US Tax Reform Lifts Brambles Profit
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Brambles shares reacted positively to logistics and pallet hire group maintaining interim dividend at 14.5 cents a share yesterday.
The company revealed a big rise in statutory net profit to $US447.2 million ($565.65 million), triple the same time last year, aided by $US130.1 million of deferred US tax liabilities following the US company tax rate reduction.
The result was also skewed by the absence of a $US120 impairment suffered on its US oil and gas container joint-venture in the first half of 2016-17.
That saw the shares rise 1.1% to $9.74.
Sales revenue for the six months to December 31 rose a more modest 5% to $US2.75 billion thanks to volume growth in Europe and the Americas, where double-digit revenue growth in its Latin-America pallets business.
Underlying profit was also up 5% at $US493.7 million, despite the loss of a contract with Woolworths and the impact of the shutdown of Australian automotive manufacturing.
Chief executive Graham Chipchase said the improved offshore volume growth was offset by cost pressures in transport, handling and lumber.
“We continue to face structural cost challenges," Mr Chipchase said. “It is something we have to get on and action in the next six months."
Mr Chipchase said Brambles was looking at options to cut the cost of business, including passing on higher prices.
“I don’t think you should see the opportunity for a massive price increase but we'll do what we can, we have to, because transport and lumber inflation is significant," Mr Chipchase said.
Chief financial officer Nessa O’Sullivan said the long term effect of the US corporate tax changes will be negligible for the company.
“The impact is not expected to be significant and we expect our annual effective tax rate from FY19 onwards to be between 27 - 29 per cent,” Ms O'Sullivan said.
Brambles said it was maintaining its forecast of full-year sales revenue to grow in the mid-single digits, while underlying profit growth is likely to be in excess of sales revenue growth.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.