The logistics company Brambles Limited (ASX:BXB) released healthy financial results with underlying profit up 10% for the 1H16 period. The company also upgraded its previously stated guidance for FY16.
Brambles’ sales revenue was lifted by 8% at constant currency, accredited to new business wins, sales mix and like-for-like volume growth in its Pallets operations globally, expansion with new and existing retailers. However, the revenue declined 2% on actual currency rates. Statutory profit after tax rose 2% or 14% at constant currency, driven by margin improvement in Pallets operations worldwide.
The company established a disciplined capital allocation approach that focuses on all business units’ ability to deliver satisfactory scale and returns, resulting in lower capital expenditure growth for FY16.
Cash flow from operations was US$8 million lower than the previous interim period due to translational impact of non-US dollar earnings.
Brambles’ CEO Tom Gorman elucidated the company’s strategies: “We continue to see considerable opportunities to invest in growth at attractive rates of return, where we can leverage the strength of our existing customer relationships, intellectual property and embedded network scale. The strong profit growth in Pallets reflected sales mix benefits on new business, the continued delivery of direct cost efficiencies, the delivery of overhead savings under the One Better business improvement program, and the lessening of plant and transport cost pressures in the USA.”
Mr. Gorman further added that he is confident in Brambles’ growth potential as he anticipates for the company to post a strong result in FY16, with underlying profit growth of 8% to 10%, against the previously stated 6% to 8% growth outlook.
Net finance costs are forecasted to be lower, at between US$115 million and US$120 million, down from its earlier range of US$120 million to US$125 million.
Author: Simon Herrmann
Feb 22, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.