Brambles upbeat about future earnings

Brambles has reported resilient sales and a strong cash flow performance for the year ending 30 June 2009. Sales revenue from continuing operations was up 1% (down 8% in actual currency) to US$4.0 billion, driven by new business wins (net of any losses) of approximately USD 100 million and price/mix gains in both CHEP and Recall offsetting weak organic volumes.
Underlying profit was USD 900.6 million, a decrease of 8% (down 16% in actual currency). The difficult economic conditions particularly impacted CHEP’s automotive sector (down 23%), gave rise to increased plant costs in CHEP and drove down recycled paper revenue in Recall’s Secure Destruction Services6 (SDS).
Excluding automotive and SDS, group sales revenue increased 3% and Underlying profit decreased 5%, a resilient result in the context of declining retail sales in the United States and key European markets during the year.
The result also reflects the continued investment in growth initiatives such as China and India. Future growth will be driven by a combination of this investment, continuing new business wins, general operating leverage and any upswing in automotive and SDS paper revenues as economies recover.
During FY09, the company renewed US$1.9 billion of debt facilities for terms between 3 and 5 years, and at balance date had undrawn committed bank facilities totalling US$1.2 billion.
The chief executive officer of Brambles, Mike Ihlein, said: “I am pleased that we have been able to drive revenue and cash flow growth across our business, with net new wins offsetting declines in organic volumes that reflected worsening global economic conditions in the last 9 months of the financial year. Our balance sheet also remains strong, with a prudent level of debt and substantial undrawn committed credit facilities.
“Even though our underlying profitability in FY09 has been adversely affected by a number of factors, we expect many of those will turn around quickly when markets improve.
“This result demonstrates the continued resilience of our businesses. CHEP is a global business helping make the world’s supply chains more efficient, providing visibility to supply chain costs and delivering value for customers. Recall is a global leader in document and information management. The power of our value propositions, even in difficult times is shown by our ability to win considerable new business during the past year.”
Major initiatives on track and will help underpin future performance
Brambles is in line or ahead of plan with delivery of the previously-announced initiatives to improve cost structures, underpin future operating performance over the medium to long-term and meet customer requirements. These initiatives include the CHEP USA pallet quality program, the facilities and operations rationalisation program and the CHEP USA accelerated pallet scrapping program, all of which will deliver future benefits to the company. In addition, the new arrangements with Walmart have been successfully implemented Brambles well placed to accelerate financial performance as economies recover Brambles has largely offset weakness in organic volumes with considerable net new business wins in all key geographies of both CHEP and Recall. This is despite challenging trading conditions across the globe, including a very weak automotive sector and exceptionally low recycled paper revenues.
The company’s initiatives to deal with the economic downturn, address customer requirements, improve cost structures and realise efficiencies will provide a solid foundation to drive future operating performance. It will also continue its investment program for medium to long-term growth in countries and regions such as China, India and Central and Eastern Europe.
Recent early signs of improving macro-economic stability in a number of markets are  encouraging. In particular, the de-stocking by Brambles’ customers that has been evident in the last year appears to be coming to an end. An improvement in economic conditions will, in due course, positively impact the Company’s major customers as they return to growth, which in turn will benefit Brambles due to its strong underlying business models and robust new business pipeline.
Mr Ihlein concluded, “Even in a severe economic downturn, Brambles has been able to deliver sales revenue growth. As global markets recover, we should experience a return to our traditional stronger rate of sales revenue growth reflecting both organic growth and new business wins together with expected improvements in the automotive sector and better recycled paper revenues. Combined with operating leverage in the pallet business in an upturn, an ongoing focus on cash generation and a solid balance sheet, Brambles is well placed to accelerate financial performance as economies recover.”

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