Brambles Ltd Investor Day Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Anthony Moulder from CLSA. You talked about customer terms changing. Can you elaborate as to what the changes that you're making to customer terms, please?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So conceivably that would be a smaller component of the improvement in cycle times?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Okay. And maintenance CapEx is probably the biggest level, as far as the improvement in cash flow, I would imagine; loss rates, damage rates. Can you talk to some of the initiatives that you're driving through the business to deliver those?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Just one follow-up, if I could. CapEx-to-sales is such a blunt force, as far as how you manage the pooling intensity of this business. How long does it take before CapEx translates to sales in pooling?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Which I agree with. I'm just -- I guess I struggle with why CapEx-to-sales is the measure that you're tying that measure to -- or that focus to.

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Anthony Moulder from CLSA. Just the U.S., the justification for not going to the U.S. is that they were facing issues post GFC. Conceivably, Europe also facing the same post GFC, low labor costs. Why is it taking so long to go to the U.S.?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : But it's still -- I understand that, but the value that you're describing from automation is so significant that it removes that issue of the lower labor cost differential in the U.S. market, doesn't it? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 14, 2018 / 8:30AM, BXB.AX - Brambles Ltd Investor Day

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So those third parties, the large repairers in the U.S. market, what's changed as far as your relationship with them that means that now...

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So with that pressure, why do you have to invest the CapEx into their facilities for them to do repairs of your network?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : And so it's your lease of their land that they operate on?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So that's the switch out...

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Right. And so what visibility do you get to their repair rates to see the benefit that comes from this automation?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Right. And lastly, can you talk to how much of that labor is displaced with these robots as you automate the facilities?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : How many robots -- how many robots are you putting in per facility?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Anthony Moulder. Germany, you've lost share in the Europe pallet over the last 5 years. Can you talk about the growth in the half pallet, quarter pallet?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Is it -- so is the Europe pallet in Germany still the best way to look at -- still at the size of opportunity? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 14, 2018 / 8:30AM, BXB.AX - Brambles Ltd Investor Day

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Had my hand up for ages. Anthony Moulder from CLSA. I wanted to talk about plastic pallets. There may be a few parts to this question. But the 600,000 pallets that you've gotten back from Walmart, I think...

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So they came out because a nestable rackable pallet was put down to store. Is that your nestable pallet?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : And plastic, you're starting to talk about plastic and offering that. Can you talk about the pricing differential relative to wood?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : And this other thing that says premium pallet, can you talk about why you're starting to take another step into putting a premium pallet into the U.S.?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Anthony Moulder from CLSA. I want to ask about Safeway Albertsons. Obviously, there was a contract loss a few years ago. I think at that time, there was still some confidence post integration of Safeway intel. But since you could re-win that contract, can you give some update as to where discussions are?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So do I. And one more question if I could. So the amount of crates that you've got now, and obviously, we're now introducing meat and fish, that brings a complexity. That brings a cost to serve. And as retailers want that differentiation, how do you push back to retailers, given the desire would be to have a single or 7 different sizes, but a single SKU within that?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Anthony Moulder from CLSA. I just wanted to get a sense as to how you see the evolution. You've illuminated customers' supply chains. Conceivably, they would want that illumination to continue. They would want to continue to see the data set coming through. So is that the challenge to then try and repurpose those pallets to another part of the network, while customers increasingly want more data coming through from your supply chain?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So how big do you think the network needs to get -- or the pallet pool needs to get with that technology over time?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : And last question is how do you think about the value that you get or the customers get from this technology? How do you monetize that? Or is it about the stickiness of the customer more so than generating a strong return from the investment you're making?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Since you opened that can of worms, what are the noncore parts of the business; how you're still looking at the portfolio that you currently have?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : I thought I'd try. Targets...

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : It's a relative measure. So a couple of things. Obviously, asset turns are an important part of how you drive efficiency in this business. Is there any scope to give a guidance level or at least a metric as to where you're at today and where that could potentially get to? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 14, 2018 / 8:30AM, BXB.AX - Brambles Ltd Investor Day

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Can I just ask Nessa a follow-up question on the margin points you made?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : So Graham was saying that FY '18 margin in Americas is expected to be slightly below '17?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : Okay. And that's despite the first half being down 2.3 percentage points?

Question: Anthony Moulder - CLSA Limited, Research Division - Analyst : But slightly down, full year? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MARCH 14, 2018 / 8:30AM, BXB.AX - Brambles Ltd Investor Day