The Brambles Limited (ASX: BXB) share price is down more than 9% today after the company released its FY19 results. Is this a buying opportunity?
About Brambles
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. At the time of writing, Brambles has a market capitalisation of around $19 billion.
The Numbers
Brambles reported sales revenue of US$4,595.3 million, representing growth of 7% in constant currency terms and 3% in actual terms. Underlying profit saw a decrease of 3%, however, in statutory terms, profit after tax increased by 112%. This was mostly due to the recognition of a US$945.7 million post-tax gain on the sale of IFCO.
When this sale is removed from results, statutory profit after tax from continuing operations declined by 13% to US$454.1 million.
Return on invested capital (ROIC) remained high at 19.5% while cash flow from operations fell by US$293 million, reflecting a one-off cash inflow that occurred in FY18.
Dividends
Brambles declared a final dividend of 14.5 cents per share, which is the same as both the FY19 interim dividend and the FY18 final dividend. The dividend will be 30% franked and the dividend reinvestment plan (DRP) is being suspended while the ongoing on-market buyback takes place.
Analyst Estimates
According to Bloomberg, analysts were expecting a dividend of 17.5 cps, so Brambles fell short on that front. The Bell Potter estimate for NPAT was US$622 million, which compares to the reported profit after tax from continuing operations of US$454.1 million.
While underlying profit was much higher, that figure is pre-tax and finance expenses, so the US$454.1 million figure is a more appropriate comparison.
Management Commentary
Brambles CEO Graham Chipchase
said that FY19 presented a challenging environment.
“We delivered a solid FY19 result in a challenging economic and operating environment,” he said.
“During the year, our teams balanced price realisation with impressive volume growth notwithstanding strong competition in every market and a moderation in like-for-like volumes in line with the slowdown in most major economies and the global automotive industry.”
Is It Time To Buy Brambles Shares?
While the share price decline produces a more compelling valuation, the stagnant dividend and talk of strong competition do not make me confident about Brambles’ growth prospects over the next few years. It may make a good long-term investment but I think there are better options, like the proven businesses in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
