Brambles has posted a solid earnings uplift and expects the good times to continue

Brambles’ underlying profit has jumped by a quarter and the pallet company has also flagged that it will come home with a wet sail in the second half.

Brambles is seeing an improvement in pallet recoveries.

Brambles shares are up by more than 7 per cent after the pallet and logistics solutions company delivered what chief executive Graham Chipchase called an “outstanding result’’.

The company on Friday posted a 25 per cent uplift in underlying profit of $US548.8m on revenue of $US2.93bn, up 14 per cent, and also upgraded its full year outlook.

Brambles now expects full year sales revenue growth to come in at 12-14 per cent with underlying profit to be 15-18 per cent higher than the previous corresponding period.

During the pandemic, as global supply chains were pushed to breaking point, Brambles struggled with a lot of its CHEP wooden pallets failing to be returned into its global pool for re-use.

The company said on Friday that there were early signs of improved pallet returns across the US and UK, “with the business well-positioned to manage progressive destocking expected across US and European supply chains in the second half of the year’’.

Mr Chipchase said the company had incurred a $US170m cost in the first half due to increases in the cost of lumber, and had been putting more capital into new pallets, but said overall the company had handled what was a challenging external environment well.

“This performance reinforces the defensive nature of our business and highlights the critical role our pooled solutions play in supply chains today,’’ Mr Chipcchase said.

“We continue to work hard to improve pallet availability across our operations, not only through capital investments in new pallets but also various efficiency initiatives and extensive engagement with customers and retailers to promote the efficient use of our assets through their supply chains.

“In addition, we have recently started to see some early signs of improved pallet return rates from manufacturers and retailers in North America and the UK, which supports our expectation for progressive inventory destocking across North America and European supply chains in the second half of the year.

“We are yet to see material signs of destocking or improved cycle times in Australia.

“However, pallet return rates have begun to gradually improve as our teams continue to work collaboratively with retailers and manufacturers, and we maintain our support of customer

demand by increasing investment in new pallets.’’

Mr Chipchase said with pallet return rates forecast to improve through the balance of FY23 the company expected its capital expenditure requirements to reduce “as we redeploy these additional pallets to improve service to our existing customers and pursue new business.

“We also anticipate the deferred repair and transport cost benefits to reverse as more pallets

return to our service centres for repair.’’

Mr Chiphcase said the improved profit outlook for the full year reflected better than expected price realisation, “driven by both commercial actions and customer mix, flowing into the second half of the year combined with improvements to both our pipeline of productivity initiatives and outlook on the macroeconomic environment’’.

“The strong results have also been enabled by the progress in our Shaping Our Future transformation program, where we continue to improve asset efficiency through pallet re-manufacturing activities, increased collections and improved commercial terms,’’ he said.

“These efforts have been supported by the expansion of our digital and analytical

capabilities. We now have over 300,000 GPS-enabled pallets in more than 25 countries including Chile, where we are progressing our serialisation trial to individually identify pallets.’’

Brambles will pay a dividend of 17.67c, 35 per cent franked, on April 13.

The company’s shares were up 7.5 per cent at $12.97 by midday.

Originally published as Brambles has posted a solid earnings uplift and expects the good times to continue