Full Year 2023 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 : Just first would be interested in the pricing dynamics at the moment. I guess the commentary about the sales growth guidance suggests that it's still going to be weighted towards price. But am I correct in interpreting that that's mostly a reflection of the pricing initiatives that you've already delivered through the course of FY '23 flowing through or are you still sort of -- is there still a lot of work to play out in terms of how you're repricing your portfolio?

Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst : Maybe just a follow-up on price in terms of what you've reported so far. Can you comment a bit on the role that mix is playing in the price and mix numbers that you're reporting? Because I guess you've got slightly larger swings in volume at the moment than what you've reported in previous years. Like is the average customer in the U.S. actually paying 18% more on their contracts or is some of that coming through by mix?

Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst : Great. And just one more for me. Specifically on IPEP, I guess, because you commented about more pallets being returned. Is there a prospect of changing your assumptions around IPEP or is that potentially part of the assumption for the operating leverage in your guidance for FY '24? 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 30, 2023 / 12:00AM, BXB.AX - Full Year 2023 Brambles Ltd Earnings Call

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : Just had a question on the balance sheet. Your gearing looks a bit lower than the 2x financial policy and presumably, there's going to be a bit more improvement over the next 12 months. So just in terms of your capital allocation priorities, are you sort of considering a buyback or a dividend or anything else at the moment or is the shaping our future program, I guess, material enough to sort of stop those conversations from happening at the moment?

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : And I guess one thing that might play into that is asset efficiency and your target of reducing uncompensated losses by 30%. So I mean, that looks like a massive improvement relative to the forecast that you've given us today in '24. So I mean can you fill in the blanks of sort of how you'd get such a big improvement in the FY '25 year? Or is this, I guess, more of a case of not wanting to restate the original target that you gave?

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : Just one specific question on that then. So I think you're guiding to being at or around 103% in FY '24. I'm just looking at the slides, which basically sets you back to where you started. And then in the following year, you get to 70%, so you get that massive improvement in that year. You sort of outlined a bunch of things in the notes. Is there anything specific in there that changes in that year to get you to that number? Because it's quite a material source of cash flow as you get there.

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Just a couple of questions from me. The first one, I guess, is just a bit of follow-up from Matt's question around the asset efficiency scores and the big step-up, I guess, in the uncompensated pallet losses. I'm just wondering whether there's any particular market that led that major increase in the uncompensated pallet loss?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : You talked about 300,000 smart assets being deployed by the end of this year into North America, I'm assuming a vast majority of those are going into the U.S. market. Is that fair?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Okay. Just second question for me just regarding the additional recovery mechanisms that delivered the 10 million additional pallets into the pool. As we see pallet availability improve and costs coming down, just wondering whether those additional recovery mechanisms are still economic and required? And if so, how many pallets should we assume to be added back into the pool for FY '24? 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 30, 2023 / 12:00AM, BXB.AX - Full Year 2023 Brambles Ltd Earnings Call

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Sorry, just to confirm that the cost of that additional recovery mechanism is coming into OpEx and not into pooling CapEx?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : You called out 10 million pallets recovered in FY '23?. Is it fair to make a similar assumption for FY '24?

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : Just a quick question on cash flow and I appreciate the guidance that you haven't given -- I appreciate the guidance you have given for next year. But I just want to get a sense as to what sort of level do you believe is a sustainable level of free cash flow going forward in the context of the working capital movements that you have flagged into next year, but then thereafter, and a more normalization of lumber costs.

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : Fair enough. But nonetheless, congratulations on the delta, both in terms of the operating leverage and the cash flow generation. Just another one in terms of the pallet loss rates and what's [compensatable] and what's [uncompensatable]. Are you able to give additional clarity around that? Was it still around about the 50% mark or is it something a little bit more than that? 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 30, 2023 / 12:00AM, BXB.AX - Full Year 2023 Brambles Ltd Earnings Call

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : I appreciate that. Last question for me, just on Latin America. That looks like a pretty reasonable result. So you had flagged some improvements there over time, just up some heightened loss rates. I mean, are you able to give a bit more color as to what you've done there, particularly in the context of that pooling CapEx to sales ratio, which has increased -- sorry, decreased significantly. Like how much of that is actual underlying operational day-to-day improvement? And how much is that largely driven from that pricing inflation that you may have had?