Brambles News Australia: BXB set to join Silicon Valley, big data and IoT realm as it lifts profit outlook for 2016

It’s a busy day for Brambles Limited (ASX: BXB), who upgraded its underlying profit outlook for 2016 to eight to 10 percent, just as CFO Zlatko Todorcevski announced his retirement.

The news also follows the company’s announcement that it would establish a new office in Silicon Valley as it looks to grow further by expanding into ‘big data’ and the Internet of Things.

BXB 1H16 Results: Brambles lifts underlying profit guidance

The supply-chain logistics giant on Monday recorded a net profit of US$290 million (approx. AU$405 million) for the six months to December 31. This marks a two percent increase from the US$286 million logged in the prior corresponding period (1H15). This slight rise would have been 14 percent if not for the strength of the US dollar.

Revenue fell two percent to US$2,752.2 million, but in constant currency terms it rose eight percent. According to the company’s announcement, this constant-currency growth was driven by new business wins, modest pricing gains in the Pallets segment, and like-for-like volume growth.

Brambles also lifted its full-year underlying profit guidance from 6-8 percent growth, to 8-10 percent growth (in constant currency terms). This new guidance translates to Underlying Profit of US$1,015-1,035 million at 30 June 2015 exchange rates.

A 25 percent franked interim dividend of 14.5 cents per share was also announced, up 0.5 cents per share from last year.

“We are very pleased with this first-half result, which reflects our strategy of investing in our strong network position to drive growth, as well as the delivery of indirect cost and supply chain efficiencies and a lessening of some external cost pressures,” Brambles’ CEO, Tom Gorman, said.

“We continue to see considerable opportunities to invest for growth at attractive rates of return, where we can leverage the strength of our existing customer relationships, intellectual property and embedded network scale. As such, we continue to anticipate growth capital expenditure during FY17 to FY19 of approximately US$1 billion.”

ASX:BSB opened at AU$11.46 and hit AU$12.05 at around 1.30pm AEDT.

Big Data push with BXB Digital

Joining the good news on Monday was Brambles's launch of BXB Digital, a new company based in Silicon Valley, Northern California, that would embed the logistics giant in the Internet of Things (IoT) – a digital economy ruled by networks of physical objects that are able to send and receive data to the Internet, to each other and to users.

Analyst firm Gartner estimates there will be over 26 billion connected devices by 2020 - other predictions put this number at over 100 billion – and for Brambles, this presents the perfect opportunity to study and offer valuable big data analysis of a complex supply chain.

Brambles’ current primary activity is the transportation of goods through supply chains. It provides more than 500 million reusable unit-load equipment such as pallets, crates and containers through its CHEP and IFCO brands, to transport goods to companies such as Coles and Woolworths, Wal-Mart, Tesco and Nestle.

If these transport platforms were embedded with durable, sustainable sensors connected to the IoT, the logistics company would not only be able to transport goods, but also feed reliable information such as the temperature of goods being transported, and how far a pallet of container is from its destination.

"Today, our assets are essentially dumb assets," Gorman told Fairfax. "We could move to a space where we get real-time information.”

Brambles has already injected some seed capital into this business, which is not only expected to start generating revenue soon, but to eventually stand on its own.

BXB Digital will be headed by former Senior VP, Customer Innovation & Internet of Things at SAP, Prasad Srinivasamurthy, from March.

Brambles CFO Retires

Meanwhile, the good news from Brambles is dampened somewhat by its announcement that Chief Financial Officer (CFO), Zlatko Todorcevski, will be stepping down after 4.5 years with the company.

Citing the toll of travel demands as his reason for retiring, Todorcevski had led the company through the Recall demerger, a number of debt capital raisings and more recently, the group-wide One Better and One Finance initiatives.

“As an international company with the bulk of its business outside Australia, the travel demands of my role and the consequent time away from my family have caused me over recent months to think about retiring not only from Brambles but also from full-time executive life in general,” Todorcevski said in a statement.

“I believe that now is the right time to finalise this decision and allow the Board to focus on recruiting my successor.”

Todorcevski will remain with Brambles until February 2017, through the selection of a successor. The Board will shortly begin a global search process to review potential internal and external candidates for the role.