.0708 0.0515 1.0129 0.2574 0.2683 Average 1H18 1.0000 1.1844 1.3254 0.7802 0.7922 0.0752 0.0540 1.0239 0.3111 0.2796 31 Dec 18 1.0000 1.1440 1.2690 0.7044 0.7
Slide 30: 1H19 currency mix
Appendix 4 1H19 currency mix (US$m) Total USD EUR GBP AUD CAD ZAR MXN BRL PLN CHF Other1 Sales revenue 2,856 959 838 232 181 152 90 90 36 43 35 200 1H19 share 100% 34% 29% 8% 6% 5% 3% 3% 1% 2% 1% 8% 1H18 share 100% 33% 29% 8% 7% 6% 3% 3% 2% 1% 1% 7% Net debt2 2,407 1,287 1,507 50 (739) 14 91 136 5 (
Slide 31: Credit facilities and debt profile
Appendix 5 Credit facilities and debt profile Committed Uncommitted Maturity Type Debt drawn Headroom facilities facilities (US$b at 31 December 2018) <12 months Bank/USPP1/Other 0.2 0.3 0.1 0.4 1 to 2 years Bank/144A2/Other 1.0 - 0.7 0.3 2 to 3 years Bank/Other 0.7 - 0.2 0.5 3 to 4 years Bank/Other
Slide 32: Capital expenditure on Property, Plant and Equipment
Appendix 6 Capital expenditure on Property, Plant and Equipment (Accruals basis, US$m) 973 1,061 1,023 1,192 592 637 33 89 58 317 140 231 320 202 19 46 185 742 157 663 571 590 350 374 100 59 60 62 71 39 FY15 FY16 FY17 FY18 1H18 1H19 1 Other PP&E Replacement (DIN) CHEP growth IFCO growth 1 Replacemen
Slide 33: Net plant and transport costs/sales revenue
Appendix 7 Net plant and transport costs/sales revenue Net plant cost/sales revenue Net transport cost/sales revenue 1H19 1H18 1H19 1H18 CHEP Americas 37.8% 38.2% 24.1% 23.0% CHEP EMEA 23.0% 23.1% 20.4% 20.5% CHEP Asia-Pacific 35.3% 34.9% 12.9% 12.3% IFCO 20.9% 20.6% 19.8% 20.4% Group 29.5% 29.6% 21
Slide 34: Strong price realisation and solid volume growth in US pallets
Appendix 8 Strong price realisation and solid volume growth in US pallets US pallets revenue growth breakdown 1H19 revenue growth components: Price/mix growth of 3%: Effective price, +8% which includes transport and lumber surcharges recognised as an offset to direct costs, increased 5% in 1H19 Like
Slide 35: CHEP Americas: Underlying Profit analysis
Appendix 9a CHEP Americas: Underlying Profit analysis (US$m) Components of margin decline: CHEP USA (1.7)pts CHEP Canada (0.5)pts Higher pallet repair & handling costs associated with inflation, investments in Driven by a higher cost-to-serve in CHEP Latin America (0.4)pts US pallet quality and the
Slide 36: CHEP EMEA: Underlying Profit analysis
Appendix 9b CHEP EMEA: Underlying Profit analysis (US$m) Impact of lumber inflation and higher repair & handling costs only partially Largely due to third- offset by efficiency savings party transport inflation in Europe (6) (6) (9) (6) 39 (8) In line with growth in the pool Higher cost-to-serve acr
Slide 37: CHEP Asia-Pacific: Underlying Profit analysis
Appendix 9c CHEP Asia-Pacific: Underlying Profit analysis (US$m) Higher pallet repair & Includes the benefits of asset handling costs across the recovery outcomes and the region receipt of a one-off infrastructure grant in the Asia region 5 (3) 1 (5) 59 62 57 1H18 Volume, price, mix Net plant costs
Slide 38: IFCO: Underlying Profit analysis
Appendix 9d IFCO: Underlying Profit analysis (US$m) Largely wage inflation and Includes US$2m net benefits of inefficiencies in North America movements in provisions (1) 3 (2) (1) (1) 6 Driven by pool growth in Europe Higher third-party transport inflation in North America only partially offset by e
Slide 39: 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 40: Glossary of terms and measures (continued)
Appendix 10 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/ Current period results translated into US dollars at the actual monthly exchange rates applicable in the Constant FX
Slide 41: Glossary of terms and measures (continued)
Appendix 10 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 financ
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