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Brambles lifts profit, full-year guidance

Nicholas Grove  |  22 Feb 2016Text size  Decrease  Increase  |  

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Nicholas Grove is a Morningstar journalist.


Brambles (BXB) on Monday announced a 2 per cent year-on-year rise in net profit after tax to US$290.9 million for the half year ended 31 December 2015.

Stripping out the rise in the US dollar, profit rose 14 per cent to US$325.4 million, the provider of pallet and reusable plastic crate pooling services said.

Basic earnings per share (EPS) rose 1 per cent to 18.5 US cents a share.

The result was achieved on the back of an 8 per cent rise in sales revenue in constant currency terms.

The largest contributors to growth were: strong new business wins in the pallets operations; increased like-for-like volumes and sales mix benefits in the developed market pallets operations; and retailer expansion in European reusable plastic crates, the company said.

Morningstar equity analyst Tim Mann said the highlight of the result was the strong organic growth in the Americas pallet segment.

"This performance largely dispels the equity market's recent fears regarding Brambles' high levels of US business inventories. A potential slowdown in pallet volume growth now looks less likely amid strong grocery-sector growth and market share gains from smaller poolers," he said.

Brambles declared a half-year dividend of 14.5 Australian cents per share, up 0.5 Australian cents on both the 2015 half-year and final dividends. The dividend is franked at 25 per cent and payable on 14 April 2016 to shareholders on records as at 5pm on Friday 11 March 2016.

The non-underwritten dividend reinvestment plan (DRP) will remain in place for this dividend at a discount of 1.5 per cent, the company said in a statement.

"The board's decision to increase the dividend reflects these strong first-half results and our view of the robustness of Brambles' medium to long-term capacity for both profit growth and cash generation," Brambles chairman Stephen Johns said.

"We expect to maintain the franking rate of 25 per cent through fiscal 2017. The retention of the non-underwritten, discounted DRP reflects our short-term funding needs.

"For future dividends, subject to financing requirements, it is our current intention to offer the DRP with no discount and to neutralise any dilutive impact on earnings per share by buying back an equal number of Brambles shares to any we issue."

Brambles CEO Tom Gorman said the pleasing first-half result reflected the company's strategy of investing in its strong network position to drive growth, as well as the delivery of indirect cost and supply chain efficiencies and a lessening of some external cost pressures.

"We continue to see considerable opportunities to invest for growth at attractive rates of return, where we can leverage the strength of our existing customer relationships, intellectual property and embedded network scale.

"As such, we continue to anticipate growth capital expenditure during fiscal 2017 to fiscal 2019 of approximately US$1 billion."

Gorman said while macroeconomic conditions remain "uncertain," he said Brambles is on track for a "strong" result in fiscal 2016 and is confident in the robustness of its longer-term outlook.

"As a result of the strong first half and continued momentum in January, we now expect to achieve constant currency sales revenue and underlying profit growth in fiscal 2016 of between 8 per cent and 10 per cent, compared with our previous guidance range of 6 per cent to 8 per cent growth," he said.


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