Will the Brambles Limited (ASX: BXB) share price recovery continue after it reported its third quarter trading result?
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.
Here’s What Brambles Revealed
The logistics business reported that sales revenue from continuing operations for the first nine months of FY19 grew by 7% at constant foreign exchange rates to US$3.41 billion. This growth comprised of 7% volume growth and price increases of 2%.
However, the actual reported growth was only 2% because of a strong US dollar, which is the currency that Brambles reports in.
Diving into its divisions, CHEP Americas sales revenue was up 6% thanks to strong price increases and ongoing expansion with customers.
CHEP Europe, Middle East and Africa (EMEA) sales revenue grew 8% due to net new business wins and price increases.
CHEP Asia-Pacific sales revenue increased by 4% from both volume growth and price increases.
Brambles CEO Graham Chipchase said: “Notwithstanding positive volume growth, we saw a moderate slowdown in the growth of like-for-like volumes during the third quarter, particularly in Europe which is consistent with broader macroeconomic conditions in that region.”
The IFCO division sale process continues, which was announced a couple of months ago. The proceeds of the sale are going to be used for an on-market share buy-back up to US$1.65 billion, a capital return of AU29 cents per share and to pay down debt.
Brambles expects FY19 constant-currency underlying profit growth to show a modest improvement on the prior year with price increases and delivery of cost efficiencies offsetting the global cost inflation.
Cost generation is expected to improve in the second half compared to the first half and the company’s investing in efficiencies is expected to deliver profit margin improvements in the medium term.
Whilst this was a decent update from Brambles, it is a relatively slow growth business and not a particularly ‘moaty’ one. I think there are plenty of other large caps that could be better picks, such as the ASX shares outlined in the free report below.
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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).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.