Brambles (ASX:BXB) share price melts away despite 8% FY22 revenue upgrade

Brambles shares finished in the red today as the company released its financial results for the half-year ended 31 December 2021.

| More on:
Logistic workers sitting amid pallets and stock in a warehouse.

Image source: Getty Images

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

Key points

  • Brambles posted its half-year results to the market today 
  • The company secured a number of growth points during the period and upgraded guidance for sales and profit for FY22 
  • In the last 12 months, the Brambles share price has slipped 1% into the red 

Shares in Brambles Limited (ASX: BXB) edged lower on Friday after the company released its interim report and financial results for the half-year ended 31 December 2021.

At market close, the Brambles share price finished down 0.81% at $9.81 apiece.

Brambles share price tanks as profit lands ahead of guidance

Key takeouts from the company's earnings results today include:

  • Sales revenue growth of 8% and Underlying Profit growth of 4%, ahead of FY22 guidance
  • Underlying Profit included US$24.4 million of short-term transformation costs associated with the 'Shaping Our Future programme'
  • Excluding short-term transformation costs, Underlying Profit increased 9% and included small use of leverage
  • Cash Flow from Operations decreased US$260.5 million
  • Free Cash Flow after dividends decreased by US$311.7 million
  • Declared an increased FY22 interim dividend of 10.75 US cents up from 1H21 dividend of US10 cents
  • A $2.4 billion share buyback program to recommence on 28 February 2022 and expected to complete in FY22

What happened this half for Brambles?

Brambles says that revenue growth this half was underscored by "price realisation in all regions to recover inflationary cost pressures and other cost to-serve increases".

The company also realised a lower cash flow from operations that decreased to US$260.5 million. The decline was attributed to higher lumber costs of US$270 million whilst another US$80 million of pallet purchases was deferred from FY21 due to supply constraints.

Brambles was also decisive in its response to supply chain pressures that were brought on by the global pandemic, resulting in cost blowouts for major industry.

"In response to supply chain challenges and scarcity of critical inputs, manufacturers and retailers increased inventory levels to de-risk their supply chains, which has resulted in increased demand for pallets and included empty pallet stockpiling across the supply chain", the company said.

"This increase in inventory levels and pallet stockpiling, especially evident in Europe and Australia, combined with ongoing lumber scarcity and new pallet supply constraints, further exacerbated industry-wide pallet shortages".

Sales revenue came in at US$2.77 billion and increased 8% year over year. Brambles achieved this by passing price increases downstream to recover higher input costs caused by inflation.

Underlying profit increased 4% and when backing out non-recurring items it increased 9% year on year. As such, the board declared an interim dividend of US10.75 cents per share, to be paid as 15.06 Australian cents per share, and franked at 30%.

Investors should know that, per the release, the unfranked component of the interim dividend is considered a conduit foreign income and may have implications at tax time.

Free cash flow after dividends was an outflow of US$147.9 million, a substantial decrease of US$311.7 million
compared to this same time last year.

Management commentary

Speaking on Brambles' 1H22 result, chief executive Graham Chipchase said:

Brambles delivered a resilient performance in the face of unprecedented supply chain disruptions and operating cost inflation. Our teams across the world have worked tirelessly to support our customers through significant COVID-19 disruptions including port congestions, container capacity constraints and shortages in transport, raw materials and other critical inputs. While Brambles is not immune to the pressures across global supply chains and pallet industries around the world, our scale, network advantage and the supply chain investments we have been making across our businesses have helped us respond to a range of cost and supply challenges in the first half.

What's next for Brambles?

Brambles management upgraded the company's FY22 sales and underlying profit guidance today. It now expects sales revenue growth of 6-8%, up from previous guidance of 5-7%.

Meanwhile, management anticipates an underlying profit growth of 3-5% up from a range of 1-2% previously. It also notes that underlying profit should include approximately US$50 million of short-term transformation costs.

Backing these out, management sees underlying profit growth to fall in a range of 8-10%, around 1–2 percentage points above previous estimates.

It also forecasts free cash flow after dividends to be another net outflow of US$350 million, ahead of a previously outlined US$200 million.

"If the lumber prices and supply chain dynamics that are currently impacting pallet availability and the capital
cost of pallets persist, Brambles expects FY23 Free Cash Flow after dividends to also be a net outflow", it remarked.

Brambles also estimates the FY22 dividend payments to remain in line with its policy of maintaining a payout ratio of 45-60% of net underlying profit.

Brambles share price snapshot

In the last 12 months, the Brambles share price has slipped 1% into the red and continued the trend into 2022 by sliding another 8%. In fact, Brambles is in the red across all major time frames, including today.

TradingView Chart

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Earnings Results

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Earnings Results

ASX 200 stock jumps 10% on strong FY24 results

How did this KFC restaurant operator perform in FY 2024?

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.
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock just slashed its final dividend by 23%

This retailer had a tough time during the 12 months. Here's how it performed.

Read more »

Man jumps for joy in front of a background of a rising stocks graphic.
Earnings Results

Catapult shines: 20% sales growth propels ASX tech stock to new 52-week high

A strong annual result from this tech player has caught investor attention.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Earnings Results

Xero share price leaps 8% on staggering earnings upheaval

A major turnaround in profitability is sending investors into a frenzy over Xero shares today.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

Read more »

increasing rural asx share price represented by happy looking sheep
Earnings Results

Why is this ASX All Ords stock staying strong as profits crash 76%

How is this company's share price marching higher after mowing down more than three-quarters of its profits compared to a…

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces as they react to the action in front of them in a home setting.
Earnings Results

Guess which ASX 200 stock is surging 11% on an 'outstanding' result

This ASX gaming giant just posted a 17% jump in profits, and its shareholders are basking in the glory.

Read more »