Brambles Trying To Reduce The Operating Cost Due To An Increase In Ongoing Cost Inflation

  • Oct 23, 2018 AEDT
  • Team Kalkine
Brambles Trying To Reduce The Operating Cost Due To An Increase In Ongoing Cost Inflation

On 23 October 2018, Brambles Limited (ASX: BXB) reported a sales revenue of US$1,420.6 million in Q1 FY19. There was an increase in 3% of the sales revenue as compared to the prior corresponding period at actual FX rates and 6% at constant FX rates. The actual strength of the US dollar is determined by the difference between the operating currencies and the US dollar. The increase in sales revenue by 6% is in line with the stated object of delivering annual mid-single digit revenue growth across all segments i.e. CHEP Americas, CHEP EMEA, CHEP Asia, and IFCO

At CHEP Americas, the resultant increase in the sales revenue by 5% was due to volume growth and the price realized at US, Canadian and Latin American pallet businesses. There was an increase in the sales revenue by 8% in the CHEP EMEA. It was due to a strong increase in the volume growth which was followed by the increased inflationary cost for the past 12 months. There was a high demand for pallets in Australia and New Zealand as a result of which there was an increase in the sales revenue by 1%. There was a growth in the sales revenue growth by 5% in IFCO segment which was the outcome of strong volume growth across Europe, South America and Asia. However, North America reported a decrease in sales volume as a result of a price increase in the region.

Graham Chipchase, the CEO of the company says that the reason for which there was a revenue growth of currency by 6% in Q1 FY19 which reflects the demand of the customers in regard to the company share and reuse logistic solutions. However, the main challenge which the company is facing at present is the ongoing cost inflation in the major markets including the US and Europe regions. As a result of inflation, the company is looking for further opportunities to reduce the operating cost of the business. 

 The company is hopeful in the scenario of exceptional cost pressure, high compensation and the low cost that the underlying profit in 1H19 will be in line with the prior corresponding period on a constant currency basis as well as the underlying growth in 2H19.

For the year ended 30 June 2018, the profit made by the company is US$747.1 million. The total asset of the company is US$7,838.5 million and total liabilities of US$4,676.5 million. This shows that the company has a capacity to meet its long-term obligations. The total current asset of the company is US$1,569.3 million and the total current liabilities is US$1,684.5 million. This reflects that at present the company is not in a position to clear its short-term obligation. The total shareholder's equity is worth US$3,162 million. The company was able to generate US$1423 million from its operating activities. The company has invested a major portion of cash in payment for property, plant, and equipment worth US$1,138.3 million. There were also certain cash inflows into the business as a result of which the net cash outflow from the investing activities was US$770.2 million. The company has also made the repayment of the borrowings and paid a dividend of US$3,027 million and US$352 million, respectively in FY18. Resultantly, the net cash outflow from the financing activities came in at US$566.3 million.

BXB’s shares traded at A$10.475 with a market capitalization of A$16.6 billion and PE ratio of 16.39x as on October 23, 2018 (AEST 2.22 PM).

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