The Brambles Limited (ASX: BXB) share price could come under pressure today and in 2017 following the release of its half-year report.
In a statement to the ASX this morning, Brambles reported a 4% increase in revenue but a 50% fall in profit to $US 146 million, from $US 291 million in the same period last year.
The company said significant items, including a $US 120 million non-cash impairment, hurt the results. Had Brambles not reported the impairments, operating profit would have increased 1%.
Despite the non-cash impairment, cash flow from operations fell $US 26 million following investments.
"While performance in the first half was below our expectations, our team delivered revenue growth in every operating segment and Underlying Profit growth across the Group, with the exception of our Pallets North America business," outgoing CEO Tom Gorman said. "Notwithstanding the challenges in Pallets North America, our portfolio of businesses remains in a strong position, both operationally and strategically."
The Brambles board declared an interim dividend of 14.5 cents per share, the same as last year, with franking at 25%.
Looking ahead, Brambles expects sales and profit to be in-line with 2016 (excluding currency effects and impairments).
Should you buy Brambles shares in 2017?
Last month, the company flagged the fall in profit as a result of retailer issues in North America, including destocking, and the impairment. The Brambles share price has fallen 15% since then.
Looking ahead, the company expects its North American business to face cost and competitive pressures.
Ultimately, given the uncertainty, investors should not pay too high a price for Brambles shares. And at today's prices, I think there are better options for dividend income and growth than Brambles shares.
