26 WESTERN PALLET
Brambles Financial Result Features U.S. Margin Growth
Despite a range of challenges, Brambles delivered sales and earnings growth across all our segments and materially improved Group cash flow generation in the first half of 2020, according to Brambles’ CEO, Graham Chipchase.
“Our operating environment in the first half was characterized by increasing macroeconomic uncertainty and ongoing political instability, particularly evident in major European markets. In the US, while transport and lumber inflation continued to moderate, labor and property costs continued to increase,” he said.
“In this context, our first-half sales performance reflects the resilient nature of our business as we continue to expand with new and existing customers despite price realization to recover higher costs in most markets. Sales revenue growth of 7% was particularly strong, and above our guidance range, as the anticipated moderation in like-for-like volumes across our European pallet and automotive businesses was offset by customer contract timing benefits in the US pallet business which are not expected to repeat in the second half of the year.
“Underlying Profit growth of 5% was in line with guidance and included initial benefits from supply chain and asset management initiatives in the Americas region. As anticipated, margins in our US business started to improve with a one percentage point margin increase delivered in the half. This is in line with our stated objective to improve US margins by 2-3 percentage points through a combination of pricing, efficiency gains, and cost-out initiatives.”
In CHEP Americas, direct cost increases reflected additional transport miles and overheads associated with the enhanced asset management program in Latin America and higher block-pallet repairs in Canada. In the US, labor and property-related inflation and temporary inefficiencies during the rollout of the automation program drove an increase in plant costs. Despite these cost pressures the US business delivered margin improvement of one percentage point in the first half, in line with Brambles’ objective to improve margins by 2-3 points by FY22.
“It was also particularly pleasing to see the effectiveness of pricing and asset management initiatives in Latin America which delivered meaningful cash flow and asset efficiency benefits within the first year of implementation. We remain confident the actions we are taking in the region are on track to deliver further margin and cash flow benefits over the medium term.”