• Revenue Growth: 4% increase, driven by equal contributions from volume growth and price realization.
• Underlying Profit Growth: 10% increase compared to the previous year.
• Free Cash Flow Before Dividends: $429 million, an increase of $118 million from the same period last year.
• Interim Dividend: 19 US cents per share, a 27% increase from the prior period.
• Dividend Payout Ratio: 58%, within the 50-70% target range.
• Pooling CapEx to Sales Ratio: Reduced by 2.6 points to 11.9%.
• Net New Business Volume Growth: 2% increase, with contributions from North America and Asia Pacific.
• Price Realization: 2% increase, aligned with cost to serve.
• Profit After Tax: 11% increase, reflecting operating profit growth and a decline in net finance costs.
• EPS Growth: 11% increase.
• Return on Capital Invested: Flat, with increased earnings offset by an 8% increase in average capital invested.
• Asset Efficiency Improvements: Contributed to a $68 million decrease in IPEP expense.
• FY25 Free Cash Flow Guidance: Upgraded by $100 million to between $850 and $950 million.
• Sales Revenue in US Pallet Business: 6% increase, with price mix of 4% and net new business wins of 2%.
• Shaping Our Future Transformation Costs: Increased by $4 million, driven by investments in asset digitization and data analytics.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Brambles Ltd (BMBLF) reported a 10% uplift in underlying profit, driven by price realization and volume growth.
• The company achieved significant improvements in asset efficiency, contributing to a $118 million increase in free cash flow before dividends.
• Brambles Ltd (BMBLF) declared an interim dividend of 19 US cents per share, a 27% increase from the prior period.
• The company upgraded its FY25 cash flow outlook by $100 million, primarily due to lower than expected capital expenditure.
• Brambles Ltd (BMBLF) is making progress towards its sustainability targets, including a 5% reduction in scope 1 and 2 emissions.

Negative Points

• Brambles Ltd (BMBLF) faced higher repair costs due to elevated damage rates in key markets.
• The company experienced increased storage costs from excess plant stocks in the US.
• Weak macroeconomic conditions in Europe continue to weigh on consumer demand.
• Brambles Ltd (BMBLF) is tracking slightly below its FY25 target for the representation of women in management roles.
• The company paused the rollout of automated end-to-end repair processes due to some installations not meeting operational performance metrics.

Q & A Highlights

Q: Can you clarify the $40 million CapEx reduction related to serialization plus in the US and UK? Is this a permanent reduction or a deferral? A: Joaquin Gil, Chief Financial Officer: The $40 million reduction is permanent as we found a more optimal way to conduct the pilot, so this spend will not occur in FY26. The $10 million pause in the automated end-to-end repair process may fall into FY26, depending on installation timing.

Q: Regarding the $100 million lower CapEx creditor payments, is this due to price and volume changes or a shift in payment timing? A: Joaquin Gil, Chief Financial Officer: The reduction is due to improvements in asset productivity, meaning we are purchasing fewer pallets, which reduces the CapEx creditor balance. It's a sign of improved asset productivity and volume.

Q: Can you quantify the headwind from higher storage costs in the first half, and should we expect a similar impact in the second half? A: Joaquin Gil, Chief Financial Officer: We expect pallet inventory levels to return to optimal levels by the end of FY25, so storage costs will continue. Use the guidance on planned and transport costs as a percentage of sales from the FY25 outlook considerations as a guide.

Q: What is driving the conversion of whitewood users to pooled solutions in the US, and how does serialization or digital investment play into this? A: Graham Chipchase, Chief Executive Officer: The conversion is driven by the benefits of a pooled solution, such as cost and sustainability advantages. Serialization, as trialed in Chile, offers an effortless service that can attract new business and retain existing customers by providing a competitive edge.

Q: How does the pause in automated end-to-end repair processes impact your strategy, and what percentage of sites have been automated so far? A: Graham Chipchase, Chief Executive Officer: We've automated 30 sites out of a revised target of 50. The pause allows us to ensure installations meet expected returns and learn from current implementations to improve future rollouts. This decision reflects our commitment to capital discipline.

Q: Can you provide more detail on the net new business wins in the US pallets segment? A: Joaquin Gil, Chief Financial Officer: The 2% net new business wins include both rollover and in-half wins. We have significant wins in the first half, which supports our guidance for continued momentum into the second half.

Q: How does the serialization plus initiative impact your medium-term cash flow guidance? A: Graham Chipchase, Chief Executive Officer: The initiative is factored into our investor value proposition of at least $750 million in free cash flow per annum. The rollout will be lumpy, but our guidance remains unchanged, reflecting our views on serialization plus and other capital projects.

Q: What feedback are you receiving from customers regarding your service improvements and sustainability efforts? A: Graham Chipchase, Chief Executive Officer: Customers appreciate our efforts to be easier to do business with, such as improving delivery in full on time and reducing administrative burdens. They also recognize our role in helping them meet sustainability commitments, which enhances our customer relationships.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.