In something of a surprise to investors, global logistics giant Brambles (BXB) has moved into the oil and gas servicing sector – just as the industry is being shaken by cost-cutting, narrowing profit margins and weak prices.
Specialist companies like WorleyParsons (WOR) have found making good returns from oil and gas easier than from the rest of the resources sector in the past couple of years of cost-cuts and closures, but the ease is only relative.
World oil prices are falling as production soars in the US and excess stocks grow in Europe and parts of Asia (despite China continuing to lift imports).
And there seems to be more pressures ahead for oil and gas, despite its obvious advantages compared to mining.
But that hasn’t concerned Brambles who yesterday revealed it had bought UK-based Ferguson Group for 320 million pounds ($A555 million) in a move that will expand its specialist containers business.
BXB 1Y – Brambles expands into energy
Brambles CEO Tom Gorman described the acquisition of the company as a “very strong fit” in the company’s statement yesterday.
“Ferguson Group is a very strong fit for Brambles, consistent with our strategy of diversifying in segments with strong equipment-pooling and growth characteristics.
"Combined with our presence in the downstream refining sector through CHEP Catalyst & Chemical Containers, Ferguson Group provides a platform for further expansion of our Containers offering in oil and gas.
“Ferguson Group has a record of compound annual growth in sales revenue of 11% since 2009 and a compelling organic growth outlook. It has attractive margin and return on capital characteristics, which are strongly aligned with our objectives to create sustainable value for shareholders.
"We expect the acquisition to be accretive to Brambles’ underlying earnings per share from FY15,” he said.
But the market picked up on the surprise and the shares eased by just under 1% yesterday to end on $9.44, despite a stronger day for the wider market.
What Mr Gorman didn’t say was that the value of the dollar has risen against the pound in the past month as fears about the independence vote in Scotland have grown. That has made sterling denominated purchases a bit cheaper than earlier in the year.
Ferguson has regional hubs in the UK, Norway, Singapore, Australia and the United Arab Emirates and strategic business partners in other key industry locations worldwide.
In addition, Ferguson Group provides rental of other standard modular equipment and other specialist logistics services.
Ferguson provides over 18,000 containers to the offshore and gas industry for the transport of items including fluids and equipment, so Brambles will remain within its core competency, logistics.
Brambles said it will fund the transaction from existing committed debt facilities and the acquisition is expected to be completed by the end of this month.
