Brambles shares plunged 16% on back of profit downgrade

Published at Jan 23, 2017, in Features

Supply chain logistics group and owner of key brands, CHEP and IFCO, Brambles (ASX:BXB) became another casualty of confession season on Monday morning after the company announced that a below expectations first half performance would result in its full-year result falling short of guidance.

This has resulted in the company’s shares plunging circa 16%. Management had previously provided mid-range constant currency sales and profit growth of 8% and 10% respectively.

The group’s Chief Executive Tom Gorman said, “In the first half we delivered sales revenue growth in every operating segment and with the exception of our North American pallets business we delivered underlying profit growth across the group”.

However, North America represents a substantial part of the group’s business and the fact that it has experienced revenue and cost pressures towards the end of the first half has placed a drag on the overall business.

Gorman said the pressures experienced were partly due to US retailer destocking which impacted volumes and resulted in increased transport and plant costs associated with higher than expected pallet returns.

Outlook for North America looking uncertain

In a comment that may account for the sharp downturn in the company’s share price, Gorman also cast a cloud over the outlook for this business, saying, “We have continued to see a deferral of potential customer conversions to pooling in North America and pricing pressure across our recycled pallet operations”.

The group will provide updated full-year guidance as part of its half-year result summary on February 20, which will also take into account January trading volumes.

Analysts at Citi reviewed Brambles just last week. The broker had a buy recommendation on the stock with a target price of $13.89, representing a premium of circa 35% to the low of $10.32 which the company struck in the first hour of trading.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why Finfeed.com is Australia’s leading small cap publication

Founded seven years ago, Finfeed.com is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise.

Finfeed.com provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more.

Finfeed.com is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!

X