Brambles shares drop following weak interim results – Brambles in merger talks with GKN
Shares in Brambles, the logistics company in merger talks with GKN of the UK, fell more than 7 per cent on Friday as analysts cut full-year profit forecasts for the Australian group following the announcement of a weak set of interim results on Thursday.
There was also disappointment that the company – which held an analysts meeting on Thursday – had not provided more details of the talks with GKN and indicated that any merger was still some way off.
The shares fell A$3.50 to A$44 – giving the group a market capitalisation of A$10.2bn – after also sliding A$1.50 on Thursday.
Merrill Lynch cut its net profit forecast by six per cent to A$367m (US$191.6m), before exceptionals, for the year to the end of June. This compares with A$369m last year.
Brambles, which issued a rare profits warning last November, cautioned analysts that the second half would be “bumpy” as it completed a divestment programme.
John Fletcher, chief executive, added that Brambles expected to complete the sale of its car transport, German access equipment and wagon rental businesses by June. This leaves it still to dispose of its equipment rental assets in Australia and the US.
A net A$149m charge for a write-down in the value of the poorly performing equipment rental businesses was behind a slump in interim net profits to A$32.9m, against A$185m last year.
Brambles said Chep, the pallet business it shares with GKN, continued to increase its market penetration in the consumer goods sector, particularly in the US. However, the group added that the business had been hit by short-term issues, including slower-than-expected development of its German and Italian pools.
Operating profits in the equipment hire division, which includes Chep as well as most of the businesses for sale, fell nearly seven per cent to A$133m on revenues up 27 per cent at A$1.23bn.
Transport and logistics suffered an even bigger drop in profitability with operating profits falling nearly 14 per cent to A$59.5m.
Group sales rose 16 per cent to A$2.75bn.
Reflecting the write-down and capital expenditure of A$401m, net debt rose A$234m to A$1.67bn, giving gearing of 44 per cent.
