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Brambles Industries (BI.)

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Thursday 21 November, 2002

Brambles Industries

Trading Statement

Brambles Industries PLC
21 November 2002


          BRAMBLES TRADING UPDATE FOR THE FOUR MONTHS ENDED 31 OCTOBER 2002



MAIN POINTS

• Brambles EBITA (earnings before interest, tax and goodwill amortisation) from 
  continuing businesses for the four months to 31 October (at constant exchange 
  rates), down by 9% compared with same period last year.

• CHEP in the Americas EBITA up 22% with major improvement programme in CHEP USA
  being successfully executed.

• In CHEP Europe comprehensive review completed by new management; restructuring
  programme to fundamentally improve performance now underway:

  • CHEP Europe EBITA significantly down from last year.

  • One-off exceptional charge for reorganisation of approximately £85 million
    (A$238 million) to be taken over 2.5 years, with cash payback in 18 months.

  • First beneficial impact of reorganisation on CHEP Europe profits will occur
    next financial year; results thereafter should continue to improve with
    additional benefits from this programme as well as revenue growth.

• CHEP in other markets performing strongly.

• Recall continuing to grow organically and through acquisition.

• Cleanaway performing steadily.

• For the full year Brambles group EBITA from continuing businesses (before
  restructuring costs) is now expected to be below earlier expectations. Cash
  generation, however, will remain strong.




COMMENTARY

After the merger in August 2001, which brought all the Brambles businesses under
one unified management, a comprehensive review was commenced at CHEP and the
management team strengthened with the appointment of Victor Mendes as CHEP's CEO
in March 2002. While the review confirmed CHEP as a unique, profitable business
with good growth prospects, it also identified a number of legacy issues in its
US and European operations.

The strong push for revenue growth in the past several years had led to an
increasingly large investment in pallet stocks, an expansion in the number of
small drop points and an increasing flow of pallets to non-participating
distributors (NPDs). These resulted in lower asset utilisation and reduced
margins.


CHEP IN THE AMERICAS

These issues were addressed in CHEP USA with a major and focused improvement
programme which began in early 2002.

The programme included the completion of a new contract with Wal*Mart, a new
pricing model for costly NPD deliveries, and a totally restructured service
centre (depot) network with a drive for associated improvements in transport and
pallet collection costs.

The programme is being executed effectively and we are already seeing margin
improvements, a resumption of profit growth and reduction in capital
expenditure. We have also now completed the implementation of the new SAP system
four months ahead of schedule.

As a result, EBITA in CHEP in the Americas in the four months to the end of
October was up by 22% compared with the same period last year after charging an
additional one-off cost of £4.5 million (A$13 million) associated with the SAP
implementation.

For the full year, and even after charging the remaining £8 million (A$22
million) one-off cost relating to completion of the service centre consolidation
programme, the performance of CHEP in the Americas should continue to be strong,
driven by the ongoing successful execution of the improvement programme in the
USA.



CHEP EUROPE

As with CHEP's operations in the USA, CHEP Europe is a fundamentally strong and
profitable business which has delivered good returns and consistent growth over
many years.

CHEP Europe has however operated a country based management structure with
different business processes in each country. Although this was appropriate in
the early days of CHEP Europe, a major negative outcome has been the growth in
the number of excess pallets in the European pool. This has led to lower asset
utilisation and reduced revenue and margins. The structure has also become more
costly, less efficient and less customer friendly as the single European market
has evolved.

Following Victor Mendes' appointment as CHEP's global CEO, Mark Luby was
appointed President of CHEP's European businesses in July this year. Mark
successfully ran CHEP Asia Pacific for the previous 5 years.

To address these issues, Mark's new management team is reorganising and
refocusing CHEP Europe through the creation of a new pan European organisation
structure. The team is implementing a reorganisation plan which includes:


• An accelerated programme to recover and relocate pallets;

• Standardisation and streamlining of business processes across Europe;

• Reconfiguration of service centres and transportation logistics;

• A new pricing model to align prices more closely with activities and costs;
  and

• A focus on improving customer service to clearly differentiate CHEP's service
  offering.


The reorganisation programme at CHEP Europe is estimated to cost approximately
£85 million (A$238 million). The cost will be shown in the accounts as an
operating exceptional item under UK GAAP and as a significant item under
Australian GAAP. Approximately 50% of the cost will be charged to the profit and
loss account this year, 35% next year with the balance, all relating to the
collection and relocation of pallets, in the financial year to 30 June 2005.

Approximately £45 million (A$126 million) of the cost will be in cash, and is
related to the one-off collection and relocation of excess pallets under the new
pan European structure. This initiative is expected to produce cash benefits
through a reduction in capital expenditure starting in the current financial
year. The completion of this element of the reorganisation will take about 30
months. Consequent savings in capital expenditure over this 30 month period are
expected to exceed £100 million (A$280 million), with a positive net cash impact
in the current financial year.

The remaining £40 million (A$112 million) of the reorganisation costs relate to
key process efficiencies, cost reduction and the other issues noted earlier.
Approximately £35 million (A$98 million) of these costs will be cash with an
expected cash payback of 2.5 years.

The overall impact of this reorganisation on the results of CHEP Europe will
commence with a benefit to profits of £15 million (A$42 million) in the next
financial year, and a further £15 million (A$42 million) in the following year.

In terms of current performance, profits of CHEP Europe in the first four months
of the year were 33% lower than last year, including a £4 million (A$11 million)
abnormal cost associated with a number of service centre fires which are being
investigated by the authorities. Excluding this abnormal cost, the EBITA of CHEP
Europe in this period was 23% lower than the same period last year. For the full
year and excluding the exceptional cost of restructuring, CHEP Europe's profits
are forecast to be similarly lower than last year.

Factors which are impacting CHEP Europe's lower performance this year include a
timing delay in the start up of new contracts, an increase in the volume of
pallet repatriations from the UK to the continent, and a higher than anticipated
level of pallet collection activity.

Following the reorganisation programme, CHEP Europe will be operating with lower
costs, a focused pan European operation and management structure and will have
enhanced competitive advantage through improved customer service and scale. It
is also expected to grow revenue and increase margins and profits from this
lower cost base.



OTHER BUSINESSES

In Brambles other continuing businesses, Cleanaway is performing steadily and,
notwithstanding the state of the German economy, the business is tracking last
year's performance. Recall is continuing to grow and while Industrial Services
was impacted by the bankruptcy of a customer, its profits are holding at last
year's level. Interlake continues to suffer from the decline in its market.
Brambles Shipping was sold in October.


SUMMARY

In summing up the Group's current trading and outlook, Chief Executive Officer
Sir CK Chow said 'We have high quality businesses and a clear strategy. We have
faced up to the issues arising from our CHEP reviews and have now set the
foundation for a revitalised company. The actions we have taken to focus on
value creation and in improving use of capital will result in a much stronger
Brambles.'

                _______________________________________________



For further information, contact:

London

Media:                  Richard Mountain, Financial Dynamics             +44 (0) 20 7831 3113

Investor and Other:     Sue Scholes, Head of Investor Relations          +44 (0) 20 7659 6012

Sydney

All Enquiries           Edna Carew                                       +61 (0) 2 9256 5204




 The Brambles Industries Group is globally headquartered in Sydney, Australia.




                      This information is provided by RNS
            The company news service from the London Stock Exchange