Full Year 2022 Brambles Ltd Earnings Call Transcript

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

Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst : Maybe just starting with the free cash flow outlook. It strikes me that with coming in higher than the guidance for FY '22, giving double-digit earnings growth into next year, proceeds from First Reserve, lower U.S. lumber costs, you've also flagged an improving CapEx to sales ratio. Why are we still expecting a negative number to free cash flow?

Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst : Maybe I could just move on to pricing. Obviously, it's a strong feature, the main driver of sales growth at the moment and you say that some of that will continue into FY '23. Do you have a sense of how the market is -- your competitors and the broader sort of whitewood environment is moving on pricing? And where is the level of tension with customers at the moment? Is it sort of acceptable when you present the data and the risk analysis that you've been talking about? Are you getting customers walking away on that basis? Or are you actually getting the behavioral responses that you're expecting in terms of asset control?

Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst : And just a little bit deeper on that one. Can you foresee a scenario where the core pricing sort of either stays where it is or continues to tick up, but the customers -- I guess I'm thinking about the Americas here, where the customer experience is actually a price reduction because of surcharges dropping away?

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : I just had a quick question on the pooling CapEx to sales improvement. Just wondering if you could perhaps give a little bit more color as to why you're not expecting it to improve more from that 30% down to maybe 26%. Is that potentially reflective of longer cycle times and pallets being with manufacturing and retailer customers and potentially higher damage rates as well?

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : That's great. And then just a further question on pricing, I appreciate we've spoken a little bit about it already. But in the context provided on some of the high-risk claims that you have flagged and in the context of the inflation that we have seen as well as understanding that the surcharge dynamic as well, I mean to the extent, how much are you still expecting the pricing to increase over the next little while? Because it looks like that second half number was particularly strong, particularly in the Americas.

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : Okay. Great. And look, just a final one for me, I won't overstay the welcome. But as far as the FY '23 guidance goes, there was a slide that you did highlight things for -- your targets for uncompensated sort of pallets, scrapped, et cetera. For your FY '23 guidance, is that -- does it mean that you need to hit those targets to hit that guidance? Or is that largely an aspirational target that you've set there?

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : I just wanted to clarify with the comments around the higher weighted per unit pallet costs coming through in 2023 versus 2022. Just wanting to know what that's based on in terms of are you making an assumption for where that might go to over the course of the year? And maybe just related to that, what is your sort of visibility when you make those sorts of assessments?

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : And I was going to ask about Europe. So I mean do you feel like you've got pretty good visibility with lumber and nails and other things that might have been impacted by sanctions or other things?

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : I mean just to clarify one thing with that European situation, though. I appreciate that you don't actually source that much from those places you mentioned. But the broader market sources quite a bit from those markets. So are you seeing an impact from that?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Just can I just follow up on the previous comment around the safety stocks and that you would prefer another 5 million to 6 million pallets to replenish that safety stock? Can I just ask, if you had those 5 million to 6 million pallets today, what sort of cost savings would you be looking at through the next 12 months? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 17, 2022 / 12:00AM, BXB.AX - Full Year 2022 Brambles Ltd Earnings Call

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : So roughly, so 10 million in terms of net benefits on effectively plant costs. What about transport cost savings? Because there was a significant amount of additional transport runs to go and collect pallets.

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : I'm just trying to get a sense that if we do see pallets coming back in the second half, but we do sort of fall into a bit of a recessionary environment, what's the cost savings that are going to come out as the pallet pool rebalances itself.

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Okay. Sounds good. I just wanted to draw into the CHEP Americas ROCE improvement that we saw in the second half, 260 basis points in what seasonally is a weaker period. Just wanted to understand proportionately how much of that came from Canada versus U.S. versus LatAm, specifically for the second half.

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Okay. And then just in terms of that ROCE improvement. Is it fair to say that a large proportion of that improvement was really underpinned by the transformation program in terms of the use of automation or deployment of digital assets in that region?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : You've mentioned -- just on the deployment of digital assets. You've mentioned the deployment of those assets into LatAm and into Canada. Have you deployed any digital assets into the U.S. market outside of the [cost control]?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Can I ask just a further question on the continuous diagnostics rollout? You've mentioned -- you've called out adding another 300,000 pallets or devices into the North American market. Can I just ask just within the U.K. market specifically, have you fully rolled out in that market? And if not, how much further is there to go there? And what proportion of that pool do you expect to serialize? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 17, 2022 / 12:00AM, BXB.AX - Full Year 2022 Brambles Ltd Earnings Call