Brambles FY24 Earnings Call Highlights

Brambles (ASX: BXB) shares soared to fresh all-time highs on Wednesday after its FY24 profits, dividend and outlook topped analyst expectations.

FY24 Earnings Summary

The year-on-year growth is on a constant currency basis and compared against Morgan Stanley's estimates as at 7 June 2024.

• Sales up 7% to US$6.54bn, in-line with estimates

• Operating profit after tax up 17% to US$779m or 4.7% ahead estimates

• Basic EPS up 19% to 56.1 US cents or 5.8% ahead of estimates

• Total FY24 dividend of 34 US cents was 17% ahead of estimates

• FY25 underlying profit growth of 8-11% compared to 7.2% estimates

Earnings Call Highlights

The below topics have all been answered by CEO Graham Chipchase and CFO Joaquin Gil.

FY24 performance: "In FY24, our performance was strong across all aspects of the business ... Underlying profit growth was 17% and free cash flow before dividends of $882.8 million were both ahead of our FY24 guidance."

Free cash flow and capital management: "The improvement in the capital intensity of our business is evident in the material increase in our free cash flow generation ... This has led to the two capital management initiatives we have announced today ... an on-market share buyback of up to $500 million in FY25."

Margins: "Our ongoing commercial discipline, combined with improvements in asset efficiency, contributed to the 1.8 percentage point increase in gross profit margins this year."

US volumes: "With improving pallet availability, our business was able to pursue and win new business during the year ... However, dual sourcing initiatives by some larger customers offset contributions from new contract wins."

Global volumes: "Like-for-like volumes increased 1% as growth from existing customers in Australia and US pallets businesses more than offset lower pallet volumes in Europe."

Inflation trends: "The overall rate of input cost inflation moderated... However, labor inflation persisted in all markets ... Combined plans and transport costs increased by $163 million and included inflationary impacts ... partly offset by deflation in lumber, fuel, and US transport costs."

Capital management: "We will focus on shareholder returns... through sustainable dividends in line with our revised policy ... and through the deployment of surplus capital to optimise our capital structure."

Analyst Q&A Highlights

On pallet salvaging: "We still see an opportunity to improve that number through asset recovery and go to market."

Q4 volume growth in the US: "We’ve got good volume momentum both in the US and across the group as we head into FY25."

Pricing strategy: "We still think that the costs to serve are increasing driven largely by that. And as a result ... we are still aiming to recover that."

On cash flow and ROCE targets: "We’ve made a structural change in terms of asset productivity and efficiency ... we’re comfortable in terms of our free cash flow going forward."

On digitisation: "It’s about digitising pallets for an existing customer, but doing it in a way which gives them much more insight as to what’s going on with the flow of products on the pallet so that they can intervene much more quickly and for example extend shelf life."

Capital management as leverage continues to fall: "I would have to give you the very unhelpful answer, which is this is a board decision which we will discuss this time each year and then announce this time each year what the plans are for the following year."

Confidence on second-half volume growth: "That second-half weighting was in relation to net new business wins and that's based on really just the environment. One is, we see whitewood prices, our view is will increase throughout FY25 ... we do have a very strong new business pipeline in Europe and the US in particular."

This article was generated with the support of AI and reviewed by an editor.