Brambles pricing power outweighs consumer spending slowdown

afr.com:

Transport and logistics group Brambles expects profit growth to slow in 2023-24 as cost-of-living pressures on households mean lower volumes of goods are being transported on pallets to the group’s retailer customers, which are cutting back inventory levels.

But hefty price rises and surcharges of $US815 million ($1.26 billion) imposed by Brambles on customers as it clawed back inflation in timber prices, energy, labour and transport costs enabled it to lift net profit by 19 per cent to $US703.3 million in the 12 months ended June 30.

Brambles chief executive Graham Chipchase.  Domenico Pugliese

Brambles operates a pool of 361 million pallets and containers under the CHEP brand, transporting goods to retailers around the world, and is a bellwether for the health of the economy.

A slowing in consumer spending and a shortage of pallets as retailers kept holding on to them for longer in a “just in case” mentality meant like-for-like volumes were down 5 per cent in 2022-23.

Chief executive Graham Chipchase said the softening in consumer demand had “continued to weigh on volumes” in July. Retailers were also cutting back the inventory levels they carried in warehouses and stores, but it was more pronounced in the US and Europe than in Australia, he said.

The company lifted its final dividend by 17 per cent to US14¢ a share. Sales revenue was up 14 per cent to $US6.08 billion as price increases offset an overall decline in volumes of 2 per cent.

The company expects underlying profit growth of between 9 per cent and 12 per cent in 2023-24, and sales revenue to increase by 6 to 8 per cent.

Brambles shares gained 6 per cent in early trading on the ASX to $14.99. The shares have risen about 25 per cent in the past six months from