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Brambles: Downplaying 2023-24 growth?

On Thursday, Brambles (ASX:BXB), the global logistics giant, reported a 13% increase (15% higher at actual Forex rates) in September quarter revenues, reaching $US1.64 billion ($A2.56 billion). Despite this impressive figure, the company reaffirmed its full-year guidance, projecting revenue growth of 6% to 8%. This raises the question: Is Brambles anticipating a gradual slowdown in revenue and earnings?

CEO Graham Chipchase offered insights, stating, “Although sales revenue performance was strong in the first quarter and exceeded our full-year guidance, we anticipate pricing growth to moderate in the coming months. This moderation is expected as we cycle through stronger prior-year comparatives and the rollover contributions from FY23 pricing initiatives. Additionally, we foresee current-year price realisation aligning with a lower cost-to-serve environment, including benefits from improved supply chain behavior.”

He emphasised, “Importantly, as pricing moderates and cost-to-serve declines, we remain committed to volume growth while maintaining commercial discipline to generate appropriate margins, return on capital, and sustainable Free Cash Flow.”

However, Brambles’ quarterly report reveals that the revenue surge primarily resulted from price increases on contract rollovers, with minimal actual demand growth, except in Australia, where the company reported “strong demand.”

Brambles explained, “Sales revenue growth was mainly driven by rollover contributions from prior-year pricing initiatives.” Group volumes remained flat, aligning with the prior corresponding period.

Key highlights from the report include:
CHEP Americas saw a 12% increase in sales revenue at constant currency, driven by price growth of 12%. Overall segment volumes were flat, with growth in Canada and Latin America offsetting lower volumes in the US.US volumes declined by 1%, mainly due to lower like-for-like volumes, partially offset by increased beverage and dairy sector volumes.CHEP EMEA witnessed a 14% increase in sales revenue at constant currency, primarily driven by price growth of 15%, while volumes declined by 1%. Price growth reflected rollover contributions from prior-year contractual price increases.In CHEP Asia-Pacific, sales revenue increased by 13% at constant currency, with volume growth of 8%. Price growth of 5% was driven by price realisation and a favorable customer mix.Mr. Chipchase noted, “The momentum from FY23 has carried forward into the first quarter of FY24, with sales revenue increasing by 13% on a constant FX basis.” He acknowledged that pricing on current-year contractual renewals continued to rise, but this was largely due to rollover contributions from prior-year pricing initiatives, as volumes in their largest markets remained subdued.
He added, “Volumes with existing customers in our US and European pallet businesses continued to decline, but the rate of this decline moderated compared to the previous quarter, reflecting broader consumption activity and improved pallet availability across our US and European network.”

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