In the current gloomy market conditions, Brambles showed there was still life in the US, European and Australian economies for a company operating in a service sector that has already seen a fair bit of doom (UPS and FedEx’s earnings downgrades in the US, for example).
As a result, Brambles shares enjoyed the best trading conditions for 10 months as they rose more than 9% to $8.15. That broke the falling trend of the last 10 months.
Brambles said in a trading update to the ASX that it was expecting "solid” profit growth this year.
The company said the sales for the first 11 months of the year were up 13%, compared to the same period of 2006-07.
"Brambles has delivered a solid performance for the 11 months to the end of May 2008 with sales 13% higher than the prior corresponding period (6% in constant currency), driven mainly by volume growth across all regions of CHEP and Recall," the company said in the trading statement to the ASX.
"This has been achieved in what is a challenging economic environment in many markets.
"Brambles continues to win significant new business in all markets and this will contribute strongly to volume in 2009 and beyond. In the USA and Europe, 2,400 new contracts have been signed in the 11 month period, representing more than US$180 million in annualised sales."
Brambles said it added a contract with US meat processing giant, Tyson Foods and signed deals across Germany, Poland and China as part of a push to boost the performance of its CHEP wooden pallets business. It also said that an agreement with Wal-Mart, the world’s largest retailer, was expected "shortly".
"Excellent progress is being made in a number of strategically important growth areas for CHEP, particularly Food Service and Beverages in the USA, expansion in Germany and Poland and the emerging markets of China and India.
"Of particular significance is CHEP USA’s expansion of business with Tyson Foods, the world’s largest processor and marketer of chicken, beef and pork. This is the largest customer win by CHEP USA for several years and will make Tyson Foods one of CHEP USA’s largest customers.
"Underlying profit growth for the full year is expected to be solid, reflecting the strength of Brambles’ business models.
"Brambles is confident that it will shortly reach agreement with Wal-Mart on a positive outcome.”
CHEP’s European sales rose 12% after it won more than 2,000 contracts in the 11 months to May.
In the rest of the world, the news was just as solid
"Sales for the 11 months to the end of May 2008 were 18% higher than the prior corresponding period (7% in constant currency), with all countries performing well.
"The previously announced six-year RPC service agreement with Woolworths Limited is expected to add approximately US$90 million in aggregate sales over the next six years.
"CHEP China is progressing well, with new customer wins including Pearl River Breweries, the largest brewery in Southern China, and Nongfu Spring, China’s largest mineral water producer. CHEP China has also signed its first major automotive contract, a three-year agreement with ChangAn Ford Mazda Automotive Nanjing (CFMA).
"CHEP’s progress in India is also encouraging. Pallet trials with two major manufacturers in the FMCG sector have been completed successfully and larger scale pilot programs in both pallets and automotive containers are being implemented. Pallet shipments to CHEP’s first customer in India took place recently.
"Recall, Brambles’ document management unit boosted sales 16% as it added new customers but the company warned that its North American profit growth is expected to be affected by higher costs and restructuring."
"Brambles’ underlying profit growth for the full year – that is, before the non-recurring US$13 million profit on sale of a Madrid property in 2007 – is expected to be solid, reflecting the strength of Brambles’ business models.
"Reported sales and profit for the full year will also benefit significantly from the strength of most currencies versus the US dollar.
"Brambles’ balance sheet remains strong with committed credit facilities of US$4.0 billion of which US$1.4 billion is unutilised. No major refinancing is required before 2010."
And Brambles updated the market on the impact of rising fuel costs. It was a rare statement from a major industrial company.
"For the 11 months to the end of May, CHEP’s transportation costs as a proportion of revenue were broadly in line with the prior corresponding period. CHEP is continuing to implement a range of initiatives to minimise both its own and its customers’ transport costs.
"This includes optimising transport networks and using “on-line” auctions of its transport requirements. The recent acquisition of LeanLogistics, a leading provider of technology-based transport and supply chain solutions in the USA, will also enable CHEP to provide a new transport optimisation service to both existing and new customers.
"Brambles also has various contractual arrangements with customers which assist in the recovery of costs, including fuel."
For Wotif, the growing online accommodation operator, the market update was a bare two sentences, compared to the detail from Brambles.
"Wotif.com Holdings Limited advises that it expects its net profit after tax for the year ending 30 June 2008 to
