Chep pallet sales remain strong in Australia and New Zealand despite contract losses
Brambles, the logistics company that operates the Chep and Ifco brands of pallets, noted a 6 per cent sales revenue growth at its FY19 first quarter trading update.
The revenue, at US$1.4 billion (A$2 billion), is in line with the company’s objective of delivering annual mid-single digit revenue growth and reflects revenue momentum across all segments, Brambles says.
In Australian market, it notes Chep Asia-Pacific sales revenue increased 1 per cent to $110.4 million (A$156.37 million) as higher demand for pallets in Australia and New Zealand offset a 2 percentage point impact in the quarter due to the “cycling of the final month of a large Australian RPC [reusable plastic crate] contract”.
That contract loss, with Woolworths, alongside automotive contract losses at Chep Australia, announced to the market in 2016, was combined with inflationary cost pressures and cost challenges in Chep Americas to keep profit flat with the prior year, which was US$773.5 million (A$1.1 billion) after tax.
Ifco sales revenue growth of 5 per cent was driven by strong volume growth across Asia, Europe and South America, while volume declines in North America partially offset by price increases in the region, Brambles says.
Cars and crates dent Brambles profits. Read more, here
Brambles CEO Graham Chipchase tells shareholders the company’s going forward focus is on cost-cutting and automation.
“Constant currency revenue growth was 6 per cent in the first quarter, reflecting ongoing customer demand for our share and reuse logistics solutions.
“The business is, however, challenged by ongoing cost inflation across our major markets. Despite escalating costs, effective pricing which includes surcharges offset approximately two-thirds of the inflationary cost increases experienced during the quarter.
“In addition to pricing actions, we continue to look to our own operations for further opportunities to reduce costs.
“Given the exceptional cost pressures facing our business and the combination of higher compensations and lower costs in 1H18, underlying profit in 1H19 is expected to be broadly in line with the prior corresponding period, on a constant-currency basis.
“We expect constant-currency underlying profit growth to improve in 2H19 reflecting increased pricing growth, a higher cost base in the prior comparative period and the delivery of cost efficiencies across the group.
“Our global automation and procurement programmes remain on track and are expected to deliver margin benefits over the medium term despite the current cost environment.”