Even though Brambles Ltd lifted sales and earnings in the 6 month to December 31, and is paying a slightly higher interim dividend, the market couldn’t make its mind up about the worth of the result.
The shares fell 22c to the day’s low of $6.89 in early trading after the result was released, then recovered to trade above $7, reaching a high of $7.26, then eased to close at $7.19, down 4c.
The best that can be said about the market’s treatment is that the shares finished on an upward trend after that early weakness.
The company reported sales revenue of US$2,147.2 million for the six months ended 31 December 2010, up 3% on the prior corresponding period.
It told the market that operating profit was US$366.1 million, up 8% and after tax profit was up 6% at US$219.8 million.
And it maintained its full year earnings guidance.
Brambles said sales at its key US pallet business, where it picked up new business from small and medium enterprises, rose 5%, although its European operations recorded a 2% drop.
The net profit of $219.8 million was up from $207.1 million a year earlier but below analysts forecasts for $241 million, according to the consensus of a Reuters’ survey of analysts.
And that probably explained the early weakness.
Brambles declared an interim dividend of 13 Australian cents, up 0.5c from the first half of the 2010 financial year.
Brambles CEO Tom Gorman said: “This is a strong result, with increased group sales revenue and profit, and a robust rate of new business wins in all of our business units. Our focus remains on building our customer relationships and investing in initiatives that we expect to provide a strong foundation for profitable growth over the long term.
“CHEP’s and Recall’s sales revenue growth illustrates our ability to strengthen our core business at the same time as we expand our reach by adding new customers, developing our service offering and growing geographically.
"We are experiencing strong growth in emerging regions such as Latin America, Central & Eastern Europe, the Middle East & Africa and Asia.
“We are defending and growing our business amid ongoing competition.
"The contribution to sales revenue in the period from net new business wins was US$34 million and the annualised value of net new business won in the period was US$54 million. $US14 million worth of new business was won in Europe as well.
“We expect ongoing positive sales revenue momentum as we expand our business with both new and existing customers," Mr. Gorman said.
"This is despite economic weakness in Spain and the UK and subdued consumer spending in the USA and Australia. In line with these conditions and continued competitive activity, pricing remains broadly flat."
In spite of major customer losses such as Con Agra in June last year, Mr. Gorman said the group retained its market-leading share of about 48% in the US.
Brambles’ Europe, Middle East and Africa pallet business saw a 2% fall in revenue to $US 751 million because of currency impacts, but the division also experienced a solid lift in net new customer wins.
Major customer wins, including Australian cereal maker Sanitarium and Chinese retailer CRV in the half, helped lift sales revenue for its Asia Pacific pallet business by 13% to $US220 million, the company said.
News of those wins, plus the realisation that profit margins rose in the half year across all businesses, saw the result re-rated during the day, as we saw from its recovery.
