Brambles shares edged higher – just – yesterday after the company produced a better than expected first half performance and upgraded its outlook (and in doing so became one of the few companies to give future guidance for the rest of the year).
Despite the impact of COVID-19 and Brexit in the final months of the half, Brambles lifted revenue profit and dividend and sees better results in the six months to June.
The improvement came despite a rise in costs because of changes in consumer demand patterns and higher input costs in the half – principally from the impact of COVID and the lockdowns on retailing and other consumer=facing businesses and the surge in online sales.
For the six months to December, Brambles reported a 7% increase in sales revenue to $US2.566 billion.
This was driven by strong volume growth and price realisation in the global Pallet businesses and the contribution from the commencement of a large Australian RPC contract.
This offset COVID-19 related declines in Automotive and Kegstar (beer keg) businesses (the latter being now merged into MicroKeg, a US business of the same sort with Brambles taking a minority position).
Underlying operating profit also rose 7% to $US465 million and profit after tax was up 6% to $US295.2 million.
Brambles declared a 10 US cents a share interim dividend, up 11% from the 9 US cents a share paid previously.
This is a payout ratio of 50% and in line with Brambles’ dividend policy to payout between 45% and 60% of underlying profit after finance costs and tax.
Brambles CEO, Graham Chipchase, was happy with the first half performance, saying in the statement:
“We experienced elevated levels of demand in our key pallet businesses in the first half, as retailers raised inventories to accommodate increased levels of at-home consumption and to provide greater contingency against changes in consumer demand.
“There was also a noticeable shift within the consumer staples segment towards established, household brands which drove stronger volume growth with our largest customers.”
“Operationally, COVID-19 related changes in network dynamics and customer demand patterns resulted in additional pallet collection and repair costs, with wage inflation in most regions increasing plant costs further.
“Our focus on optimising the use of our existing asset pool to service elevated levels of demand also contributed to higher plant and transport costs in the period and limited our investment in new pallets.”
looking to the rest of the year Brambles now expects full year sales revenue growth of 4% to 6% in constant currency with improving profit margins. This is expected to lead to underlying profit growth of 5% to 7% in constant currency.
Mr Chipchase added: “The strong first-half result has allowed us to upgrade our FY21 sales revenue and earnings guidance. We remain committed to delivering Group Underlying Profit leverage and expect US margins to improve by approximately one percentage point, with the US automation programme on track for completion by the end of the fiscal year.”
The shares rose 0.19% to $10.42.
