Brambles Rebounds After Solid Update
Get More Commentary, Discussion & Market Information On -
In late January, Brambles shares fell by as much as 16% after it revealed a weak trading update and profit warning. That was a month before the actual half year result was released. The shares fell from $12.28 to $10.58 in a day.
The shares have remained weak ever since as doubts continued at the company’s weakly performing US pallets business, perhaps its core operation.
Yesterday the company released its third quarter trading update showing signs that those US pallet operations has steadied and the shares rose nearly 6% to $10.17.
Clearly its not out of the woods yet, but there was a more confident buzz around the stock yesterday,
Brambles said in its update that sales revenue for the first nine months of its financial year rose 4% to $US4.09 billion ($A5.41 billion), helped by new business in that US pallets unit, strong volumes in European pallets and growth in emerging markets.
Revenue rose 5% on a constant currency basis.
“Overall, our businesses delivered a solid performance in the third quarter despite ongoing macroeconomic uncertainty, softer FMCG demand in Southern Europe and the USA, and robust competition in most markets,” new CEO Graham Chipchase said in the update.
After Brambles issued the surprise profit warning in January, and unveiled a 50% slump in first-half profit in February, as competition and cost pressures in its North American pallets business hit the bottom line.
The weak first half result pulled down the company’s market value by nearly a quarter in the intervening the past three months and saw the company dump its North American CEO last month.
Brambles told the ASX yesterday that the US pallets business had secured a number of new contracts despite competition and ongoing price pressure, which would provide a good foundation for the next financial year. The company maintained its previously revised full-year guidance, with revenue growth likely to be similar to the 4% recorded in the first half.
Full-year underlying profit is expected to be flat.
"For the financial year ended 30 June 2017, the Group continues to expect constant-currency sales revenue growth to be in line with the first-half performance and Underlying Profit to be flat on the prior year, at constant currency,” Brambles said.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.