Brambles Profit Rises, to Spin off IFCO RPC Unit -- Update
August 23 2018 - 7:08PM
Dow Jones News
By David Winning
SYDNEY--Logistics company Brambles Ltd. (BXB.AU) reported a
sharp rise in annual profit and said it will spin off or sell a
business that supplies crates for moving fresh produce to retailers
in Europe, Asia and the Americas.
Brambles reported a net profit of US$747.1 million for the 12
months through June, up from US$182.9 million a year ago. The
result included a US$127.9 million benefit resulting from the U.S.
tax reform while US$120 million in impairment charges that weighed
on its result a year ago weren't repeated.
Directors of the company declared a final dividend of 14.5
Australian cents a share, in line with the payout a year
earlier.
Brambles said it has decided to spin off its IFCO RPC business,
following on from February's sale of its North American recycled
whitewood pallets business to a Colorado-based private equity firm
for US$115 million including debt and subsequent sale of a stake in
an oil-and-gas joint venture with Hoover Container Solutions.
"Although both CHEP and IFCO operate pooling models, they are
distinct businesses with different financial profiles and customer
propositions," Brambles said. "There is no meaningful operational
overlap or customer-related synergies between CHEP and IFCO that
would be lost as a result of a separation."
Brambles said it will also consider whether a sale of IFCO would
be a better outcome for shareholders than a demerger.
As part of the separation, Brambles said it would "also
undertake an evaluation of its capital structure to ensure it is
optimal for supporting future growth and shareholder returns while
still maintaining a strong balance sheet and credit profile."
Brambles has been striving to engineer a business turnaround
after its stock was sold off following a rare profit warning and
hefty writedowns in the 2017 fiscal year. While asset sales have
steadied Brambles's share price, management has faced newer
challenges with labor shortages in key markets and higher fuel
prices driving up transport costs significantly. Brambles has also
contended with higher lumber costs, reflecting a strong U.S.
housing market and import tariffs.
Analysts expect Brambles to pass on the higher costs to
customers through increased prices of its products, albeit with a
time lag that could be as long as 24 months. Morgan Stanley last
month said it didn't expect Brambles to get its operating leverage
back until the 2020 fiscal year at the earliest.
Brambles's underlying profit, a measure of continuing operations
that strips out financing costs, tax and one-time items, was flat
at US$996.7 million, on a constant currency basis in the 2018
fiscal year.
Annual revenue rose by 6% to US$5.6 billion after stripping out
the impact of currency swings, in line with management's
expectation for sales growth of mid-single digits through the
cycle. Brambles has been driving growth by converting customers to
pooled solutions and broadening its global footprint.
"FY19 underlying profit will continue to reflect ongoing
input-cost inflation and other cost challenges," said Chief
Executive Graham Chipchase. "We expect the multi-year automation,
procurement and pricing initiatives we are currently undertaking to
progressively deliver efficiencies and earnings benefits over the
medium term."
-Write to David Winning at david.winning@wsj.com
(END) Dow Jones Newswires
August 23, 2018 18:53 ET (22:53 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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