Brambles profits slump 29% over 14m lost pallets
BRAMBLES INDUSTRIES, the troubled Anglo-Australian support services group, yesterday revealed the cost of losing more than 14 million freight pallets as it reported a 29 per cent slump in full-year profits.
Shares in Brambles, which admitted last December that it had mislaid millions of pallets, fell nearly 10 per cent in London as Sir C. K. Chow, the chief executive, said that the problem has so far cost the company about £28 million.
He said the company had found about 4.5 million pallets but that it would have to take a one-off charge of £15 million to get them back into the system, and that a further 4 million pallets had been damaged beyond repair, prompting an additional write-off of £13 million.
Sir C. K. added that the company was about two-thirds of the way through a worldwide audit, which he expects to be completed by June 2005 at a total cost of about £45 million.
Brambles, the world’s largest supplier of pallets, owns about 200 million pallets, which are hired out to customers to transport goods around the globe The charges helped to depress full-year pre-tax profits by almost one third to £190 million, on sales of £2.99 billion. The figures were dragged down further by a £13 million charge relating to 120 redundancies in its European pallet division, as part of a costcutting drive that will reduce the head count by 350. The remaining redundancies are expected to be completed by next June.
Brambles, which derives more than 80 per cent of its revenues from outside Australia, also blamed higher pallet repair and inspection costs at its North American division for the poor performance.
The profits were at the lower end of expectations, causing the company’s shares to fall by 20½p to 170p.
Karl Green, an analyst at Dresdner Kleinwort Wasserstein, said: “The incremental cost of pallet maintenance and repair was higher than expected and, more importantly, will put a drag on 2004 earnings.”
Brambles’ pallet division, known as CHEP and accounting for 53 per cent of group profits, reported a decline in comparable operating profits to £199 million, from £207 million the year before.
Mr Green estimates that increased US maintenence costs accounted for most of the decline. He has lowered his 2004 operating profits forecast for CHEP’s US division from £98 million to £78 million as a result.
Mr Green added: “Pallet maintenence costs have gone up because Brambles is making its assets work harder and is in the middle of a drive to improve their quality.”
Meanwhile, Brambles reported a 4.3 per cent decline in operating profits to £96 million at its Cleanaway waste removal operations and a better than expected 6 per cent fall in operating profits to £49 million at its Recall document management division.
Brambles is a household name in Australia and can trace its history from 1875, when Walter Bramble founded the company in Newcastle, north of Sydney.
In 2001 Brambles merged with the support services business of GKN in one of the largest deals in Australian corporate history.
Commenting on the outlook for this financial year, Sir C. K. would only say: “We expect to make good progress for the year as a whole.”
