International logistics and pallets group, Brambles (BXB) was another company to leave a less than positive impression on investors yesterday with its 2014-15 results.
The shares fell 2.6% to $10.06 as the company revealed ambitious sales and profits targets for the coming year.
Investors were not quite as confident about the company’s future as it was when directors said in yesterday’s announcement that it would earn higher profits in 2015-16, despite worries over the "tepid” health of the global economy driven by the sluggish Chinese economy which is clearly slowing.
Brambles expects underlying profit to reach between $US1 billion ($A1.36 billion) and $US1.02 billion, growing at a rate of 6% to 8% in the year to June, 2016.
It said sales would climb at a similar rate, from the $US5.46 billion reported for the year ended June 30.
"This outlook presents continued delivery of profitable growth despite the tepid nature of the global recovery and ongoing cost pressures in our North American pallets business," said its chief executive, Tom Gorman.
"It also reflects the near-term impact of the increased investment we are making to drive long-term value for customers and shareholders."
This confidence came as Brambles’ Operating profit was US$939 million, up 1% (up 8% at constant currency).
"Underlying Profit, was US$986 million, up 3% (up 10% at constant currency), reflecting sales growth, as well as mix benefits and the delivery of direct and indirect cost efficiency programs worldwide, which more than offset the impact of higher plant and transportation costs in the US Pallets business,” directors said.
The company posted an underlying profit of $985.8 million for the year.
Mr Gorman said the company planned to spend $US1.5 billion in the next three years on programs to generate growth, including the expansion of its US pallet pool and presence in emerging markets.
“As a result, we anticipate compound annual growth in average capital invested to [financial year 2019] will be greater than the 5 per cent we forecast in December 2013,” he said.
"However, we remain committed to our objective to deliver return on capital invested of 20 per cent by [financial year 2019]. These targets will continue to be aided by concerted actions to drive cost efficiency and disciplined allocation of capital across our portfolio of businesses."
The company will pay a dividend of 14 Australian cent a share, 30% franked. That’s up from 13.5 cents a year ago. That takes the total for the year to 28 cents, from 27 cents a share.
Interestingly the company says it is reactivating its dividend reinvestment plan – so clearly it sees a need to conserve cash in the coming year.
The Board has elected to reactivate the Dividend Reinvestment Plan (DRP), on a non-underwritten basis. A price discount of 1.5% discount will apply to shares issued under the DRP for the 2015 final dividend.
Brambles’ Chairman Stephen Johns said in yesterday’s statement: “Reactivating the DRP on a non-underwritten basis provides eligible shareholders who wish to reinvest their dividends with an opportunity to do so, while providing Brambles flexibility in support of its funding strategy and future growth investment needs.”
