Bunzl increases earnings outlook as cost inflation eases
The group posted a 4 per cent rise in underlying pre-tax profits to £395.6m for the six months to June 30, although profits were 0.8 per cent lower with currency movements stripped out.
Underlying operating profits lifted 6.5 per cent to £438.3m, or 2.5 per cent higher on a constant currency basis.
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Hide AdThe FTSE 100-listed firm said it now expects annual underlying earnings to be “moderately higher” than in 2022 at constant exchange rates as it also upgraded its profit margin outlook.
Bunzl – which supplies businesses around the world with a variety of products, including coffee cups and food labels to department stores and hospitals – said cost inflation has fallen back, “driven by a meaningful reduction in freight costs and wage growth that was closer to more typical historical levels”.
It also highlighted efforts to boost margins through a series of initiatives, including driving higher sales of more profitable own-brand products.
But the pullback in inflation is a “double-edged sword” for the group, according to Hargreaves Lansdown equity analyst Matt Britzman.
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Hide AdHe said: “On the one hand, lower input costs have helped margins push higher over the half, but the flip side is a drop in revenue as the pricing on a lot of Bunzl’s products can be linked to inflation.
“Add in a drop in Covid-related sales and the underlying business is seeing a bit of weakness creep in; comparable periods are tough though.”
Revenues lifted 4.5 per cent to £5.9bn, or 0.6 per cent higher on a constant currency basis over the first half.
Bunzl said sales and profit margins are also being given a fillip by its flurry of acquisitions, having announced 12 so far in the year to date – including another two unveiled alongside its interim results.
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Hide AdBunzl said it has acquired a business in Poland – its first in the country – and another one in the Netherlands.
Mr Britzman said: “The announced acquisition in Poland marks the group’s first foray into the region, one that’s previously been on the radar.”