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Brambles posts 8% profit growth

Blue-chip global pooling solutions provider Brambles (ASX: BXB) has done it again, producing another set of credible results, which is all the more impressive given the company has faced tough operating environments in many of its regions.

The higher full year profits have allowed the board to increase the dividend and coupled with the strong share price performance, this has made Brambles a great investment for shareholders over the past year.

The results (before significant items)

  • Sales revenue up 5% to $US$5.9 billion
  • Net Profit after tax up 8% to US$677 million
  • Earnings per share (EPS) up 3% to US$0.435 cents
  • Final dividend of A$0.135 cents up half a cent on the prior, bringing dividends for the financial year 2013 to 27 cents

Highlights

The Americas region was a standout with Brambles winning new business in its pallets segment. The global reusable plastic crates (RPC) segment was also a highlight and helped boost overall growth in revenues. The bottom line was boosted by expanding operating margins, which increased from 18% to 19% for pallets and an impressive 14% to 17% for RPCs.

The containers segment was a laggard, however, with margins falling from 12% to 9%. Overall the expanding margins helped to improve return on capital invested which expanded at a Pooling Solutions level from 16.2% to 16.8%

In commenting on the group’s results, CEO Tom Gorman stated, “Our major established Pooling Solutions businesses are growing strongly and profitably as a result of continued new business expansion, while we are investing in the longer term opportunities in the Containers sector and in emerging markets.”

Outlook

The demerger of the Recall document management business is progressing with a shareholder vote planned for early December. Management provided financial year (FY) 2014 guidance for Brambles as a stand-alone (ex-Recall) business to achieve underlying profit of US$930 million to US$965 million, which implies a 4% to 8% growth rate on FY 2013. (Underlying profit reflects profits before interest, tax, discontinued operations and significant items.)

Foolish takeaway

The market wasn’t enamoured with Brambles result, sending the shares down over 5% after the results release. With Brambles’ share pricing having rallied by over 30% in the past 12 months compared with the S&P/ASX 200 Index’s (Index: ^AXJO) (ASX: XJO) 15.6% rise, the stock was arguably priced for perfection. With high returns on capital, high profit margins and global expansion opportunities, Brambles is a quality stock which is likely to be on most Fools’ watchlists.

Brambles trades on a dividend yield of just 3%, which might be too low for some yield seeking investors. Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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