TIDMBXB
RNS Number : 7512C
Brambles Limited
19 November 2009
Brambles Limited
ABN 89 118 896 021
19 November 2009
In accordance with ASX Listing Rule 3.13.3, I enclose the addresses which were
delivered by Mr Graham Kraehe, Chairman and Mr Tom Gorman, Chief Executive
Officer, at the Brambles Limited Annual General Meeting, held at The Savoy
Ballroom, Grand Hyatt Melbourne, 123 Collins Street, Melbourne today.
Copies of the slides used during the presentations are available on the
Brambles' website at www.brambles.com.
Robert Gerrard
Company Secretary
Brambles Limited 2009 Annual General Meeting
Addresses delivered by
Graham Kraehe AO, Chairman,
and Tom Gorman, Chief Executive Officer
19 November 2009
[Graham Kraehe AO]
Good afternoon, ladies and gentlemen.
Brambles achieved revenue growth and a strong cash-flow performance in the 2009
financial year despite the weakest economic conditions in decades. This
performance illustrates the resilience of the business.
Some key aspects of the result were:
* CHEP's automotive business was particularly affected by the sharp contraction in
economic conditions while Recall's Secure Destruction Services business was
impacted by falling paper prices and volumes.
* These two businesses are relatively small parts of Brambles' portfolio. The
other parts of the business increased sales by 3 per cent as net new business
wins and gains in price or sales mix offset a decline in organic volumes.
* Group sales revenue, including the automotive and SDS businesses, increased 1
per cent to more than US$4 billion.
* The reduction in Brambles' Underlying profit of 8 per cent to US$900.6 million
was largely due to the economic slowdown and continued investment in growth
initiatives.
* We delivered a strong improvement in free cash-flow after dividends as lower
capital expenditure more than offset the reduced Underlying profit.
* Total dividends for the year were 30 Australian cents, including the 17.5 cent
interim and the 12.5 cent final paid on October 8.
A dividend reduction and our use of the reinvestment plan reflect the Board's
focus on ensuring an appropriate balance between rewarding shareholders and cash
conservation.
Brambles' strong capital controls and financial position meant we did not have
to raise capital during the year. We retain significant capital flexibility,
with a robust balance sheet including substantial unutilised borrowing capacity.
We have plenty of liquidity, with no refinancing requirements until the 2011
financial year.
Meanwhile, the cash-generating performance of our business has allowed us to
continue to invest in quality, growth initiatives and systems despite the
downturn - and to end the year very well-placed to benefit from a broader
economic recovery when it occurs.
Let me now talk to you about the CEO succession we announced in October.
Mike Ihlein contributed to Brambles over six years, four as CFO and two as CEO.
Mike played a key role in restructuring Brambles to focus on CHEP and Recall
through the sale of Cleanaway, Brambles Industrial Services and other assets in
2006. This process and the unification of the dual-listed structure, which Mike
also led as CFO, allowed Brambles to return more than US$3.5 billion of excess
cash to shareholders through buybacks and other capital management initiatives.
He also laid the foundations for the next phase of business improvement through
his leadership of the CHEP USA review and introduction of the Better EveryDay
program.
The completion of that review and the beginning of a new period of operational
focus throughout Brambles was a logical time for succession. After an
international search, Tom was the Board's unanimous choice as CEO.
Tom has extensive international operational experience through a long career
with Ford, including as President of Ford Australia between 2004 and 2008.
He has shown strong leadership at CHEP EMEA over the past two years. He has
successfully taken that business into new markets, generating strong returns for
shareholders and getting closer to customers amid challenging conditions.
Given the Board's commitment to people development, we were delighted to appoint
such a strong internal successor.
We also express our thanks to Liz Doherty, who is returning to the UK after two
years as CFO. Liz leaves Brambles in strong financial shape despite the extreme
economic conditions that occurred during her tenure. We welcome Greg Hayes and
are confident he will prove to be an outstanding Brambles CFO.
Two recently appointed Directors stand for election today: John Mullen and Brian
Schwartz. Carolyn Kay, Stephen Johns and I are standing for re-election by
rotation. Each will speak to you a little later.
During the 2009 financial year, the number of Board meetings increased,
reflecting the time the Board and management devoted to managing the impact of
the Global Financial Crisis and the CHEP USA review. We held meetings in
Australia, the USA and Europe, at which Directors visited major CHEP and Recall
sites and met with key customers and staff.
We are conscious of the importance of aligning outcomes for executives and
shareholders, especially in times of uncertainty. Executive bonuses were lower
for the 2009 financial year; short-term bonuses were zero for the CEO and CFO
while Board fees were frozen. Luke Mayhew will talk more about remuneration
later.
Another increasingly important area of our business is sustainability. Many of
you will have had the opportunity to read our Sustainability Report, published
on the Brambles website last week.
I would now like to speak about safety. With great sadness, we reported two
fatalities in the 2009 financial year. These were discussed at last year's AGM.
The Board continues to work with Brambles' management team to achieve the only
acceptable goal of Zero Harm.
Brambles announced today it will cancel its secondary listing on the London
Stock Exchange.
Since December 2006, the number of CDIs, the instruments by which Brambles
shares trade on the LSE, has fallen substantially. They now represent less than
2 per cent of Brambles' issued share capital - and there has been very limited
trading over the last two years.
Given costs associated with administration and maintenance, the Board decided to
cancel the secondary listing because it believes it is no longer in the
interests of Brambles shareholders as a whole.
I will now give a brief trading update.
Today we released commentary on our performance for the first four months of the
2010 financial year, with trading conditions similar to those during the second
half of the 2009 financial year. Making comparisons with the prior corresponding
period was always going to be challenging, as most of the prior period occurred
before the escalation of the financial crisis and its severe impact on consumer
activity and trade volumes.
As with the 2009 full-year result, CHEP's operations in the automotive sector
and Recall's Secure Destruction Services business have been particularly
affected.
The destocking process has now ended. We have considerable leverage to a
broad-based return to economic growth when it occurs. However we are yet to
witness a widespread pick-up in activity or restocking in our major markets.
Both CHEP and Recall are performing solidly and continue to generate net new
business wins in all regions, with the exception of CHEP USA, which experienced
sales revenue below expectations during the four months to October.
Brambles' group sales revenue was down 3 per cent to US$1.4 billion in the first
four months of the 2010 financial year compared with the prior corresponding
period. In summary, conditions have stabilised but they are yet to begin
improving.
As announced in our trading update today, CHEP USA has experienced lower organic
volumes and has been unable to generate sufficient new business to offset fully
the impact of customer losses. CHEP USA now anticipates total pallet issues for
the 2010 financial year will be approximately 3 per cent lower than the 2009
financial year.
The slowdown in CHEP USA has resulted in the short-term accumulation of
approximately 4 million additional idle pallets during the 2009 calendar year,
which will result in associated short-term storage and handling costs. CHEP USA
considers that these pallets will be required to meet future customer growth
requirements and does not plan to alter its previously announced program to
scrap 7 million excess pallets.
As announced last month, the Better EveryDay program will require an ongoing
investment in CHEP USA. Better EveryDay is a new service and quality offer that
will deliver immediate benefits to customers and address next generation
supply-chain needs. The roll-out of Better EveryDay follows the CHEP USA review,
which was rigorous. The review had the full involvement and support of the Board
and Better EveryDay is progressing as planned.
Both CHEP and Recall are strong businesses with outstanding market positions,
operating models and people. We retain a strong balance sheet, a high degree of
financial flexibility and high rates of cash generation to fund investments in
quality and growth. In addition, we have other long-term growth opportunities,
such as our entry into new regions and market segments.
The Brambles Board and management are focussed on positioning your Company to
benefit from these opportunities and on using our unique position in the supply
chain to generate sustainable long-term growth.
Before I finish, I would like to take the opportunity to thank the more than
12,000 Brambles employees around the world for their hard work and dedication
during a challenging year. I also thank my fellow Directors for their input, and
our customers and shareholders for their continued support.
I will now hand over to Tom Gorman.
[Tom Gorman]
Thank you, Graham.
Let me begin by saying how honoured I am to have the opportunity to lead
Brambles at this important stage in our Company's development.
I'd like to thank the Board for selecting me and to thank Mike Ihlein, my
predecessor, for convincing me to join Brambles two years ago.
Mike set Brambles on a course for improved customer satisfaction, pushed us to
get closer to the customer and demonstrated a high level of integrity.
I plan on continuing many of Mike's initiatives, while bringing my own style and
sense of urgency to the opportunities and challenges ahead.
Today I hope to give you some insight into the five priorities that will
underpin my approach to building a prosperous future for our shareholders.
My priorities are: improving quality and customer satisfaction; delivering
profitable growth; driving cost competitiveness; focusing on our people and
being a responsible corporate citizen.
Before explaining these priorities in more detail, I'd like to give you my
personal view on why I came to Brambles and why I continue to be confident about
our future.
Over the course of my 25-year business career spanning four continents, I have
dealt with many different businesses.
There are few businesses, if any, that can match Brambles' strengths. These
strengths include: strong operating models and market positions; superb
customers; financial strength and flexibility; and substantial growth
opportunities.
Even against the backdrop of one of the most difficult economic times we have
ever experienced, our businesses have demonstrated their underlying strength,
have been able to add new customers, and have generated significant operating
cash-flow.
Our business is able to add scale by expanding in highly penetrated mature
markets, by delivering growth in markets where our operating models are still
developing or our market-share is relatively small - and growing strongly in
new, emerging markets.
Of course, even with the growth that comes from adding new customers, severe
economic conditions will have a negative impact on our overall growth rate. But,
again, our business model is strong and we expect upside in both established and
developing markets as economic growth returns around the world.
In simple terms: this is a great business, with great prospects and, for me
personally, it's a great time to be taking the reins.
In the near-term, my focus will be on getting to know our customers,
shareholders and employees as well as possible. I am committed to clear, direct
and frequent communication with all three of these groups.
I am also pleased to have been able to announce the appointment of Greg Hayes as
Chief Financial Officer. Greg will be a valuable partner to me as we look to
drive Brambles' growth and performance. He has exceptional financial and
commercial experience, in particular from being CFO of AGL and CEO of Tenix.
Since the announcement of my appointment as CEO, I have been on the road a fair
bit. I have met with scores of investors and analysts and today I hope to get
feedback from our shareholders that have made the effort to join us at this AGM.
I've also been spending time in CHEP's operations in the USA and in Europe, I've
been with the LeanLogistics team in the USA and I will shortly be holding
leadership meetings with the Recall business in Atlanta.
By mid-December we will have completed a leadership summit with our top 60
executives and I'll be heading to China in January to get closer to one of our
most promising long-term growth markets. It's been a very exciting start.
As I'm sure you would expect, I plan on dedicating a considerable amount of my
time and energy to the successful implementation of the Better EveryDay program.
This program is aimed at improving the customer experience in CHEP USA.
We announced this program in October and it has three main planks: improvement
in pallet quality through a step change in repair standards; making it easier
for our customers to do business with us; and increasing and reorganising our
sales force. The program was the result of seven months of market analysis,
customer research and comprehensive trialling.
As I mentioned, I have already visited the team in the USA and I'm encouraged by
what I've seen of the early implementation phase. Customer feedback is
excellent, the team is energized and I believe our people are motivated by the
support they have received to address customers' concerns with our products and
services.
While we work to implement Better EveryDay and, over time, put in place
offsetting pricing and volume strategies and new business opportunities, margins
in CHEP USA will be affected. The increase in net operating costs for CHEP USA
will be US$50 million a year, and there will be US$110 million of fast-track
expenditure over the 2010, 2011 and 2012 financial years.
In addition to customer and employee feedback, I have also received constructive
feedback from the many institutional shareholders I have seen over the past
month. These shareholders understand and accept the short-term financial impact
on margins in CHEP USA in order to ensure a stronger competitive position and
support long-term growth.
We cannot assume any of our competitors will go away. Remaining focused on
delivering unparalleled levels of quality and service, offering customers
innovative solutions to their problems and avoiding complacency is what is
needed to grow the business in the future. It is for this reason that we
launched the Better EveryDay program in the USA.
The CHEP USA review included analysis of numerous alternative pallet materials
and designs - and a reassertion of our commitment to wood as the most
economically and environmentally sustainable material for pallet pooling.
Let me now return to share more detail with you on the five priorities I
identified at the beginning of these comments.
I'll start with quality and customer satisfaction. If we believe everything
starts with the customer then we must focus on delivering ever-improving levels
of customer satisfaction.
That means making sure the quality of our products, services and relationships
are sources of competitive advantage. It is not enough to rely solely on our
scale and technical expertise - we must deliver an excellent experience.
Better EveryDay reflects this ethos. It includes making it easier for our
customers to do business with us and, ultimately, is focused on giving our
customers as few reasons as possible to engage with our competitors.
The second of my priorities is profitable growth. I believe there is enormous
growth potential within both CHEP and Recall. We have opportunities to expand
geographically, to enter new market segments, to provide new products and
services and to win market-share from our competitors.
For example, in addition to the expansion opportunities that exist for CHEP's
operations in the USA and Continental Europe, we also have opportunities in
highly-established markets such as Australia and the UK. The new platform
initiative around providing fresh food crates to Australian supermarkets is a
great example. These plastic crates offer a real efficiency to the fruit and
vegetable supply chain as they eliminate the need to repack products between the
producer and the retailer.
Newer regions such as Central & Eastern Europe, the Middle East, China, India
and Latin America will also have their part to play in delivering profitable
growth.
We also have significant opportunity to expand our asset management service
offering by leveraging our information and data-base management capability to
help our customers increase the efficiency of their supply-chain operations.
This desire to expand our service offerings is the primary driver behind our
acquisition of transport management solutions provider LeanLogistics. We are
only now scratching the surface of the potential in this area.
Cost competitiveness is also a priority as we will continue to drive
efficiencies in our operations and our overheads. These efficiency improvements
are critical as we continue to invest in quality, innovation and growth.
The fourth of my priorities reflects our commitment to improve our focus on our
people, ensuring they're safe, engaged, motivated and performing to the best of
their ability. Of course, it's easy to say these things. Delivering on this
priority will require commitment and leadership. I'm excited by this challenge,
because I know our 12,000 people represent an immensely deep pool of talent,
experience and creativity.
I believe it is appropriate that I reiterate Graham Kraehe's comments regarding
the tragic fatalities our business experienced in the 2009 financial year. I too
find these fatalities to be unacceptable and I remain committed to Zero Harm and
continuous safety improvement. We are seeing a reduction in the severity of
injuries occurring throughout our business and we continue to educate our people
and audit our operations. The recent roll-out of new safety management
information systems will help us monitor, benchmark and improve our performance.
The final priority for our business is corporate social responsibility. In
addition to being a good corporate citizen and taking responsibility for the
impact of our actions on the communities in which we operate, we also have a
compelling opportunity to build upon the inherent environmental benefits of both
CHEP's and Recall's businesses in a world where sustainability is becoming
standard business practice. Our customers are looking to do business with
responsible partners with sustainable business models and we know we can deliver
against this objective.
By focussing on these five areas, I believe we can deliver superior shareholder
returns for many years. I'm committed to ensuring we pursue every possible
avenue to achieve that goal.
In summary, I believe strongly in our businesses. We have outstanding market
positions, financial strength and growth potential. Although short-term trading
conditions remain somewhat subdued in our largest markets, we are very
well-placed to benefit from global economic recovery when it occurs.
Ladies and gentlemen, I look forward to updating you on our progress at the
half-year result in February 2010 and to speaking with you in more detail about
our strategies and our performance in the months to come.
Thank you very much for your time, and for giving me the opportunity to lead
this great company.
I now hand back to your Chairman, Graham Kraehe.
Investors and media, for further information please contact:
+---------------------------------------+---------------------------------------+
| Michael Roberts | James Hall |
| Vice President | Manager |
| Investor Relations & Corporate | Investor Relations & Corporate |
| Affairs | Affairs |
| +61 2 9256 5216 | +61 2 9256 5262 |
| +61 418 263 199 | +61 401 524 645 |
| michael.roberts@brambles.com | james.hall@brambles.com |
+---------------------------------------+---------------------------------------+
Brambles (ASX, LSE: BXB) is a provider of supply chain and information
management solutions through its two businesses, CHEP and Recall. Brambles
employs more than 12,000 people in over 45 countries. For further information on
Brambles and all announcements, presentations and webcasts, please visit
www.brambles.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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