Brambles Limited · ASX:BXB
Brambles — FY2016 Earnings Presentation
52 slides from Brambles's earnings presentation, Aug 18, 2016
Slide 1: Full-Year 2016 Results
Full-Year 2016 Results 18 August 2016
Slide 2: Overview
Overview Tom Gorman, CEO 2 Brambles
Slide 3: Group safety performance
Group safety performance Brambles Injury Frequency Rate 25 (per million man hours) 20 15 10 5 0 FY12 FY13 FY14 FY15 FY16 3
Slide 4: Key messages
Key messages Strong FY16 result, momentum expected to continue in FY17 Sales growth 8% and Underlying Profit growth 9%, in line with upgraded guidance Accelerated revenue growth and operating leverage in developed market pooled Pallets Strong growth in emerging market Pallets Strong sales revenue mo
Slide 5: CEO retirement & succession
CEO retirement & succession Stephen Johns, Chairman 5
Slide 6: CEO retirement and succession plan
CEO retirement and succession plan Continuing to build sustainable value from a solid foundation Tom Gorman elects to retire after 7 successful years as CEO Retires as CEO and Director on 28 February 2017 Leaves the Group on 30 June 2017 Graham Chipchase appointed as successor Unanimous decision aft
Slide 7: CEO retirement and succession plan
CEO retirement and succession plan Tom Gorman decision: Right time. Brambles in great shape. Solid foundation for succession Well-established strategy and foundation for profitable growth Brambles refocused as supply-chain logistics solutions company Expanded into new markets and solutions offers To
Slide 8: Results Highlights
Results Highlights Tom Gorman, CEO 8
Slide 9: Highlights of FY16 result
Highlights of FY16 result Strong underlying performance (Continuing operations) FY16 result Change vs. FY15 Actual FX Constant FX Sales revenue US$5,535M 2% 8% Operating profit US$915M (3)% 5% Profit after tax US$557M (5)% 2% Earnings per share US35.3¢ (6)% 1% Dividends per share AU29.0¢ 4% Underlyi
Slide 10: Delivery scorecard
Delivery scorecard Key FY16 financial objectives met despite challenges FY16 Guidance FY16 Outcome Constant FX sales revenue growth of 8-10% 8% sales revenue growth at constant FX Underlying profit: US$1,015 – US$1,035M Underlying Profit translates to US$1,031M or (30 June 2015 FX – reflecting growt
Slide 11: FY16 growth trends by segment
FY16 growth trends by segment Change in constant FX Sales revenue Underlying Profit ROCI Pallets Americas 8% 8% (0.1)pp 44% of Group sales revenue Pallets Americas (Pooled)1 9% 14% 1.1pp Pallets EMEA 6% 14% 1.2pp 24% of Group sales revenue Pallets Asia-Pacific 5% 3% 0.8pp 6% of Group sales revenue R
Slide 12: Imperative
North America Recycled Strategic part of our Pallets portfolio Customer Operational Financial Multi-platform offering Key component of Strong cash flow with Imperative Strategic Tailored solutions US pooled plant low capex requirement for different supply- operations US$35M supply-chain ch
Slide 13: FY16 sales growth by segment
FY16 sales growth by segment Acceleration supported by growth capex investment Pallets: developed Pallets: emerging RPCs Containers 64% of Group revenue 10% of Group revenue 18% of Group revenue 8% of Group revenue North American Recycled Net New Business Organic 16% Price/Mix 15% 6% 12% 12% 4% 4% 5
Slide 14: Financial Analysis
Financial Analysis Zlatko Todorcevski, CFO 14
Slide 15: Group profit analysis (US$M)
Group profit analysis (US$M) Efficiencies largely offsetting cost pressures in US pallets; inflationary pressures in Latin America pallets 6 (32) (21) (5) (15) (39) 192 In line with capex to (80) support growth, primarily in Pallets and Europe RPCs Strong delivery of supply chain 1,073 efficiencies
Slide 16: Pallets Americas: results analysis
Pallets Americas: results analysis FY16 Change vs. FY15 Underlying Profit bridge (US$M) Actual Constant (US$M) (15) FX FX (19) USA Pooled 1,489 8% 8% (12) (3) (25) 105 Recycled 460 3% 4% (21) Canada 237 (5)% 7% North America 2,186 6% 7% 449 Latin America 242 (8)% 14% 418 428 Sales revenue 2,428 4% 8
Slide 17: Pallets EMEA: results analysis
Pallets EMEA: results analysis FY16 Change vs. FY15 Underlying Profit bridge (US$M) Actual Constant (US$M) FX FX 7 (2) (3) 4 Western Europe 745 (2)% 6% (36) UK & Ireland 339 (7)% - 41 Cent & East Europe 110 8% 20% Europe 1,194 (3)% 5% 391 Africa, India & M.E. 149 (2)% 16% 355 344 Sales revenue 1,343
Slide 18: Pallets Asia-Pacific: results analysis
Pallets Asia-Pacific: results analysis FY16 Change vs. FY15 Underlying Profit bridge (US$M) Actual Constant (US$M) FX FX (2) (4) 8 Australia & (9) 274 (8)% 5% New Zealand Asia 45 (2)% 6% 72 74 65 Sales revenue 319 (7)% 5% Underlying Profit 65 (9)% 3% Margin 20.4% (0.4)pp (0.4)pp FY15 Volume, Net pla
Slide 19: RPCs: results analysis
RPCs: results analysis FY16 Change vs. FY15 Underlying Profit bridge (US$M) Actual Constant 6 (US$M) (12) (1) FX FX 1 (3) 22 (14) Europe 621 7% 15% North America 199 4% 4% 145 Rest of world 172 19% 38% 132 131 Sales revenue1 992 8% 16% Underlying Profit 131 0% 10% Margin 13.2% (1.1)pp (0.7)pp ROCI 8
Slide 20: Containers: results analysis
Containers: results analysis FY16 Change vs. FY15 Underlying Profit bridge (US$M) (2) (4) Actual Constant (2) (US$M) FX FX 16 Automotive 146 (1)% 7% (14) IBCs 132 2% 10% (5) Oil & Gas1 98 (12)% (5)% 59 53 Aerospace 78 1% 5% 48 Sales revenue 454 (3)% 5% Underlying Profit 48 (18)% (11)% Margin2 10.7%
Slide 21: Indirect cost reduction update
Indirect cost reduction update Overhead costs / sales revenue Cumulative One Better cost reductions of 17% US$34M delivered to end of FY16 On track to deliver FY19 targets US$100M total program At least 2 percentage point reduction in 16% overheads to sales ratio to 13.5% Key initiatives: Bett
Slide 22: Continued investment in growth
Continued investment in growth Growth capital expenditure on pooling equipment (US$M) 407 373 267 251 217 400 300 300 FY12 FY13 FY14 FY15 FY16 FY17F FY18F FY19F Pallets RPCs Containers Group 22
Slide 23: Cash flow reconciliation
Cash flow reconciliation Change (US$M) FY16 FY15 (Actual FX) EBITDA 1,539 1,533 6 Capital expenditure (1,080) (983) (98) Proceeds from sale of property, plant and equipment 104 78 25 Working capital movement (147) 4 (151) IPEP expense 75 80 (5) Other 24 17 7 Cash Flow from Operations 514 730 (216) S
Slide 24: Balance sheet position
Balance sheet position June 2016 June 2015 Net debt US$2,622M US$2,689M Average term of committed facilities 4.3 years 3.9 years Undrawn committed facilities US$1.5B US$0.9B FY16 FY15 EBITDA/net finance costs (x) 13.5 13.7 Net debt/EBITDA (x) 1.70 1.75 24
Slide 25: Strategy & Outlook
Strategy & Outlook Tom Gorman, CEO 25
Slide 26: Executing against our strategic goals
Executing against our strategic goals FY16 progress Investing in network Growth capex to support customers and leverage network position advantage Brand and go-to-market investment Creation of BXB Digital and commitment to invest US$10M in FY17 Driving operational FY16 progress and organisatio
Slide 27: Delivering higher returns
Delivering higher returns FY16 ROCI: 15.3% FY16 Adjusted ROCI: 17.2%1 FY19 ROCI: 20% QUALITY - US durability program - Mitigation of input cost pressures - Pricing and sales mix improvements Average Capital Average Capital - Direct cost efficiencies Invested: Invested: - One Better indirect cost red
Slide 28: Indicative drivers of FY19 ROCI
Indicative drivers of FY19 ROCI 22% 20% Quantity 18% Quality Growth CAPEX: Mature Pallets ~35% 16% Emerging Pallets ~35% IFCO ~25% Key Drivers Containers ~5% 20.0% One Better Program 14% US Pallet Durability 17.2% Supply chain efficiencies 12% 10% FY16 Adjusted FY19 28
Slide 29: Outlook
Outlook (Continuing operations, US$M 30 June 2016 FX) FY17 Guidance1 Sales revenue2 growth 7-9% US$1,055M - US$1,075M Underlying Profit3 (reflecting growth 9-11%) Net interest costs US$105M - US$110M Effective tax rate on Underlying Profit 29.5% Growth capex US$400M 1 FY17 assumes Hoover-Ferguson Gr
Slide 30: Key points recap
Key points recap 1 Strong FY16 result in line with upgraded guidance Sales revenue momentum and profit leverage expected to continue 2 in FY17 Focus on disciplined capital allocation and optimal portfolio 3 composition 4 FY19 objectives reaffirmed 30
Slide 31: Appendices
Appendices Brambles
Slide 32: Glossary of terms and measures
Appendix 1 Glossary of terms and measures Except where noted, common terms and measures used in this document are based upon the following definitions: Actual currency/FX Results translated into US dollars at the applicable actual monthly exchange rates ruling in each period. Average Capital Investe
Slide 33: Glossary of terms and measures (continued)
Appendix 1 Glossary of terms and measures (continued) Except where noted, common terms and measures used in this document are based upon the following definitions: DIN The sum in a period of: - Depreciation expense; - Irrecoverable Pooling Equipment Provision expense; and - Net book value of compens
Slide 34: Glossary of terms and measures (continued)
Appendix 1 Glossary of terms and measures (continued) Except where noted, common terms and measures used in this document are based upon the following definitions: Net new business The sales revenue impact in the reporting period from business won or lost in that period and over the previous financi
Slide 35: Underlying Profit currency reconciliation
Appendix 2 Underlying Profit currency reconciliation (US$M) FY16 result FY16 result FY17 guidance (30 June 2015 FX) (actual FX) (30 June 2016 FX, excluding Oil & Gas1) 1,055 – 1,075 Growth: Growth: 1% 9-11% Growth: 9% 1,031 987 993 970 944 FY15 result FY16 result FY15 result FY16 result FY16 result
Slide 36: Brexit: Brambles well placed for transition
Appendix 3 Brexit: Brambles well placed for transition Highly diversified geographic footprint ~9% of revenues1 from the UK, ~37% revenues1 from Europe Minimal exposure to cross-border pallet movements <10% of all European volumes relate to EU/UK cross-border flows Primarily servicing the defensive
Slide 37: Summary of FY19 objectives
Appendix 4 Summary of FY19 objectives Average sales revenue growth (constant FX) “High single digits” (7-9%) US$100M by FY19 One Better indirect cost reductions (vs. FY14) (US$34M delivered to date) Average Underlying Profit growth (constant FX) Positive leverage on sales growth Growth capex ~US$1.0
Slide 38: Strongly defensive portfolio
Appendix 5 Strongly defensive portfolio FY16 sales revenue by region FY16 sales revenue by sector Eastern Africa, India & Europe Auto, 2.7% Oil & Gas, 1.8% Middle East Asia ex-Japan Packaging, 2.8% Other, 3.6% 1.1% 2.0% Aero, 1.4% Latin 7.1% America General 5.1% retail, 2.0% Japan Storage ANZ & Dist
Slide 39: Reconciliation to statutory profit
Appendix 6 Reconciliation to statutory profit Earnings Per (US$M, Continuing operations, Actual FX) Operating Profit Tax Profit after tax Share FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 Underlying Profit 993.2 986.9 (256.1) (253.2) 623.1 621.8 39.5 39.7 Acquisitions related costs (7.8) (10.3) 0.2 0.
Slide 40: Pallets: net transport cost/sales revenue
Appendix 7 Pallets: net transport cost/sales revenue 22% 20% 18% 16% 14% 12% FY12 FY13 FY14 FY15 FY16 Americas EMEA Asia-Pacific Total 40
Slide 41: Pallets: net plant costs/sales revenue
Appendix 8 Pallets: net plant costs/sales revenue 46% 42% 38% 34% 30% 26% 22% FY12 FY13 FY14 FY15 FY16 Americas EMEA Asia-Pacific Total 41
Slide 42: Pallets: Replacement capital expenditure (DIN)/sales revenue
Appendix 9 Pallets: Replacement capital expenditure (DIN)/sales revenue 14.0% 13.5% 13.0% 12.5% 12.0% FY12 FY13 FY14 FY15 FY16 42
Slide 43: Major currency exchange rates
Appendix 10 Major currency exchange rates1 USD exchange rate: USD EUR GBP AUD CAD MXN ZAR CHF BRL FY16 1.0000 1.1058 1.4719 0.7270 0.7548 0.0576 0.0689 1.0146 0.2713 Average FY15 1.0000 1.1946 1.5734 0.8301 0.8505 0.0697 0.0876 1.0605 0.3748 30 June 2016 1.0000 1.1123 1.3453 0.7467 0.7731 0.0540 0.0
Slide 44: FY16 currency mix
Appendix 11 FY16 currency mix (US$M) Total USD EUR GBP AUD CAD MXN ZAR CHF BRL Other1 Pallets 4,090 1,928 745 325 244 258 147 103 10 51 279 RPCs 992 199 465 77 76 - - 21 55 10 89 Containers 454 77 144 78 53 10 - 9 26 1 55 Sales revenue 5,535 2,205 1,355 480 373 268 147 132 91 62 423 FY16 share 100%
Slide 45: Credit facilities and debt profile
Appendix 12 Credit facilities and debt profile Committed Uncommitted Maturity Type Debt drawn Headroom facilities facilities (US$B at 30 June 2016) <12 months Bank/USPP1/Other 0.3 0.3 0.2 0.4 1 to 2 years Bank/EMTN2/Other 1.1 0.7 0.4 2 to 3 years Bank/USPP1/Other 0.6 - 0.6 3 to 4 years Bank/144A3/Ot
Slide 46: Return on Capital Invested (ROCI)
Appendix 13 Return on Capital Invested (ROCI) 25% 20% 15% 10% 5% 0% FY12 FY13 FY14 FY15 FY16 Pallets RPCs Containers Group 46
Slide 47: Capital expenditure on Property, Plant and Equipment
Appendix 14 Capital expenditure on Property, Plant and Equipment (Accruals basis, US$M) 1,035 1,095 20 878 866 908 44 93 13 141 14 88 120 294 151 150 188 97 102 569 577 592 620 542 69 80 80 70 68 FY12 FY13 FY14 FY15 FY16 Other PP&E Replacement (DIN) Pallets growth RPCs growth Containers growth 47
Slide 48: US retail trade inventories/sales vs. CHEP USA plant stock
Appendix 15 US retail trade inventories/sales vs. CHEP USA plant stock 1.32 12 1.30 10 1.28 8 1.26 6 1.24 4 1.22 1.20 2 1.18 0 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Total retail trade inventories to sales ratio, excluding auto, seasonally-adjusted
Slide 49: Addressable opportunity: Pallets
Appendix 16a Addressable opportunity: Pallets Total opportunity: US$4.1B US$1.3B US$4.8B US$0.3B US$1.1B Notes: Addressable opportunity reflects Brambles’ estimate of addressable FMCG standard-size opportunity in currently served countries only. The opportunity reflects an assessment of the curren
Slide 50: IFCO RPCs: addressable opportunity
Appendix 16b IFCO RPCs: addressable opportunity Total US$3.7B Total: US$1.7B Total: US$62M Notes: Addressable opportunity: Brambles’ 22% estimates of fresh produce RPC opportunity (grocery sector only), 49% based on recollection volumes from 23% retailers. Opportunity includes served countries onl
Slide 51: Disclaimer
Disclaimer The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about and observe such restrictions. This
Slide 52: Investor Relations & Media contacts
Investor Relations & Media contacts Investors Media Raluca Chiriacescu James Millard Manager, Investor Relations Director, Corporate Communications [email protected] [email protected] +61 2 9256 5211 +61 2 9256 5263 +61 427 791 189 +61 414 777 680 52