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U.S. costs hurt Brambles profit
MELBOURNE, Australia (Reuters) -- Brambles Industries, the world's largest supplier of freight pallets, says annual net profit fell 39 percent to Aust. $330 million ($211 million) on U.S costs and European restructuring. That compares with A$545 million a year earlier. Tuesday's profit announcment for the year ended June 30 drove Brambles shares down almost 8 percent as investors fretted about its U.S. business. The Anglo-Australian group's result was hit mainly by a restructuring charge at its European pallet business, and higher-than-expected pallet repair and inspection costs at its North American division, which also saw slower sales growth. "The U.S. performance is disappointing and they said they have got some high costs coming through," said Bruce Low, analyst at ABN AMRO. Brambles, which is also listed in London, derives more than 80 percent of its revenues outside Australia, with the company's more than 200 million CHEP-brand blue pallets and containers used to cart goods around the globe. Brambles's Australian-listed shares closed 7.7 percent lower Tuesday at A$4.81 after going as low as A$4.71 earlier in the day. It was their biggest percentage drop since November last year, when the company first unveiled problems at CHEP Europe. "The performance of CHEP U.S. would mostly likely lead to downgrades" in analyst ratings, said Glenn Hart, a fund manager at Portfolio Partners. CHEP Europe and CHEP Americas account for almost 40 percent of Brambles' revenues. Brambles shares, once favoured as a growth stock, have fallen more than 50 percent since its merger with parts of Britain's GKN Plc in August 2001. Brambles, whose major clients include the world's largest retailer Wal-Mart Stores Inc, said net profit fell to A$330 million. The results included A$151 million in significant one-off items, of which A$125 million was due to a restructuring of CHEP Europe. Before tax, goodwill and one-offs, Brambles' profit was A$775 million, slightly below the midpoint of the company's previous guidance of A$742 million to A$830 million. Brambles began restructuring CHEP Europe last year after the division's performance deteriorated due to delays in new contracts, high restructuring costs, problems caused by a new pricing system, and a string of service centre fires. The division accounted for 40 percent of Brambles' core CHEP freight operations. The company said the restructuring program is on track to be completed in 2005. In the Americas, Brambles said service centre costs, which included pallet inspection and repair costs, were A$54 million higher than in the previous year. At the company's second largest business segment, waste management group Cleanaway, Brambles said it had shed 200 staff at its German operations while awaiting the outcome of a tender for a packaging recycling scheme contract. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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