By Harish Sridharan
(Reuters) -Australian logistics company Brambles Ltd raised its annual earnings outlook on Friday as it offset cost pressures with product price hikes, sending its shares 7.5% higher in their best session in over nine months.
The Sydney-based firm, which owns and rents crates and pallets globally to retailers and consumer goods companies, has seen manufacturing costs go up significantly in the quarter as higher inflation has made key raw materials like lumber more expensive.
The company now expects its underlying profit to jump between 15% and 18% on a constant currency basis, up from a prior estimate of 8%-11% growth.
Though cost of all raw materials and other critical input costs remain well above historic levels, Brambles said “early signs of improved pallet availability and moderating rates of inflation were noted in the second quarter of FY23 and in the first two months of the second half.”
Shares in Brambles jumped up to 9% during the session and even touched its highest level since February 2020, but pared some gains to close up 7.5% at A$12.97, recording their biggest single-day gain since May 16 last year.
Labor and transportation constraints at the height of the pandemic had deterred the return of pallets on time, hurting Brambles’ operations.
However, Chief Executive Graham Chipchase noted there are “early signs of improved pallet return rates from manufacturers and retailers in North America and the UK.”
For the half-year ended Dec. 31, Brambles’ underlying profit rose 25% on a constant currency basis to $548.8 million, benefiting from improved pallet pricing.
“Pricing growth is expected to soften into the second half, but remain positive,” Morningstar equity analyst Trevor Huynh wrote in a research note.
Brambles also raised its interim dividend payout by 14% to 12.25 cents per share.
In a separate statement, the company said Chief Financial Officer Nessa O’Sullivan will retire in the first quarter of 2024.
(Reporting by Harish Sridharan in Bengaluru; Editing by Subhranshu Sahu and Rashmi Aich, Nivedita Bhattacharjee)
