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Brambles shares took a tumble in Sydney trading on Monday after the pallet maker and logistics company used its interim results to flag flat sales growth in the second half and flat underlying profit for the financial year.
The company has also withdrawn its medium-term target for return on capital invested for the 2019 financial year and said it would endeavour to “strike a sustainable balance between financial returns and growth”.
This riffs off a trading update provided by the company in late January, when it said it expected to deliver first-half sales revenue growth of 5 per cent in constant currency terms, compared to previous guidance of between 7 per cent and 9 per cent, and underlying profit growth of 3 per cent, a sharp revision from earlier guidance of between 9 per cent and 11 per cent.
Brambles hit those revised expectations, and today revealed sales revenue of $2.74bn and underlying profit of $468.9m in the six months ended December 31. Profit after tax sank 42 per cent to $162.3m at constant exchange rates.
It now expects sales revenue growth in the second half to be in line with the December half, and underlying profit is expected to be flat compared with the 2016 financial year.
The company warned last month of revenue and cost pressures in its North American pallet business, partly due to “US retailer destocking which impacted volumes and resulted in increased transport and plant costs”.
Tom Gorman, chief executive, described the first-half performance in Pallets North America as “disappointing” but said the business remained in a strong position both operationally and strategically and was looking to take advantage of technological innovations.
However, the company said it expects the Pallets North America business to continue to face cost and competitive pressures in the June half.
Brambles kept its dividend unchanged from the previous six-month period at 14.5 Australian cents, franked at a rate of 25 per cent.
Shares were down 8.3 per cent, but had fallen as much as 9.2 per cent.