Half Year 2022 Brambles Ltd Earnings Call Transcript

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

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : Look, I just had a quick question on the loss rates in The U.S., which looked to increase. Just wanted to get a sense as to what your control ratio is on the pallet pool in that region.

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : That's great. And then second one from me, if I may. Just in terms of the overall CapEx, I mean, I appreciate pooling CapEx to sales, now this is going to be quite high this year and into the second half. But how should we ultimately be thinking about your FY '25 targets in that regard? Are you still on track for that? And then I guess as another point, looking at the supply chain and maybe with the pallet shortages and maybe incremental CapEx that you're spending now, to what extent are you effectively bringing forward some of that CapEx and growth in the pool.

Question: Anthony Longo - JPMorgan Chase & Co, Research Division - Analyst : Absolutely. And look, sorry, I'm -- final one for me. I just wanted to just get confirmation on the CHEP Americas margin comment. So with respect to The U.S. being largely flat, I just wanted to get an understanding of what specifically drove the increases in Canada and LatAm combined? Or is that mainly the price that you were getting through Latin America? Or is there anything else that we should be aware of?

Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst : Just a question regarding the effective price you're paying for pallets at the moment and the choice around, do you grow or do you not grow. We see that the sales growth was heavily driven by price with a neutral impact on volume. How much of that is because there's volume growth out there that you're choosing not to pursue? Or how much of it is because even if you wanted to grow, you basically can't get enough pallets to serve it?

Question: Andre Peter Fromyhr - UBS Investment Bank, Research Division - Analyst : Okay. And then just on the transformation program. I guess we can see the dollar values around the short-term spending and the digital spending, but the benefits of the program a little more directional. To what extent should we expect the transformation to actually deliver or like contribute cash benefits in FY '22? Or are there any already in the half just gone?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Graham, I just had a quick question on that Slide 25, which is the Shaping our Future matrix that you've got there. Just looking under the customer segment, you referred to, I guess, the underlying drivers of revenue growth, which gives you that sort of 5% to 7% revenue growth. And based on the last few years, that sort of implies a 6% to 8% roughly profit growth. Now I noted there that you've written that, that customer segment delivers 55% of the underlying profit growth that you're expecting, and that there's an additional 45% of underlying profit growth coming from the asset efficiency and network productivity and so forth. So can I -- am I reading this correctly in that your expectation through this plan is to deliver circa, at what, 12% to 13% profit growth on the back of 5% to 7% revenue growth?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Excellent. Now I'm just wondering, with some of these metrics, it's obviously over, what, another 3 years, 4 years time horizon. Are we going to be able to measure you against some of these? I mean I'm just wondering, are you going to be able to provide us with some data such as uncompensated pallet losses so that we can actually measure you against these metrics? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 24, 2022 / 11:00PM, BXB.AX - Half Year 2022 Brambles Ltd Earnings Call

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : That's right. And just one on -- still on the scorecard. Under the sustainability in the industry section, there's a mark there which says 30% recycled or upcycled plastic in new closed loop platforms. So I'm assuming plastic pallets. Just wondering where -- I'm assuming at this point that you're 0% recycled on closed loop platforms. And just wondering in which markets those closed loop platforms actually exist?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Excellent. Just one final question for me, given the events of yesterday. Just wondering if you've got any assets or -- in the Ukraine or in the surrounding regions?

Question: Owen Birrell - RBC Capital Markets, Research Division - Analyst : Price cost inflation gets passed through? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 24, 2022 / 11:00PM, BXB.AX - Half Year 2022 Brambles Ltd Earnings Call

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : I've just got a few very quick questions, predominantly around the situation in the Americas. First question is just whether you lost steady contracts based on price over the last 6 months.

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : So I guess what I'm pointing towards specifically is, I guess, the shortage of pallets and potentially the balance of negotiations falling into your favor? And I guess, versus history though, is it difficult to see customers moving because of price at the moment? That's really at the core of my question.

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : Okay. And how do you judge the price that you need or, I guess, the cost to serve in your language for each customer? Is it on an earnings outcome or on a cash flow outcome?

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : Okay. That helps. And then my last question is just related to that. And again, just focusing on the Americas for a minute. Do you think that your contract structure is, I guess, nimble enough to adapt to, I guess, changes in cost inflation? I fully recognize that things are very abnormal at the moment. But just wondering whether you're able to move quick enough or whether this idea of a historical 3-year type contract structure is a little bit too stagnant.

Question: Matthew H. Ryan - Barrenjoey Markets Pty Limited, Research Division - Analyst : Yes. I guess I'm probably talking more about the stuff that you don't have surcharges for. So things like lumber on the CapEx side and some wage inflation on the OpEx side. I mean I think if we would have been speaking 12 months ago, both of those things looked elevated and we might have presumed that they might have come down by now. And I think your 2023 commentary suggests that if it stays at these levels, then you could still expect an impact to cash flow. So has your thinking changed at all because of those, I guess, exposures and, I guess, your ability to move quicker than in the way that you've just described?