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Brambles shares the largesse with increased dividend payout ratio

The global supply chain logistics group is well on track to meet its forecasts of higher revenue, earnings and free cashflow generation in 2025.
ASX

Shareholders in the global supply chain logistics company, Brambles (ASX:BXB), enjoyed the full package in the 2024 financial year with the share price rising 32 per cent over the past year to close at $19.40 on Tuesday as well as a substantial jump in the payout.

It’s set to continue in the current financial year with chief executive officer Graham Chipchase using the first quarter results to September 30, 2024, to say the group was on track to meet its predictions for the year to June 30, 2025.

“The market dynamics in the first quarter, including the continued moderation in dual sourcing activity, supports our expectation of net new business growth accelerating in the second half of the year. The benefits of pooling are clear, and we continue to highlight our customer value proposition.

“We can reconfirm our 2025 outlook for sales revenue growth, underlying profit leverage and free cash flow generation. While our sales revenue performance in the first quarter was slightly below the full-year guidance range, we expect ongoing price realisation and improved volume growth through the rest of the financial year.”

He said Brambles expected sales revenue growth of between four and six per cent, underlying profit growth of between eight and 11 per cent, positive free cash flow before dividends of between US$750 ($AU137 million) and $US850 million ($AU1,211 million) and a dividend payout ratio between 50 per cent and 70 per cent – up from the previous 45 per cent to 60 per cent – of underlying profit.

It meant shareholders received 51.99 cents in 2024, up 31.6 per cent from 39.5 cents in 2023.
Brambles’ dual ambition is to boost shareholder returns while maintaining its dominant position in the pallet and container pooling industry.

At the heart of this strategy is a significant enhancement to its capital return program. The company has announced plans for a US$500 million ($AU808 million) share buy-back in 2025. When coupled with the improved dividend payout ratio, it marks a substantial shift in its approach to shareholder returns and signals management’s confidence in the company’s cash generation capabilities.

This optimistic outlook is backed by tangible operational improvements across the business. The company’s divestment of its CHEP India business to LEAP India Private for about US$85 million ($AU137 million) demonstrates its disciplined approach to capital allocation, generating US$75 million ($AU121 million) in cash proceeds for debt reduction while allowing management to focus on markets with near-term value creation potential.

A key driver of Brambles’ improved performance has been its success in implementing structural changes to pallet collection and repair processes. The company has made significant strides in reducing uncompensated pallet losses, with improvements expected to continue.

This operational efficiency gain, combined with enhanced commercial terms and relationships across customer supply chains, is creating a more resilient and profitable business model.

Digital transformation is also playing an increasingly important role in Brambles’ evolution. The company has deployed more than 550,000 autonomous tracking devices, supporting both asset efficiency and commercial outcomes. A successful proof of concept for complete pool tagging in Chile demonstrates the potential for broader implementation of this technology across the network.

However, challenges remain on the horizon. The company faces ongoing labour inflation across its markets and must navigate uncertain macro-economic conditions affecting customer demand. Competition in key markets continues to intensify, particularly as pallet availability improves and some customers explore dual-sourcing options.

Yet Brambles appears well-positioned to handle these headwinds. Its extensive network of more than 750 service centres across about 60 countries provides significant operational leverage. The company’s digital transformation initiatives are delivering efficiency gains, while its sustainability credentials increasingly resonate with customers focused on reducing supply chain environmental impacts.

For shareholders, Brambles’ strategy offers an attractive combination of defensive characteristics and growth potential. The company’s target of delivering total shareholder returns exceeding 10 per cent a year while maintaining return on capital invested in the high teens appears achievable given the initiatives underway.

Jamie Nemtsas

  • Jamie Nemtsas is founder of advice firm Wattle Partners and the executive chair of The Inside Network.




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