Today Brambles Ltd (ASX: BXB) reported its half-year results for the period ending 31 December 2018 with its revenue up 7%, but its profit down 27%.

Brambles is a pooling solutions company specialising in the provision of reusable pallets, crates, containers and associated logistics services through the CHEP and IFCO brands.

Key Results

Brambles reported:

  • Sales up 3% in actual dollars or 7% in constant currency to US$2.86 billion
  • Net profit after tax (NPAT) down 27% actual dollars or down 25% in constant currency to US$321.4 million
  • EPS down 27% to US$0.20
  • An interim dividend of AUD 14.5cps with 65% of the dividend franked as a one-time increase due to the timing of higher Australian tax payments.

Margins Squeezed

While revenue was up for the period, this was offset by higher costs which squeezed margins including:

  • higher inflationary costs of inputs
  • higher transport costs related to the CHEP Americas segment
  • network capacity constraints
  • the conversion to block pallets in Canada
  • higher costs in Latin America.

Brambles’ CEO, Graham Chipchase described the result as “solid… despite ongoing cost pressures [with] increasingly challenging macro-economic conditions across our major markets”.

Sale of IFCO Confirmed

Brambles also released an announcement today to try and cool media speculation regarding the sale of its IFCO business. Brambles stated the “separation process is on track and is expected to be completed during 2019”, with the “assessment of sale interest at an advanced stage”. It said any further updates will come as per continuous disclosure requirements.

Is Brambles A Buy?

While Brambles’ margins have been declining for some time now, it’s possible it’s reached a bottom and margins may start to improve soon. However, Brambles is a complex company with many moving parts so it is difficult to assess with much confidence.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).