The West

Brambles post 21pc profit growth
Brambles post 21pc profit growth

UPDATE 2.20pm Global pallet and container business Brambles has lifted annual profit by more than 20 per cent and
expanded its overseas markets in the face of weak global conditions.

However its shares ended only slightly higher today as analysts focused on its capital spending program and risks to key markets from Europe’s economic woes.

Brambles posted a net profit for the year to June 30 of $US576.3 million, up from $US475.3 million ($A550.77 million up from $A454.25 million) in the previous year.

Revenue rose 20 per cent to $US5.63 billion, from $US4.67 billion ($A5.38 billion from $A4.46 billion).

Chief executive Tom Gorman said that after adjusting for new acquisitions, revenue still grew six per cent, “demonstrating the capacity of the business to expand despite weak economic conditions”.

“We are confident of delivering continued strong sales growth in new segments and emerging markets in the 2013 financial year,” he said in a statement.

“We expect improving returns from this growth in 2014 as these opportunities reach a greater level of scale and efficiency and we deliver cost reductions in our established operations.”

Brambles’ underlying profit came in at $US1.01 billion ($A965.26 million), an 18 per cent increase on the previous year that was in line with previous guidance when adjusted for exchange rate movements.

The company declared a partly-franked final dividend of 13 Australian cents.

Brambles said improved sales and margins in its Americas region pallets business were the main drivers of growth, offsetting weaker profitability in Europe, the Middle East and Africa.

Looking ahead, Mr Gorman said, Brambles expected sales growth in all segments in 2012/13 and forecast an underlying profit of $US1.01 billion to $US1.07 billion ($A965.26 million to $A1.02 billion) - an increase of between four and 10 per cent at June 30, 2012, exchange rates.

Brambles abandoned the planned sale of its Recall document management business during the year because of weak capital markets.

Analysts had valued the proposed sale at between $A1.5 billion and $A2 billion.

Mr Gorman said Recall had delivered strong underlying profit growth in 2011/12 and committed to investing in the business to support continued growth.

Brambles is in a two-year, $550 million capital expenditure program which Mr Gorman defended, telling analysts that despite European uncertainty it would be “a missed opportunity for us to pull in our horns at this point in time”.

Morningstar analyst Peter Rae said the initial fall in the shares was due to stronger expectations from the market about the outlook for fiscal 2013.

The forecast growth of four to 10 per cent showed Brambles had “limited visibility to an extent over some of the markets they are in,” Mr Rae said.

However Europe remains the key risk for Brambles.

“The biggest risk factor is that the core markets, particularly Europe, deteriorate at a much more rapid rate than they expect,” Mr Rae said.

Brambles shares fell 5 per cent in early trade before closing five cents higher at $6.48.

The West Australian

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