A surprisingly upbeat update from pallets supplier and documents manager Brambles Ltd yesterday with the company confident of making guidance, despite tough times in some of its key markets in the US, Australia and Europe.
The company says it is continuing to target an annual operating profit mid-way between $US740 million and $US780 million, after sales in the nine months to the end of March rose 5%.
The market liked the news and boosted the shares more than 3%, or 27c, to $7.27.
"Subject to unforeseen circumstances, Brambles continues to target the midpoint of its guidance range for operating profit before interest costs and tax of between $US740 million and $US780 million, at June 30, 2010 exchange rates," the company said in a statement to the ASX.
"This guidance is prior to the contribution of IFCO Systems, which Brambles will consolidate in its results for the three months ending June 30, 2011."
Brambles said IFCO’s results for the three months to March 2011 were consistent with expectations.
"For the three months ending June 2011, Brambles expects IFCO to contribute operating profit before interest costs and tax of between $US35 million and $US40 million, at June 30, 2010 exchange rates," Brambles said.
Brambles said the 5% improvement in sales revenue for the nine months to March 2011 to $US3.27 billion, reflected growth in all business units.
On a constant currency basis, sales revenue grew 4%.
Brambles chief executive Tom Gorman said the group’s continued growth reflected a gain in customers throughout Brambles as the group expanded product and geography.
"However, conditions in our largest European markets remain challenging, and the recovery in consumer activity in the USA has been modest to date," he said.
Mr Gorman said momentum was positive, the newly acquired IFCO business was performing strongly, and integration was progressing well.
"We will confirm our expectations for synergies at our full-year results in August," Mr Gorman said.
He said Brambles was growing in all regions and winning back volumes with several key customers in CHEP USA, such as ConAgra (a big, important win) and Dole.
Brambles said it was making good progress in growing its business in the automotive sector in the US.
But market conditions, including pricing and competition, remained challenging.
"We are experiencing higher costs as a result of inflationary pressures, and our increased investment in quality and in developing and growing our business," Mr Gorman said.
Looking at the main business groups, Brambles said:
CHEP Americas’ sales revenue was US$1,195 million, up 5%. This reflected new business growth in the USA and Canada and continued strong growth in Latin America. Constant currency sales revenue growth was 3%.
- CHEP Europe, Middle East & Africa’s sales revenue was US$1,143 million, up 1%. Growth remained strong in Germany, Italy, Central & Eastern Europe and Middle East & Africa. However, growth rates were constrained in the UK, Spain and France as a result of the challenging market conditions. Constant currency sales revenue growth was 4%.
- CHEP Asia-Pacific’s sales revenue was US$339 million, up 15%, primarily reflecting the strength of the Australian dollar. Volume growth was strong in the developing businesses in China, India and South-East Asia. Constant currency sales revenue growth was 5%.
- Recall’s sales revenue was US$596 million, up 8%, mostly as a result of business growth in the Americas, Europe and Asia. Carton volume growth was 6% in the Document Management Solutions service line. Constant currency sales revenue growth was 5%.
James Hardie Industries has posted a net loss of $US347 million ($A327 million) for the full year to March 31, 2011, and says it expects the key US housing market to remain flat in the current year.
The company in fact is hoping for Australia and the Pacific region to provide a boost to sales and profits in the coming year.
In fact Hardie only has itself to blame as a year ago the company has been confident the US new housing sector would rebound.
Instead it continued to weaken during the year to March, and April saw another surprise fall as demand continues to fall.
CEO Louis Gries told a briefing yesterday the US housing downturn was the worst he has seen in his 33 years of experience.
(Many in the US housing sector say it is the worst depression on record.)
"Clearly, the US housing market has been most difficult, which keeps dragging us down.
"We do not expect to see any recovery in the US housing market this year. Market demand is down while costs, pulp prices and freight have gone up,” he said.
The loss was overstated by the inclusion of a non-cash charge of $US345.2 million for taxes, penalties and interest following the loss of the appeal to the Federal Court by Hardie’s wholly-owned subsidiary, RCI, against the Taxation Office’s assessment for 1998-99.
Excluding the extraordinary items, net operating profit fell 12% to $US116.7 million – marginally higher than the company’s forecast to deliver between $US105 mill
