Brambles Limited (ASX: BXB) delivered its FY20 results after the market closed on Wednesday, revealing modest growth across most operating metrics.
For those unfamiliar, Brambles is a pooling solutions company that specialises in the provision of reusable pallets, crates, containers and associated logistics services, primarily through its CHEP brand.
What did Brambles report?
Brambles delivered 6% revenue growth on a constant currency basis, with sales revenue from continued operations coming in at US$4.73 billion.
The company said the impact of COVID-19 was largely limited to the fourth quarter. This impact included spikes in pallet demand across global grocery supply chains, significant revenue declines in the Automotive and Kegstar businesses, and higher costs in all businesses due to demand volatility and changes in network flows.
Consumer staples accounts for around 80% of Brambles revenues, which the company said underpins the resilience and defensive qualities of its business.
While revenue increased with elevated pallet volumes in March and April, the company incurred higher costs associated with things like transport, handling and repairs.
On the bottom line, net profit after tax from continuing operations grew by 5% to US$477.2 million. The contribution from the global pallet business more than offset an earnings decline in the Automotive and Kegstar businesses, COVID inefficiencies and other cost increases
How did each region perform?
Brambles reported progress in the CHEP Americas segment, including a one percentage point increase in US margins. The company confirmed it is on track to meet its target of a 2-3 percentage point increase in margins by FY22.
CHEP Americas comprises the US, Canada and Latin America, with the US being far and away the largest contributor. The US region achieved sales growth of 9% (currency-adjusted) to reach US$1.81 billion. Latin America posted the strongest growth, increasing revenue by 15% to US$325 million, while from revenue from Canada came in 7% higher at US$279 million.
Elsewhere, Europe recorded 5% sales growth on a constant currency basis, with revenue climbing to US$1.38 billion on the back of net new wins and price realisation.
The smaller CHEP Asia Pacific division reported US$340 million revenue from pallets, up 5%, while containers revenue fell 12% to US$96.1 million.
Brambles’ dividend
Brambles declared a final dividend of 9 US cents per share, bringing total dividends for FY20 to 18 US cents per share. This represents a payout ratio of 53% of underlying profit after finance costs and tax, broadly in line with FY19.
The Brambles share price closed 2% lower today at $11.01. So, using a USD/AUD exchange rate of $1.39, Brambles’ FY20 dividends equate to a dividend yield of around 2.26%.
What happens next?
Looking forward, Brambles expects revenue growth in the range of 0-4%, with improved underlying profit margins and underlying profit growth in the range of 0-5%.
The company also expects its FY21 dividend payout ratio to be in line with its dividend policy of paying 45-60% of underlying profit, and its share buyback program to continue through to FY21.
Some of the assumptions that underpin this outlook include no further widespread lockdowns in Brambles’ key markets and a slow recovery in the Automotive and Kegstar businesses.
Brambles chief executive Graham Chipchase concluded his commentary by saying, “The core elements of our strategy are robust and the focus on our four strategic themes – customer value, digital transformation, asset productivity and business excellence – position us well to manage near-term volatility and deliver sustainable value for customers, shareholders and employees over the long term.”
In other news, Amcor PLC (ASX: AMC) handed down its FY20 report yesterday, while Wesfarmers Ltd (ASX: WES) announced a $2 billion full-year profit today.
