LA Private

Brambles serves up a tasty pallet-cleanser

Global logistics business Brambles (ASX:BXB) has issued another upgrade to its 2022-23 guidance, despite weak economic data from a number of major economies and a downgrade in global growth forecasts from the IMF and World Bank.

The company told the ASX in Thursday’s update the improvement in revenues for the months to March came as a result of price rises from previous periods (which quite a few analysts were doubtful Brambles could use because of a weak outlook) and solid volumes in some markets.

The news had an odd impact on the Brambles share price. After closing Wednesday at $13.87, the update saw them leap at the opening to a high of $14.46 in the first hour, before making a long fall to end the day at $13.91, up 0.14%.

Brambles reported that its sales revenue from continuing operations for the first nine months of the financial year ending 30 June 2023 were up 9% at $US4.48 billion on actual exchange rates and a sharp 15% at constant currency rates.

Brambles said the improvements reflected contributions “from both current and prior-year pricing initiatives to recover cost-to-serve increases, including input-cost inflation and the impact of global supply chain dynamics, which have driven increased cycles times and pallet prices in all regions.”

“Group volumes were broadly in line with the prior year, despite pallet availability challenges in the December half which now seems to have been resolved.

“Improved pallet availability in the third quarter has enabled the business to recommence pursuing and developing the new business pipeline in both the US and Europe,” Brambles said on Thursday.

The improvement saw Brambles lift guidance for a second time and the company now expects sales revenue growth to be between 14% and 15% at constant currency compared to the previous guidance of 12%-14%.

By segment, the sales revenue performance for the first nine-months of FY23 Brambles reported that CHEP Americas sales revenue increased 15% at constant currency due to price growth (excluding surcharge income contribution) of 19% primarily driven by pricing actions taken in the current and prior years to recover the cost-to-serve.”

“Overall volumes in the segment were down 4%, reflecting a 6% reduction in like-for-like volumes in the US business partly offset by volume growth with new and existing customers in Latin America.

“The decline in US volumes was driven by a combination of softening underlying consumer demand, pallet availability challenges in the first half of the year, some managed loss of flows unsuited to pooled solutions, due to high risk of loss, and progressive inventory optimisation at manufacturers and retailers in the third quarter. Notwithstanding these volume declines, the US business has retained all key customers and identified opportunities for new business growth,” Brambles reported.

It said its CHEP Emerging markets, Europe sales revenue increased 15% at constant currency including price growth of 12% and volume growth of 3%. Price growth reflected contractual price increases (including indexation) and other pricing actions in the pallet businesses to recover cost-to-serve increases across the region.

“Net new business growth of 4% was driven by rollover contributions from prior-year contract wins in the European pallet business. Like-for-like volume was down 1% as pallet availability and softening demand in the European business was only partly offset by strong growth across the European and North American automotive businesses.

CHEP Asia-Pacific saw a 10% rise in sales revenue at constant currency “reflecting price realisation to recover cost-to-serve increases and like-for-like volume growth primarily in the Australian pallet business reflecting increased daily hire revenue from continued strong demand for pallets across manufacturer and retailer supply chains.”