Cars and crates dent Brambles profits

By: Andrew Hobbs

Pallets boost Chep Asia Pacific half after crate contract, Aussie car losses

Cars and crates dent Brambles profits
Oranges at half time: Brambles' Chep Asia Pacific performed well in the first half despite the loss of a major RPC contract


The closure of automotive manufacturing plants across Australia was felt by supply-chain logistics company Brambles in its first half results, with revenues in its Asia Pacific arm falling as they rose elsewhere.

Brambles chief financial officer Nessa O’ Sullivan said revenues from the Asia Pacific arm of Chep, which deals in pallet and container pooling services, had fallen 5 per cent in the first half of 2017-18 to US$238.1 million (A$300 million).

This was largely due to the end of a number of contracts serving the Australian automotive industry and the loss of a large reusable plastic crate (RPC) contract, she said, which resulted in an adverse impact of US$10.4 million for Chep Asia Pacific.

In August last year the company said these losses meant it would not make about US$23 million of the US$957.5 million it made in underlying profit in the 2016-17 financial year.

While this estimate still stands, solid volume and price growth in mature pallet regions helped Chep Asia Pacific’s revenue from pallets rise 4 per cent to US$178.5 million in the half.

This helped leave Chep Asia Pacific with an underlying profit of US$58.9 million, up 3 per cent on the previous year – along with a 1.8 per cent improvement in the margins – which O’Sullivan says is driven by overhead cost savings and an increase in the collection of asset compensations.

"Due to the phasing of asset collections being weighted to the first half, underlying profit in the second half is expected to be below the first half," she says.

In an investor presentation, Brambles CEO Graham Chipchase said Chep Asia Pacific was putting in "quite a lot of effort" to replacing its lost RPC business.

"The plan is we would like to replace that lost volume with new business that is not necessarily served by RPCs today, and there is plenty of opportunity for us to go after that," he said.

"I think you will see us have some success there in the next 12-18 months."

Company-wide revenue increase

Across the company Brambles recorded a 5 per cent rise in sales revenue to US$2.75 billion on the back of strong volume growth in its pallet business in North America, Europe and Latin America.

The company recorded an underlying profit of US$493.7 million for the half, up 1 per cent in constant currency on the same period in 2016.

Brambles said it expected future revenue growth would be "in the mid-single digits, primarily driven by growth with existing customers, the ongoing conversion of new customers to pooled solutions and expansion across geographies."

The company recorded net profit after tax of US$447.2 million for the half, up 198 per cent in constant currency on the same period in 2016 – after the company received US$130.1 million following a reduction in US income tax rates from 35% to 21%. 

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