Market Murmurs: BXB, TWE

Company News

by Glenn Dyer

Cautious optimism was the name of the game on a somewhat brighter ASX session Tuesday for both industrial behemoth Brambles (ASX:BXB) and recovering alcoholic specialist Treasury Wines (ASX:TWE).


While Brambles (ASX:BXB) has reaffirmed its 2022-23 guidance after a strong first quarter of the new financial year, it has started switching strategy to riding out what it sees as moderating growth in many regions in coming months.

Full guidance for 2022-23 was reiterated at a 7% to 10% growth in sales revenue at constant currency; underlying profit growth of between 8-11% at constant currency, including approximately $US$5 million of short-term transformation costs (FY22: US$48.4 million).

The solid first quarter rise reported came despite signs of moderating growth in the US in the quarter and the challenging economic conditions in parts of Europe (especially so far as energy costs and demand are concerned).

“While the business delivered strong first-quarter sales revenue growth and we continue to expect growth across the balance of the year, the growth rate in the second half of the year is likely to moderate given the strong pricing in the prior-year comparative period and potential impacts of macroeconomic uncertainties in the balance of the year,” the company told the ASX and shareholders at the AGM on Tuesday.

The company revealed sales revenue from continuing operations jumped more than 14% to $US1.346 billion in the first three months to September (on a constant currency basis, a rise of 6.2% on an actual exchange rate change basis)

Brambles CEO, Graham Chipchase said in the filing: “The strong momentum generated in FY22 continued in the first quarter with Group sales revenue growth of 14% at constant currency. This performance was driven by price realisation and reflects ongoing commercial discipline to recover cost-to-serve increases in our major markets.

“Consistent with our experience in the prior year, we continue to face inflationary pressures across key inputs including lumber, labour, transport and fuel. Across the Group, our first quarter weighted average price per pallet remained above FY22 levels. In line with our commentary in August, we expect these dynamics to result in a higher FY23 weighted average cost per pallet compared to FY22, reflecting regional mix impacts with ongoing unit pallet price increases most notable in Latin America and Europe.

The company said the improvement “was driven by price realisation to recover input-cost inflation and other cost-to-serve increases in all regions. This performance was driven by a combination of the rollover benefit of strong pricing in the prior year, as well as pricing actions taken in the first quarter across the Group.”

“Group volumes were broadly in line with the prior year as growth with new and existing customers was constrained by pallet availability with elevated inventory levels across supply chains continuing to impact pallet cycle times and return rates in all regions.

“During the first quarter, underlying demand moderated in the US and in some parts of Europe due to challenging macroeconomic conditions.

“In these challenging operating conditions, customer retention rates remain strong and we are prioritising the service of existing customers. Our teams around the world continue to accelerate asset efficiency initiatives to improve pallet availability and the productivity of our existing pallet pool,” Brambles said.

“While there are signals which point to a slowing global economy, we are yet to see the full impact of cost- of-living pressures and the European energy crisis on both consumer demand patterns and subsequent implications for retailers and manufacturers.

“Notwithstanding the adverse economic outlook and any potential moderation in demand from our existing customers, we remain confident in the defensive characteristics of our business and the growth opportunities we can pursue once pallet availability improves

Brambles shares edged up 0.2% to $11.59 as investors didn’t really take much notice of a warning from one of our most sensitively placed multi nationals – its pallets are used in dozens of industries across the world, especially in the US and Europe.

Interesting also there was no mention of pricing concerns for timber which were a worry in 2020, 2021 and earlier this year. Brambles claimed to be able to recover higher costs through higher prices.


Wine maker Treasury Wine Estates (ASX:TWE) continues to confirm that it is surviving its 2020 mauling at the hands of a vindictive Chinese government that sought to punish one of Australia’s most successful exporters to the country.

Along with the outright banks on Australian coal imports, China imposed draconian tariffs on Australian wine, especially brands made by TWE, forcing it to restructure, look to the US once again for expansion and take a harder edged approach to product differentiation to maximise marketing returns and revenues (TWE calls this “premiumisation”).

The irony is that the Chinese attack on TWE hasn’t stopped it from still being a player in the Chinese wine market.

Yesterday TWE CEO, Tim Ford told the company’s annual meeting that thanks to consistent demand for both premium and luxury wine across all the company’s key markets, earnings were in line with expectations for the first quarter of the 2022-23 financial year.

And with first quarter earnings in line with expectations, he said TWE expects to deliver “strong growth” for the full year.

Mr Ford said TWE is confident its brand strength will help the company hit performance targets for the current financial year despite rising costs and a gloomy global economic outlook.

“We will continue to closely monitor the consumer and trading environment, confident that the strengths of our brand portfolios, the historic resilience of the category through past economic downturns and the flexibility of our business model leaves us well-placed to react to any changes that may arise,” Ford told the AGM in Melbourne yesterday.

In the 2023 financial year, he said TWE will be working towards long-term growth goals, with strategic priorities to “remain largely unchanged”.

“After two years of significant change, we enter financial year 2023 confident that we are absolutely on the right path towards the delivery of the 2025 strategy and our ambition to be the world’s most admired premium wine company.”

Treasury Wine launched its made in China Penfolds wine in Shanghai in September which is part of a wider collection known as ‘One by Penfolds’ which groups together its multi-country of origin wines from Bordeaux in France, California (around the Napa Valley and Sonoma) and Ningxia in China.

Even though China’s economic growth rate is slowing and its harsh lockdowns had put the brakes on consumer spending, Penfolds managing director Tom King said consumer demand was “significantly ahead” of supply.

TWE said “Pleasingly our northern hemisphere vintages, including California and France, are also progressing in line with our expectations and we remain on track to deliver strong growth and EBITS margin expansion towards the 25%+ group target in F23”.

TWE shares rose 2% to $12.96 yesterday.

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