Brambles Limited

ABN 89 118 896 021

Level 10, 123 Pitt Street Sydney NSW 2000 Australia

GPO Box 4173 Sydney NSW 2001

Tel +61 2 9256 5222 Fax +61 2 9256 5299www.brambles.com

16 February 2021

The Manager - Listings

Australian Securities Exchange Limited Exchange Centre

20 Bridge Street SYDNEY NSW 2000

Via electronic lodgement

Dear Sir / Madam

Brambles 2021 Half-Year ASX & Media Release

Attached is a release to the Exchange from Brambles Limited on its financial report for the half-year ended 31 December 2020.

The release of this announcement was authorised by a Special Committee of the Board of Brambles Limited.

Yours faithfully Brambles Limited

Robert Gerrard

Group Vice President, Legal & Secretariat

Brambles' 1H21 result: Strong pallet demand and cash flow generation; FY21 outlook upgraded.

  • COVID-19 & Brexit impacted the operating environment in the first half, driving elevated levels of demand for pallets while changes in consumer demand patterns and higher input costs resulted in operating cost increases.

  • Sales revenue increased 6% at constant FX, as strong volume growth and price realisation in the global Pallet businesses and the contribution from the commencement of a large Australian RPC contract offset COVID-19 related declines in Automotive and Kegstar businesses.

  • Underlying Profit1 increased 5% at constant FX, including a US$8 million one-off compensation benefit for a service centre relocation in Australia.

  • Free Cash Flow after Dividends increased US$332.2 million and included the impact of cycling the

    US$183.2 million cash outflow in the prior year relating to a special dividend payment. Excluding this impact, the increase of US$149.0 million reflected higher earnings, a disciplined approach to capital expenditure and some timing benefits in the first half of FY21.

  • Return on Capital Invested2 of 19.0% increased 0.8pts at constant FX, driven by Underlying Profit growth and asset efficiency improvements across the Group.

  • Dividend and capital management: 2021 interim dividend of 10.0 US cents declared, with a payout ratio of 50%. A$2.4 billion share buy-back programme (61% complete) to recommence on 18 February 2021.

  • Upgraded FY21 outlook: For the full-year ended 30 June 2021, Brambles now expects:

    • Revenue growth in the range of 4% to 6% at constant FX rates, with improved Underlying Profit margins including ~1pt improvement in US margin;

    • Underlying Profit growth in the range of 5% to 7% at constant FX rates;

    • Free Cash Flow to fully fund dividends and core business capex; and

    • FY21 dividend payout ratio in line with Brambles' dividend policy.

    Outlook is subject to assumptions outlined on page 3 of this release.

Results Highlights

(Continuing operations)

1H21 result (Actual FX)Change vs. 1H203

(Actual FX)

(Constant FX)

Statutory

Sales revenue Operating profit Profit after tax

US$2,565.5m

7% 6%

US$465.0m US$295.2m

7% 5%

6% 4%

Basic earnings per share Non statutory Underlying Profit

US19.8¢

11% 10%

Return on Capital Invested (ROCI)

US$465.0m 19.0%

7% 5%

0.8pts

0.8ptsCash Flow from Operations US$423.6m US$101.8m Free Cash Flow after dividends US$163.8m US$332.2m Interim dividend declared per share US10.0¢

  • 1 A non-statutory measure that represents profit from continuing operations before finance costs, tax and Significant Items.

  • 2 Underlying Profit multiplied by two, divided by the six-month average of capital invested; capital invested is calculated as net assets before tax balances, cash, term deposits, borrowings and lease liabilities, but after adjustments for pension plan actuarial gains or losses and net equity adjustments for equity-settled share-based payments.

  • 3 The variance between actual and constant FX performance reflects the changes in Brambles' operating currencies, relative to its reporting currency, the US dollar.

Sales revenue from continuing operations of US$2,565.5 million increased 6% at constant currency driven by volume growth of 4% reflecting strong pallet demand from existing customers in the consumer-staples sectors, ongoing conversion of new customers in the Central and Eastern European pallets business and contributions from a large Australian RPC contract won in the second half of the prior fiscal year. Price realisation contributed 2% to revenue growth with ongoing recovery of input-cost inflation and a higher cost-to-serve in the Americas and EMEA regions. This strong growth offset revenue declines in the Automotive and Kegstar businesses of 6% and 56%, respectively, with both businesses cycling strong, pre-pandemic levels of customer demand in the comparative prior-year period.

Underlying Profit and operating profit of US$465.0 million increased 5% at constant currency and included a US$8 million net gain on the relocation of a service centre in Australia. Excluding the impact of this gain, Underlying Profit growth of 3% was driven by the sales contribution to profit, disciplined overhead cost control and supply chain productivity benefits associated with automation projects, pallet durability and procurement initiatives. These gains more than offset direct cost increases due to COVID-19 related changes in network flows and customer demand patterns, inflationary cost pressures and additional costs to support the Group-wide focus on minimising capital expenditure to service strong volume growth with increased volatility in the first half.

Profit after tax from continuing operations of US$295.2 million increased 4% at constant currency as the increase in operating profit was partly offset by lower interest income reflecting the US$0.6 billion year-on-year reduction in deposit balances due to capital management activity and lower interest rates on Australian dollar deposits.

Return on Capital Invested of 19.0% increased 0.8 percentage points at constant currency driven by the Underlying Profit performance and a modest increase in Average Capital Invested despite strong volume growth, reflecting the Group-wide focus on improving asset efficiency and minimising capital expenditure to service temporary spikes in demand.

Cash Flow from Operations increased US$101.8 million on the prior comparative period reflecting higher earnings and disciplined management of capital investments in the half. The year-on-year increase includes an estimated US$80 million of timing benefits largely relating to capital payments which are expected to reverse in the second half of the fiscal year.

2021 interim dividend

The Board has declared an interim dividend of 10.0 US cents per share. This represents a payout ratio of 50%, which is in line with Brambles' dividend policy to payout between 45% and 60% of Underlying Profit after finance costs and tax4.

The 2021 interim dividend will be declared in US dollars and paid as 13.08 Australian cents per share5, with franking of 30%. The unfranked component of the interim dividend is conduit foreign income. Consequently, non-resident shareholders will not pay Australian dividend withholding tax on this dividend. The interim dividend is payable on 8 April 2021 to shareholders on Brambles' register at 5.00pm on Thursday, 11 March 2021. The ex-dividend date is 10 March 2021.

CEO Commentary

Commenting on the 1H21 result, Brambles' CEO, Graham Chipchase, said: "I am proud of our people who have worked tirelessly to meet the significant increase in customer demand during a global pandemic with community restrictions and Brexit-related uncertainty. Their commitment and the resilience of our 'share and reuse' business model have enabled the continued flow of life's essentials through supply chains globally and reinforced Brambles as a trusted partner to many of the world's largest fast-moving consumer brands.

"We experienced elevated levels of demand in our key pallet businesses in the first half, as retailers raised inventories to accommodate increased levels of at-home consumption and to provide greater contingency against changes in consumer demand. There was also a noticeable shift within the consumer staples segment towards established, household brands which drove stronger volume growth with our largest customers. Operationally, COVID-19 related changes in network dynamics and customer demand patterns resulted in additional pallet collection and repair costs, with wage inflation in most regions increasing plant costs further. Our focus on optimising the use of our existing asset

  • 4 Subject to Brambles' cash requirements.

  • 5 This reflects the US cents dividend converted at an A$:US$ exchange rate of 0.7646, the average exchange rate over the five business days ending 9 February 2021.

pool to service elevated levels of demand also contributed to higher plant and transport costs in the period and limited our investment in new pallets.

"These increased operational costs were offset by disciplined cost management across the business, including corporate costs, and efficiency benefits from supply chain programmes. These benefits included additional repair capacity across our existing US service centre network as a result of the accelerated automation programme and lower damage rates due to improved pallet durability in all regions. Increased price realisation and broader coverage of surcharges, introduced to lower the business vulnerability to sudden increases in input prices, also helped mitigate the impact of the higher operating cost environment.

"Beyond our pallets business, our Automotive containers team did a great job in controlling costs to largely offset the profit impact of the volume shortfall in the half. While the recovery of automotive production has been stronger than anticipated, customer demand remains below prior-year levels and we maintain a cautious outlook for the business in the second half of the year. In addition, on 10 February we announced the merger of Kegstar with MicroStar, creating the global leader in keg pooling. The combined scale and expertise is expected to accelerate growth and future value creation for shareholders.

"During the half, we launched our 2025 Sustainability vision to pioneer truly regenerative supply chains, leveraging the power of our 'share and reuse' business model to create more positive impacts beyond our business for the benefit of future generations. We are proud of the ongoing recognition of our sustainability credentials, having recently received exceptionally positive ESG ratings from leading industry groups and publications.

"As we continue to operate in a global pandemic, we remain focused on the health and safety of our people and ensuring uninterrupted service for our customers. We are determined in our efforts and vigilant in our approach and practices to support employees, customers and the local communities in which we operate."

FY21 outlook

Brambles is upgrading its full-year sales revenue and earnings guidance to reflect the strong first-half result.

In FY21, Brambles now expects to deliver:

  • Sales revenue growth between 4-6% at constant FX rates, with improved Underlying Profit margins including an increase in US margins of ~1 percentage point;

  • Underlying Profit growth between 5-7% at constant FX rates;

  • Free cash flow expected to fund dividends and core business capex to support growth, the impact of lumber inflation on pallet prices and investments to further develop digital and efficiency objectives;

  • Dividend payout ratio between 45% to 60%, in line with Brambles' dividend payout policy; and

  • Share buy-back programme to continue subject to the ongoing assessment of the Group's funding and liquidity requirements in the context of increased economic uncertainty.

The following assumptions underpin Brambles' updated FY21 guidance:

  • The broad continuation of current trends in input costs and network dynamics;

  • A progressive recovery in the Automotive business;

  • While customer demand is expected to remain strong for the balance of FY21, second-half and full-year sales revenue growth is expected to moderate from first-half levels as the business cycles a strong comparative second-half period in the prior year which included record levels of pallet demand following the outbreak of COVID-19. In addition, Brexit-related demand in the first half is expected to reverse in the second half; and

  • Underlying Profit growth is expected to be stronger in the second half of FY21 as the business cycles higher costs in the pallets business and lost income from the Automotive business in the second half of the prior year. The second half of FY21 is also expected to benefit from higher margins in the US pallets business reflecting ongoing price realisation and continued delivery of automation, pallet durability and procurement benefits.

Commenting on the outlook for the Full Year Mr Chipchase added: "The strong first-half result has allowed us to upgrade our FY21 sales revenue and earnings guidance. We remain committed to delivering Group Underlying Profit leverage and expect US margins to improve by approximately one percentage point, with the US automation programme on track for completion by the end of the fiscal year."

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Brambles Ltd. published this content on 16 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 February 2021 06:34:00 UTC.