BMBLF - Brambles Limited (BMBLF) Q2 2024 Earnings Call Transcript

2024-02-23 12:15:09 ET

Brambles Limited (BMBLF)

Q2 2024 Earnings Call Transcript

February 23, 2024 6:00 PM ET

Company Participants

Graham Chipchase - Chief Executive Officer

Joaquin Gil - Chief Financial Officer

Conference Call Participants

Reinhardt van der Walt - Bank of America

Andre Fromyhr - UBS

Anthony Moulder - Jefferies

Matt Ryan - Barrenjoey

Jakob Cakarnis - Jarden Limited

Justin Barratt - CLSA

Scott Ryall - Rimor Equity Research

Owen Birrell - RBC

Anthony Longo - JPMorgan

Samuel Seow - Citi

Cameron McDonald - E&P

Presentation

Graham Chipchase

Thank you for joining us for our 2024 half year results presentation. Today, I'll start by providing a summary of our performance in the half, our updated outlook statement, and key updates from the Shaping Our Future transformation program. I'll then hand over to Joaquin to take you through our detailed financials.

Turning now to the key highlights on Slide 3. Our first half performance was strong across all aspects of our business. Building on the momentum -- building on the momentum we generated in FY '23, we progressed with our transformation program and our financial results delivered in every element of our investor value proposition.

Changes in our operating environment combined with benefits from our transformation, both of which I'll outline in more detail in my presentation, significantly increased pallet availability across our operations, supporting better customer service levels and material improvements in asset efficiency. I'm also very proud of the progress across all aspects of our sustainability program and our ongoing recognition as a global leader in sustainability.

Turning to financial performance, our sales revenue growth of 10% was primarily driven by price realization through improved commercial terms that better align to our cost-to-serve. The operating leverage achieved in our underlying profit growth of 19% was particularly pleasing considering the incremental increase in plant and transport costs from higher pallet returns, as well as the investments we continue to make across our transformation program.

The stronger earnings profile combined with lower capital expenditure and increased compensation for lost assets significantly contributed to the $303 million increase in free cash flow before dividends. The return on capital invested of 21.8% increased 2 percentage points, as the strong growth in underlying profit more than offset the increased capital investment in higher cost pallets to support customers.

Finally, the uplift in earnings, our strong balance sheet and continued improvement in cash flow has given us the confidence to declare an interim dividend of $0.15 per share, representing an increase of 22% on the prior year interim dividend.

Turning to Slide 4. I will now provide some more detail on the key operating dynamics we experienced in the first half, and outline the anticipated implication for our performance through the balance of the year.

Starting with input cost inflation. Overall, we experienced a moderate increase in overall input costs in the half, primarily driven by labor inflation, which drives a large proportion of our plant costs in all regions. Following the extraordinary inflation pressures experienced over the past 2 years, deflation was seen across lumber, fuel and U.S. freight in the first half.

The lower lumber prices have also translated to lower capital cost of pallets, although these still remain above historic levels in all regions. This deflation delivered operating and capital cost benefits in the first half. However, as we go into the second half, we expect deflationary benefits to moderate, as we cycle the prior corresponding period when deflation commenced.

Turning to competition, we have seen market share remain stable in an increased competitive environment as pallet availability improves for other poolers as well as whitewood market participants. We have seen the continuation of 2 trends noted at the end of FY '23, which moderated new business growth in the period....

For further details see: