Brambles (ASX:BXB) share price on watch after solid first half and guidance upgrade

The Brambles Limited (ASX:BXB) share price will be on watch on Wednesday following the release of its half year results after the market close…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Brambles Limited (ASX: BXB) share price will be one to watch on Wednesday morning.

This follows the release of the supply chain logistics company's half year results after the market close.

How did Brambles perform in the first half?

Brambles was a positive performer during the first half of FY 2021.

Management advised that COVID-19 and Brexit impacted the operating environment, driving elevated levels of demand for pallets. However, changes in consumer demand patterns and higher input costs resulted in operating cost increases.

According to the release, for the six months ended 31 December, Brambles reported a 7% increase in sales revenue to US$2,565.5 million. This was driven by strong volume growth and price realisation in the global Pallet businesses and the contribution from the commencement of a large Australian RPC contract. This offset COVID-19 related declines in Automotive and Kegstar businesses.

In respect to earnings, underlying operating profit increased 7% to US$465 million and profit after tax lifted 6% to US$295.2 million.

Also growing was the company's operating cash flow, which came in US$321.8 million higher at US$423.6 million. Management advised that this reflected higher earnings, a disciplined approach to capital expenditure, and some timing benefits in the first half of FY 2021.

This allowed the Brambles board to declare a 10 U.S. cents per share interim dividend. This represents a payout ratio of 50%, which is in line with Brambles' dividend policy to payout between 45% and 60% of underlying profit after finance costs and tax.

Management commentary

Brambles CEO, Graham Chipchase, was pleased with the half.

He commented: "We experienced elevated levels of demand in our key pallet businesses in the first half, as retailers raised inventories to accommodate increased levels of at-home consumption and to provide greater contingency against changes in consumer demand. There was also a noticeable shift within the consumer staples segment towards established, household brands which drove stronger volume growth with our largest customers."

"Operationally, COVID-19 related changes in network dynamics and customer demand patterns resulted in additional pallet collection and repair costs, with wage inflation in most regions increasing plant costs further. Our focus on optimising the use of our existing asset pool to service elevated levels of demand also contributed to higher plant and transport costs in the period and limited our investment in new pallets."

Outlook

The good news for shareholders, and the Brambles share price tomorrow, is that management has upgraded its FY 2021 guidance following its solid first half.

It now expects full year sales revenue growth of 4% to 6% in constant currency with improving profit margins. This is expected to lead to underlying profit growth of 5% to 7% in constant currency.

Mr Chipchase added: "The strong first-half result has allowed us to upgrade our FY21 sales revenue and earnings guidance. We remain committed to delivering Group Underlying Profit leverage and expect US margins to improve by approximately one percentage point, with the US automation programme on track for completion by the end of the fiscal year."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Amaero, Black Cat, Domino's, and Ramelius shares are racing higher today

These shares are having a good session on Tuesday. But why?

Read more »

Five happy miners standing next to each other representing ASX coal mining shares which some brokers say could pay big dividends this year
Broker Notes

Macquarie predicts 63% upside for this ASX 200 mining stock

Which ASX 200 stock is it?

Read more »

Red sell button on an Apple keyboard.
Share Market News

Why it's time to sell IAG and 2 other ASX 200 financial shares: brokers

Tony Paterno from Ord Minnett and Toby Grimm from Baker Young have sell ratings on these stocks.

Read more »

Two CEOs shaking hands on a deal.
Mergers & Acquisitions

Platinum shares drop despite L1 Capital merger agreement

These fund managers have agreed to merge their operations.

Read more »

a man sits back from his laptop computer with both hands behind his head feeling happy to see the Brambles share price moving significantly higher today
Share Market News

Best performing Betashares ASX ETFs over the last year

A review of this ETF provider's best performing funds. 

Read more »

A male investor sits at his desk pondering at his laptop screen with a piece of paper in his hand.
Opinions

Where I'd invest in ASX shares ahead of the likely RBA rate cut

These stocks look too good to miss.

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin, waiting in anticipation.
Share Market News

5 things to watch on the ASX 200 on Tuesday

It looks set to be a tough day for Aussie investors today.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Broker Notes

These ASX 200 shares could rise 15% to 30%

Let's see what brokers are saying about these buy-rated top stocks.

Read more »