Supply chain logistics company Brambles [ASX:BXB] was rising 6.5% in share price on Friday morning after the company released its six-month report for the first half fiscal 2023, posting an uplift to guidance.
Net profit for the first half had risen 9% to the total of US$331.1 million, and revenue from its continued operations had also gone up 7%, churning US$2.93 billion.
Brambles’ shares were in the green across the board, up 30% over the past year, 10% in the last month, and is up 21% in its sector, and 24% in the wider market:
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Brambles calls for changes to guidance on improved first half
Brambles posted a 7% increase to sales revenue in the fist half for fiscal 2023, claiming a total of $2.93 billion on the US$2.74 billion earned in 1H 2022.
Brambles said its sales revenue increased at constant currency, and was higher in the period thanks to strong pricing growth and recovering operating and capital cost-to-service increases in all regions.
Operating profit increased double that of sales revenue, by 14%, taking US$548 million over last year’s US$481.5 million.
Profit before tax increased by 11%, with the total of US$486.7 million (US$439.6 in 2022).
Brambles recorded a net outflow of $US146.6 million, which was mostly flat on the same time last year.
The group decided to lift its full-year guidance, with the anticipation that it can aim for revenue growth between 12–14%, as well as underling profit growth in the range of 15–18%.
Brambles also expressed belief it can reach free cash flow after dividend distributions, which would be another win over 2022.
An interim dividend of US12.25 was declared by the company, partially franked, which is 14% more than dividends distributed last year.
The group managed the improved half-year result despite an overall slight decrease in volumes, cause by pallet availability challenges and softening consumer demand — mostly in the US.
Sales revenue and profit offset inflation-linked impacts like plant cost increases (US$126 million), transport cost increases (US$72 million), and fuel (US$48 million).
IPEP (Irrecoverable Pooling Equipment Provision) expenses incurred another US$21 million, which was also impacted by a challenging US supply chain.
Brambles’ CEO Graham Chipchase said:
‘This performance reinforces the defensive nature of our business and highlights the critical role our pooled solutions play in supply chains today.
‘While pricing and other initiatives are offsetting operating cost inflation and supporting profit leverage, the increased capital cost of new pallets continues to impact our short-term cash flow performance, which included a lumber inflation impact of ~US$170 million in the first half.
‘Despite this short-term lumber related cash flow headwind, we are confident we have the right commercial arrangements in place to generate appropriate returns on this increased capital investment over the life of our pallets and to deliver improved cash flow outcomes as lumber costs moderate.’
The group announced CFO Nessa O’Sullivan will be retiring in early 2024 after leading the company for six years. The search for her successor has already begun.
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