Brambles, Worleyparsons, GWA Group - First Impressions from reporting

Bell Potter


Brambles (BXB):  Divisional EBIT: Pallets Americas down 9% to US$186.6m; Pallets EMEA: Down 2% to US$171m; Pallets Asia Pacific: Up 9% to US$35.1m; Containers: Up 47% to US$20.3m; RPCs: Up 31% to US$76.5m. | Net operating cash flow down 8.4% to US$582.3m. | Outlook: New guidance sees constant FX sales to grow in-line with 1H17 and EBIT to be flat on the pcp. Management withdrew its FY19 ROIC target of 20%. (Weaker 2H17 guidance and withdrawal of the Board’s FY19 targets reflect the competitive pressures faced by the USA business.)


Worleyparsons (WOR):  Reported net loss $2.4m (includes restructuring costs, onerous lease contracts) | Cost reduction program lowered overheads by $50 million as compared to 2H16. Further increased overhead reduction target to a total of $450 million in annualized savings by the end of FY17 on an exit run rate basis. | Sector Performance: Hydrocarbons EBIT down 19.6% to $137.7m. Segment margin improved from 7.7% to 9.3%; Minerals, Metals & Chemicals EBIT down 83.3% to $3.2m. Segment margin decline from 5.1% to 1.4%; Infrastructure EBIT up 20.3% to $36.2m. Segment margin increased from 5.9% to 7.9% | Net Operating cash flow ($84.8m) as compared to $44.1m  pcp | Outlook: “Notwithstanding that market conditions remain challenging, customers’ sentiment is improving and they inform the Company that their activity levels are not expected to deteriorate further. In some areas, they are beginning to increase activity, which the Company expects to flow through in the medium term. The benefit of the cost reductions achieved by the Company in the first half, are expected to be reflected in second half earnings.”


GWA Group (GWA):  Group EBIT margin up 84 bps to 17.6%. Net product Caroma Cleanflush rimless toilet range is at the top end of expectations. Corporate costs down 16%. | Segment EBIT: Bathrooms & Kitchens up 6% to $43.4m; Doors and Access Systems down 34% to $2.5m. | GWA to continue to address cost outs and remains on track to deliver$13-15 million in cost savings by FY19 through a
combination of SG&A and supply chain efficiencies. | Net operating cash flow up 22% to $39.6m (increased EBITDA and effective working capital utilisation compared to pcp. | Outlook: “We expect to see a slow-down in residential construction activity, however the pipeline of building work yet to be
completed remains reasonably strong to the end of the current financial year.“Meanwhile, our forward order book remains strong with several major projects secured, primarily across the eastern states.“Based on current market conditions, EBIT in the second half for FY17 is expected to be at or slightly ahead of first half EBIT FY17.” Aapproximately 69% of FX exposure is hedged at US72 cents for FY17.




Bell Potter Securities is a leading Australian stockbroking, investment and financial advisory firm that provides a comprehensive offering of financial services to a diversified client base that includes individuals, institutions and corporations.

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