Financial Review
Brambles manages its capital structure to maintain a solid investment-grade credit rating. During the financial year ended 30 June 2016, Brambles held investment-grade credit ratings of BBB+ from Standard & Poor’s and Baa1 from Moody’s Investors Service.
In determining its capital structure, Brambles considers the robustness of future cash flows, the potential funding requirements of its existing business, growth opportunities and acquisitions, the cost of capital, and ease of access to funding sources. Initiatives available to Brambles to achieve its desired capital structure include adjusting the amount of dividends paid to shareholders, returning capital to shareholders, buying back share capital, issuing new shares, selling assets to reduce debt, varying the maturity profile of borrowings and managing discretionary expenses.
Brambles’ treasury function is responsible for the management of certain financial risks within Brambles. Key treasury activities include liquidity management, interest rate and foreign exchange risk management, and securing access to short- and long-term sources of debt finance at competitive rates. These activities are conducted on a centralised basis in accordance with Board policies and guidelines, through standard operating procedures and delegated authorities.
These policies provide the framework for the treasury function to arrange and implement lines of credit from financiers, select and deal in approved financial derivatives for hedging purposes, and generally execute Brambles’ financing strategy.
The Group uses standard financial derivatives to manage financial exposures in the normal course of business. It does not use derivatives for speculative purposes and only transacts derivatives with relationship banks. Individual credit limits are assigned to those relationship banks, thereby limiting exposure to credit-related losses in the event of non-performance by any counterparty.
Brambles funded its operations during the 2016 financial year primarily through retained cash flow and borrowings. Brambles generally sources borrowings from relationship banks and debt capital market investors on a medium-to-long-term basis.
During the Year, Brambles issued US$500 million of guaranteed senior notes due in 2025 at a coupon of 4.125% in the US 144A market. Proceeds of the note issue were used to repay bank borrowings.
Bank borrowing facilities were either maintained or renewed throughout the Year. These facilities are generally structured on a multi-currency, revolving basis with maturities ranging to 2020. Borrowings under the facilities are floating-rate, unsecured obligations with covenants and undertakings typical for these types of arrangements.
The average term to maturity of Brambles’ committed credit facilities as at 30 June 2016 was 4.3 years (2015: 3.9 years). In addition to these facilities, Brambles enters into operating leases for office and operational locations and certain plant and equipment to achieve flexibility in the use of certain assets. The rental periods vary according to business requirements.
Brambles’ financial policy is to target a net debt to EBITDA ratio less than 1.75 times. Key financial ratios continue to reflect the Group’s strong balance sheet position and remain well within the financial covenants included in Brambles’ major financing agreements.
Brambles has a progressive dividend policy. Under this policy, the Group seeks to maintain or increase dividends per share each year, in Australian cents, subject to its financial performance and cash requirements. The Board has declared a final dividend for 2016 of 14.5 Australian cents per share, in line with the previous interim dividend and up 0.5 Australian cents per share on the previous final dividend. The 2016 final dividend is payable on 13 October 2016 to shareholders on the Brambles register at 5.00pm on 8 September 2016. The ex-dividend date is 7 September 2016.
Total dividends for the Year were 29.0 Australian cents per share, up 1 Australian cent per share. Brambles paid the 2016 interim dividend of 14.5 Australian cents per share on 14 April 2016.
Brambles’ 2016 dividends are 25% franked. The unfranked component of the final dividend is conduit foreign income: shareholders not resident in Australia will not pay Australian dividend withholding tax on this dividend.
Brambles’ Board maintained the Dividend Reinvestment Plan (DRP) for the 2016 financial year, in support of the Group’s ongoing funding needs. Commencing with the 2016 final dividend, shares issued under the DRP will no longer attract a discount and any dilutive impact on earnings per share of DRP-issued shares will be neutralised through the transfer of existing shares to participating shareholders, via on-market purchases rather than issuing new shares to them.
| US$M | Change | |||
|---|---|---|---|---|
| (Continuing operations) | FY16 | FY15 | Actual FX | Constant FX |
| Sales revenue | 5,535.4 | 5,440.5 | 2% | 8% |
| Operating profit | 915.1 | 941.8 | (3)% | 5% |
| Significant Items | 78.1 | 45.1 | ||
| Underlying profit | 993.2 | 986.9 | 1% | 9% |
| Underlying Profit margin | 17.9% | 18.1% | (0.2)pts | +0.1pts |
| Average Capital Invested | 6,486.4 | 6,251.5 | 4% | 10% |
| Return on Capital Invested | 15.3% | 15.8% | (0.5)pts | (0.2)pts |
| Brambles Value Added | 248.3 | 233.5 | 14.8 | |
| Cash Flow from Operations | 513.8 | 729.5 | (215.7) | (187.1) |
Brambles’ financial results for the 12 months ended 30 June 2016 reflected the continued execution of the Group’s growth strategy and commitment to delivering direct and indirect cost efficiencies across its operations.
The variance between actual and constant-currency growth reflects the strength of Brambles’ reporting currency, the US dollar, relative to the Group’s other operating currencies, in particular the euro, British pound, Australian dollar and Canadian dollar.
Sales revenue was US$5,535.4 million, up 2%. Constant-currency growth of 8% was in line with management’s FY16 guidance for constant-currency sales revenue growth between 8% and 10%, and consistent with the Group’s medium-term objective for average annual constant-currency sales revenue growth in the “high single digits“. Constant-currency growth was primarily driven by: strong net new business wins, robust like-for-like volume growth and modest pricing gains in the developed markets pooled Pallets businesses; improved growth momentum in emerging markets Pallets businesses; continued expansion with new and existing retailers in European RPCs; and contributions from recent acquisitions.
Underlying Profit, which excludes Significant Items, was US$993.2 million, up 1%. Constant-currency growth of 9% was in line with management’s FY16 guidance for constant-currency Underlying Profit growth of between 8% and 10%. Constant-currency growth reflected strong sales revenue growth, direct cost efficiencies in the Pallets and European RPCs segments, and US$23 million of overhead cost efficiencies resulting from the One Better program. These drivers more than offset the impact of increased operating costs in the North American recycled pallets business, short-term network inefficiencies in North American RPCs and ongoing industry headwinds in Oil & Gas.
Average Capital Invested was US$6,486.4 million, up 4% (up 10% at constant currency), reflecting the impact of acquisitions since 1 July 2014. Excluding these acquisitions (Braecroft, Ferguson Group, Rentapack, IFCO Japan and Empacotecnia), constant-currency Average Capital Invested growth was up 7%, reflecting growth capital expenditure to support expansion in the Pallets and RPCs businesses.
Return on Capital Invested was 15.3%, down 0.5 percentage points (down 0.2 percentage points at constant currency), reflecting the increase in Average Capital Invested. On a pro-forma FY19 target basis (excluding acquisitions and foreign exchange impacts since December 2013 when Brambles set a target for Return on Capital Invested of 20% by FY19), Return on Capital Invested was 17.2%, up 0.1 percentage points (up 0.4 percentage points at constant currency) reflecting the improved profitability in the Pallets segment.
Brambles Valued Added, a measure of economic profit calculated at constant 30 June 2015 exchange rates, was US$248.3 million, up US$14.8 million, reflecting similar trends as Return on Capital Invested.
Cash Flow from Operations was US$513.8 million, down
US$215.7 million, due to higher capex to support growth and one-time change to payment processes that drove increased working capital.
Calculated at 30 June 2015 FX rates.
| US$M | Change | |||
|---|---|---|---|---|
| (Continuing operations) | FY16 | FY15 | Actual FX | Constant FX |
| Underlying Profit | ||||
| Pallets Americas | 428.1 | 417.6 | 3% | 8% |
| Pallets EMEA | 354.5 | 343.9 | 3% | 14% |
| Pallets Asia Pacific | 65.1 | 71.6 | (9)% | 3% |
| Total Pallets | 847.7 | 833.1 | 2% | 10% |
| RPCs | 131.4 | 131.5 | 0% | 10% |
| Containers | 48.4 | 59.3 | (18)% | (11)% |
| Corporate | (34.3) | (37.0) | 7% | (5)% |
| Total Underlying Profit | 993.2 | 986.9 | 1% | 9% |
| Significant Items | (78.1) | (45.1) | ||
| Operating profit | 915.1 | 941.8 | (3)% | 5% |
| Net finance costs | (114.0) | (111.9) | (2)% | (8)% |
| Tax expense | (243.7) | (242.3) | (1)% | (10)% |
| Profit after tax | 557.4 | 587.6 | (5)% | 2% |
| Weighted average number of shares (M) | 1,577.6 | 1,566.0 | 1% | 1% |
| Basic EPS (US cents) | 37.3 | 37.3 | 0% | 7% |
| Basic EPS from continuing operations (US cents) | 35.3 | 37.5 | (6)% | 1% |
Operating profit of US$915.1 million, was down 3%, and up 5% on a constant-currency basis. This reflected the impact of US$78.1 million of Significant Items, comprising:
- Restructuring and integration costs of US$37.7 million ($30.4 million of which related to the One Better program);
- Goodwill impairment charge of US$38.0 million in the Oil & Gas business reflecting current market conditions in that sector;
- Acquisition-related costs of US$7.8 million; and
- A US$5.4 million gain on acquisitions, predominantly related to the IFCO Japan business.
Net finance costs were US$114.0 million, up 2%. Constant-currency growth of 8% reflected an increased proportion of long-term, higher fixed-rate debt.
Tax expense was US$243.7 million, up 1%. Constant-currency growth of 10%, reflected the lower tax deductibility of Significant Items in FY16. This resulted in an effective tax rate on operating profit of 30% (FY15: 29%). The effective tax rate on Underlying Profit was 29%, the same as FY15.
Profit after tax of US$557.4 million was down 5%. Constant-currency growth of 2% reflected higher net finance costs and tax expense which partly offset operating profit growth.
Basic earnings per share were 37.3 US cents, the same as FY15. Basic earnings per share from continuing operations of 35.3 US cents were down 6% in actual-currency terms. Constant-currency growth of 1%, reflected the increase in profit after tax partly offset by the higher weighted average number of shares on issue.
| US$M | FY16 | FY15 | Change |
|---|---|---|---|
| Underlying Profit | 993.2 | 986.9 | 6.3 |
| Depreciation and amortisation | 545.8 | 546.1 | (0.3) |
| EBITDA | 1,539.0 | 1,533.0 | 6.0 |
| Capital expenditure (cash basis) | (1,080.3) | (982.5) | (97.8) |
| Proceeds from sale of PP&E | 103.6 | 78.4 | 25.2 |
| Working capital movement | (146.9) | 4.2 | (151.1) |
| IPEP expense | 74.8 | 79.7 | (4.9) |
| Other | 23.6 | 16.7 | 6.9 |
| Cash Flow from Operations | 513.8 | 729.5 | (215.7) |
| Significant Items | (44.9) | (48.7) | 3.8 |
| Discontinued operations | (5.4) | (4.3) | (1.1) |
| Financing costs and tax | (291.8) | (272.4) | 19.4 |
| Free Cash Flow | 171.7 | 404.1 | (232.4) |
| Dividends paid | (205.1) | (359.3) | 154.2 |
| Free Cash Flow after dividends | (33.4) | 44.8 | (78.2) |
Cash Flow from Operations was US$513.8 million, down US$215.7 million. This reflected increased capital expenditure to fund growth in the Pallets segment and increased working capital due to one-time change to payment processes resulting in lower creditors.
Capital expenditure of US$1,080.3 million included: US$407 million to fund growth programs mainly in Pallets Americas, Pallets EMEA and European RPCs; and US$620 million to replace irrecoverable or scrapped pooling equipment. The remaining capital expenditure relates to other plant investments and the timing of payments.
Proceeds from the sale of PP&E increased by US$25.2 million, reflecting a Group-wide alignment of reporting compensations for lost RPCs. Previously, parts of the business recorded compensations for lost RPCs in working capital.
Free Cash Flow after dividends was a negative US$33.4 million, down US$78.2 million, reflecting the reduced Cash Flow from Operations. This was partly offset by lower dividends paid due to the reactivation of the Dividend Reinvestment Plan, which generated US$124.8 million of cash, and the translation impact of the weaker Australian dollar in which dividends are paid.
Group Sales Revenue (US$M)
Brambles’ sales revenue of US$5,535.4 million in FY16 reflected a five-year compound annual growth rate of 8%. This was delivered despite relatively weak underlying economic conditions in the period. The growth reflected the execution of the Group’s strategy: to expand the Pallets business through winning new customers, entering new markets and expanding its product offerings; to expand the RPCs operations through ongoing investment to support increased retailer conversions; to increase its presence in the Intermediate Bulk Containers and Automotive space through acquisitions and continued investment; and diversification through acquisition into new supply chains in the Containers segment such as Aerospace and Oil & Gas.
Underlying Profit (US$M)
Brambles’ Underlying Profit of US$993.2 million in FY16 reflected a five-year compound annual growth rate of 9%. The profit growth primarily reflected sales revenue growth as well as the delivery of efficiencies primarily in the Pallets business. Key drivers of profit improvement in the period included: the successful execution of the Better Everyday program to increase pallet and service quality through FY10 to FY13 in the USA pooled pallet operations; the Global Supply Chain program to reduce operating costs by US$100 million from FY12 to FY15, primarily through plant network optimisation; and reductions in indirect costs worldwide as part of the One Better program.
Return on Capital Metrics
The trend in Brambles’ key return on capital metrics (Return on Capital Invested and Brambles Value Added) over the five-year period ended 30 June 2016 reflected the Group’s expansion through both organic growth and acquisitions. Return on Capital Invested declined from 15.7% to 15.3% reflecting the impact on capital invested of acquired intangibles. Excluding the impact of acquisitions and foreign exchange movements since December 2013, Return on Capital Invested has increased to 17.2%. The trend in Brambles Value Added – a measure of economic profit over and above the cost of capital invested to create that profit – demonstrates how profit growth outstripped growth in the cost of capital, increasing to US$248 million in FY16.
Cash Flow from Operations (US$M)
By nature of Brambles’ business, Cash Flow from Operations in a given period is largely driven by profitability, capital expenditure and movements in working capital balances. The five years to FY16 was a period of strong profit growth, facilitated largely by significant investments in capital expenditure for growth. In addition, improved asset control practices contributed to reduced replacement capital expenditure relative to sales growth. In FY12, capital expenditure was especially high relative to the size of the business, reflecting growth programs to support expansion in emerging markets of the Pallets business, and in the RPCs segment following the IFCO acquisition. In FY16, capital expenditure increased to support growth in the Pallets operations and there was a one-time change to payment processes that increased working capital.
| US$M | Change | |||
|---|---|---|---|---|
| (Continuing operations) | FY16 | FY15 | Actual FX | Constant FX |
| Sales revenue | 2,427.8 | 2,333.4 | 4% | 8% |
| Operating profit | 415.5 | 403.1 | 3% | 8% |
| Significant Items | 12.6 | 14.5 | ||
| Underlying profit | 428.1 | 417.6 | 3% | 8% |
| Underlying Profit (ex North American recycled) | 432.3 | 397.1 | 9% | 14% |
| Average Capital Invested | 2,370.4 | 2,268.6 | 4% | 8% |
| Return on Capital Invested | 18.1% | 18.4% | (0.3)pts | (0.1)pts |
| Return on Capital Invested (ex North American recycled) | 21.5% | 20.7% | 0.8pts | 1.1pts |
| Brambles Value Added | 166.7 | 157.2 | 9.5 | |
Corporate actions
The LeanLogistics business, previously recognised in the Pallets Americas segment, was sold on 31 May 2016. LeanLogistics’ FY16 results are included in discontinued operations and prior year comparatives for Pallets Americas have been restated.
Sales Revenue
Sales revenue in Pallets Americas was US$2,427.8 million, up 4% (up 8% at constant currency), reflecting strong net new business wins and solid pricing and like-for-like volume growth.
North America sales revenue was US$2,186.1 million, up 6% (up 7% in constant currency). Net new business wins in the pooled pallet operations contributed 3% constant-currency growth, reflecting strong progress with the market segmentation strategy in the region. This strategy delivered a number of key wins in the protein and pharmaceutical sectors and the conversion of a large number of smaller customers in the US grocery sector from disposable “white-wood“ alternatives. Like-for-like volume growth contributed 1% of constant-currency growth, while price and sales mix improved in all business units.
Within North America:
USA pooled pallet revenue was US$1,489.3 million, up 8%;
North American recycled pallet sales revenue was US$460.0 million, up 3% (up 4% at constant currency); and
Canada sales revenue was US$236.8 million, down 5% (up 7% at constant currency).
Latin America sales revenue was US$241.7 million, down 8%. Constant-currency growth of 14%, was largely driven by strong like-for-like volume growth in Mexico, in line with improved economic conditions, and solid pricing growth, consistent with the inflationary environment in the region.
Profit
Underlying Profit was US$428.1 million, up 3% (up 8% in constant currency), reflecting a very strong profit performance in pooled pallet operations which more than offset operating challenges in the North American recycled pallet business.
Americas pooled pallet businesses (excluding North American recycled pallet business) delivered constant-currency Underlying Profit growth of 14%, reflecting strong volume, price and sales mix benefits and supply-chain efficiencies. Collectively, these benefits were more than sufficient to offset increases in direct costs in the period. On a constant-currency basis:
Net plant costs increased by US$19 million, reflecting cost inflation pressures, particularly in Latin America in line with the broader inflationary environment in that region. US pallet durability measures had a net-neutral impact on plant costs in FY16 and are expected to deliver damage rate and cost benefits from FY17 onwards;
Depreciation expense increased by US$15 million, in line with investment in the pallet pool to support expansion with new and existing customers; and
Net transport costs increased by US$12 million with US third-party freight inflation moderating during FY16. Continued improvements in asset management and a reduction in the fuel surcharge also contributed to higher transportation costs.
Underlying Profit in the North American recycled pallet business declined by US$25 million reflecting pallet core-price inflation, lower volumes, increased indirect costs and other one-off adjustments.
Operating profit of US$415.5 million was up 3% (up 8% at constant currency). Significant Items of US$12.6 million primarily related to the One Better program and the first phase of the CHEP brand refresh project.
Return on Capital
Return on Capital Invested was 18.1%, down 0.3 percentage points (down 0.1 percentage points at constant currency), reflecting increased Average Capital Invested and the decline in Underlying Profit contribution from the North American recycled pallet business.
Return on Capital Invested for the Americas pooled pallet businesses (excluding the North American recycled pallet business) was 21.5%, up 1.1 percentage points at constant currency.
Capital expenditure was US$449.8 million, up US$71.4 million, driven by investment to support strong sales volume growth in the pooled pallet businesses, replenish US plant-stock levels and manage the impact of increased cycle times associated with increased inventory levels in the US retail supply chain.
| US$M | Change | |||
|---|---|---|---|---|
| (Continuing operations) | FY16 | FY15 | Actual FX | Constant FX |
| Sales revenue | 1,343.1 | 1,380.5 | (3)% | 6% |
| Operating profit | 351.8 | 341.8 | 3% | 13% |
| Significant Items | 2.7 | 2.1 | ||
| Underlying profit | 354.5 | 343.9 | 3% | 14% |
| Average Capital Invested | 1,248.5 | 1,253.0 | 0% | 9% |
| Return on Capital Invested | 28.4% | 27.4% | 1.0pts | 1.2pts |
| Brambles Value Added | 215.8 | 185.6 | 30.2 | |
Sales
Sales revenue in Pallets EMEA was US$1,343.1 million, down 3%. Constant-currency growth of 6%, reflected broadly equal contributions from like-for-like volume growth and net new business wins with minimal price growth in a low inflationary environment in Europe. Europe sales revenue was US$1,194.2 million, down 3% (up 5% at constant currency). Like-for-like volume growth contributed 2% constant-currency growth, reflecting solid consumer demand across the major European economies particularly in the second half of the year. Net new business wins contributed 3% constant-currency growth, driven by continued market share expansion in continental Europe and minimal customer losses.
Within Europe:
Mid Europe (comprising Germany, Italy, Benelux, Scandinavia, Switzerland and Austria) sales revenue was US$361.6 million, down 2%. Constant-currency growth of 6% was primarily driven by continued expansion with new and existing customers;
UK & Ireland sales revenue was US$339.1 million, down 7%. Constant-currency growth was flat year-on-year as the rollover impact of prior-year contract losses in the first half of the year, and indexation-related price reductions offset solid contributions from new contract wins and like-for-like volume growth;
Iberia sales revenue was US$229.6 million, down 2%. Constant-currency growth of 6% reflected net new business wins and improved like-for-like volume growth, particularly in the beverage sector;
France sales revenue was US$153.6 million, down 3%. Constant-currency growth of 4% was driven by solid new business growth and a modest contribution from like-for-like volume growth; and
Central & Eastern Europe sales revenue was US$110.3 million, up 8%. Constant-currency growth of 20% was driven by strong new business growth particularly in the region’s largest markets, Poland and Turkey.
Africa, India & Middle East sales revenue was US$148.9 million, down 2% (up 16% at constant currency), primarily driven by like-for-like volume growth and price increases.
Profit
Underlying Profit was US$354.5 million, up 3%. Constant-currency growth of 14% reflected the delivery of plant and transport cost efficiencies in a low-inflation environment and indirect cost benefits associated with the One Better program.
Operating profit was US$351.8 million, up 3% (13% at constant currency). Significant Items of US$2.7 million primarily reflected One Better-related costs.
Return on Capital
Return on Capital Invested was 28.4%, up 1.0 percentage points (1.2 percentage points at constant currency), reflecting the continued strong profitability across the region. Capital expenditure was US$280.9 million, up US$24.9 million, reflecting investment to fund the growth with key customers in the region.
| US$M | Change | |||
|---|---|---|---|---|
| (Continuing operations) | FY16 | FY15 | Actual FX | Constant FX |
| Sales revenue | 319.0 | 343.5 | (7)% | 5% |
| Operating profit | 65.0 | 70.6 | (8)% | 4% |
| Significant Items | 0.1 | 1.0 | ||
| Underlying profit | 65.1 | 71.6 | (9)% | 3% |
| Average Capital Invested | 323.6 | 357.1 | (9)% | 1% |
| Return on Capital Invested | 20.1% | 20.1% | (0.0)pts | 0.8pts |
| Brambles Value Added | 27.5 | 25.9 | 1.6 | |
Sales
Sales revenue in Pallets Asia-Pacific was US$319.0 million, down 7%. Constant-currency growth of 5% largely reflected robust pricing gains and like-for-like volume growth in Australia and continued expansion with new and existing customers in Asia.
Australia & New Zealand sales revenue was US$274.2 million, down 8% (up 5% at constant currency).
Asia sales revenue was US$44.8 million, down 2%. Constant-currency growth of 6%, reflected continued growth in dynamic flow, wooden pallet volumes in China as the business transitions away from the legacy closed-loop, plastic pallet business.
Profit
Underlying Profit was US$65.1 million, down 9%. Constant-currency growth of 3% was largely driven by the pricing component of sales revenue in Australia, which was partially offset by reduced customer compensations in line with lower pallet losses in the period.
Operating profit was US$65.0 million, down 8% (up 4% in constant currency). Significant Items of US$0.1 million related to the One Better program.
Return on Capital
Return on Capital Invested was 20.1%, in line with FY15. At constant currency, Return on Capital Invested improved by 0.8 percentage points, reflecting the Underlying Profit growth and minimal growth in Average Capital Invested. Capital expenditure was US$51.2 million, down US$10.4 million, primarily reflecting lower investment in Asia.
| US$M | Change | |||
|---|---|---|---|---|
| (Continuing operations) | FY16 | FY15 | Actual FX | Constant FX |
| Sales revenue | 991.8 | 917.6 | 8% | 16% |
| Operating profit | 134.4 | 130.8 | 3% | 14% |
| Significant Items | (3.0) | 0.7 | ||
| Underlying profit | 131.4 | 131.5 | 0% | 10% |
| Average Capital Invested | 1,623.7 | 1,541.2 | 5% | 11% |
| Return on Capital Invested | 8.1% | 8.5% | (0.4)pts | 0.0pts |
| Brambles Value Added | (60.1) | (53.4) | (6.7) | |
Sales
Sales revenue in RPCs was US$991.8 million, up 8%. Constant-currency growth of 16% reflected the continued expansion of RPC programs with existing and new retail partners in Europe and the contribution of acquisitions.
All major markets delivered solid like-for-like volume growth and modest pricing gains. Excluding the impact of the acquisitions of Rentapack (Chile), IFCO Japan and Empacotecnia (Colombia), RPCs’ constant-currency sales revenue growth was 12%.
Europe sales revenue was US$621.4 million, up 7%. Constant-currency growth of 15% was primarily driven by very strong volume growth with existing retail partners (including REWE in Germany, The Co-operative Food Group in the UK and DIA in Spain) and with new retail partners, most significantly Intermarché in France. Performance in the second-half of the year was particularly strong with constant-currency sales revenue growth of 17%.
North America sales revenue was US$199.2 million, up 4%, as growth with key retail partners (including Walmart, Kroger, Loblaws and HEB) more than offset the impact of significantly reduced volumes, with Safeway following its decision to revert to the use of cardboard boxes within its supply chain. Price increases implemented during FY16 contributed modestly to the growth.
Sales revenue in the other regions was US$171.2 million, up 19%. Constant-currency growth of 38% reflected the acquisitions of Rentapack, IFCO Japan and Empacotecnia. Excluding these acquisitions, constant-currency sales revenue growth of 11% was driven by continued expansion in Australia, South Africa and Latin America.
Profit
Underlying Profit of US$131.4 million was flat on the prior year. Constant-currency growth of 10% primarily reflected the sales revenue growth and scale-related network and transportation efficiencies in Europe. These benefits were partly offset by higher depreciation costs in line with the growth and diversification of the RPC pool. In North America, short-term network inefficiencies created by the loss of volumes with Safeway in the first half of the year have been addressed and profit margins improved in the second half of the year.
Operating profit was US$134.4 million, up 3% (up 14% at constant currency). Significant Items of US$3.0 million largely reflected a fair value gain recognised on the acquisition of IFCO Japan, offset by costs associated with the One Better program and IFCO branding.
Return on Capital
Return on Capital Invested was 8.1%, down 0.4 percentage points (flat at constant currency). The Underlying Profit growth was offset by a strong increase in Average Capital Invested due to continued relatively high levels of capital expenditure in the segment to support growth and platform diversity. Capital expenditure was US$231.0 million, down US$7.3 million.
| US$M | Change | |||
|---|---|---|---|---|
| (Continuing operations) | FY16 | FY15 | Actual FX | Constant FX |
| Sales revenue | 453.7 | 465.5 | 21% | 31% |
| Operating profit | 7.7 | 58.1 | (87)% | (91)% |
| Significant Items | 40.7 | 1.2 | ||
| Underlying profit | 48.4 | 59.3 | (18)% | 11% |
| Average Capital Invested | 957.6 | 874.1 | 10% | 18% |
| Return on Capital Invested | 5.1% | 6.8% | (1.7)pts | (1.7)pts |
| Brambles Value Added | (70.5) | (46.5) | (24.0) | |
Corporate actions
On 5 August 2016, Brambles announced the combination of its Oil & Gas business into an independent joint venture company, Hoover-Ferguson Group (HFG). The Oil & Gas business’ results in FY16 are reported in continuing operations.
Sales
Sales revenue in the Containers segment was US$453.7 million, down 3%. At constant currency, sales revenue was up 5% as growth in the Intermediate Bulk Containers, Automotive and Aerospace businesses more than offset a decline in the Oil & Gas business. Excluding the Oil & Gas business, constant-currency sales revenue growth was 8%.
Automotive sales revenue was US$145.9 million, down 1%. Constant-currency sales revenue was up 7%, as strong like-for-like volume growth and contract wins in North America and Europe more than offset the ongoing decline of the Australian automotive industry.
Intermediate Bulk Containers sales revenue was US$131.8 million, up 2%. Constant-currency growth of 10% was driven by strong market share gains in Pallecon Europe and North America.
Aerospace sales revenue was US$78.3 million, up 1%. Constant-currency growth of 5% reflected strong growth in the pooling business associated with the rollout of the Cathay Pacific contract. This increase more than offset volume declines in the repair business.
Oil & Gas sales revenue was US$97.7 million, down 12%. A constant-currency decline of 5% reflected a 31% decline in Ferguson’s like-for-like sales revenue, in line with the reduction in expenditures by customers in the offshore oil and gas sector following heavy falls in the oil price. This was partly offset by the additional two months’ Ferguson ownership and increased customer maintenance activity at refineries in the Catalyst & Chemical business.
Profit
Underlying Profit was US$48.4 million, down 18% (down 11% in constant currency), as sales revenue growth was insufficient to offset margin pressure associated with industry trends in Oil & Gas and short-term cost pressures in Intermediate Bulk Containers. Excluding the Oil & Gas business, constant-currency Underlying Profit growth was 27%, primarily reflecting strong profit leverage in the Automotive business.
Operating profit was US$7.7 million, down 87% (down 91% in constant currency). Significant Items of US$40.7 million included a US$38.0 million goodwill impairment charge in the Oil & Gas business, reflecting current market conditions in the sector. The balance of Significant Items related to the One Better program.
Return on Capital
Return on Capital Invested was 5.1%, down 1.7 percentage points, reflecting the increase in Average Capital Invested as a result of the Ferguson acquisition and the decline in Underlying Profit. Capital expenditure was US$82.1 million, down US$18.9 million, primarily due to minimal requirements in Ferguson.