With businesses considered crucial to supplying staples like food, logistics groups should have been the winners of the covid pandemic - but they haven’t, well not yet anyway.
Both companies suffered dramatic profit slides over the pandemic, with net profit after tax (NPAT) at Brambles falling from nearly $2.1bn in FY19 to just under $700m in FY21. NPAT at Lindsay similarly declined from $8.8m to $1.25m over the same time span.
Brambles complained that the price of timber - used to make its iconic chep pallets that are crucial to supply chains around the globe - has risen as much as 5-fold in the US and 2.5x in Europe.
At Lindsay, a shortage of labour was also an issue, as was the reduced flights and sea freight during covid, which slugged the group’s international fresh food import and export unit.
Revenue of US$2,766.4m, up 8%
Net profit of US$304.8m, up 4%
Interim dividend of 15 cents per share, up 15%
Dividend in-line with 50% payout ratio
Revenue of $273.9m, up 25.3%
Net profit of $12.2m, up 87%
Interim dividend of 1.4 cents per share, up 16.7%
Recovery for Lindsay in FY22
Ord Minnett Qld/WA State Manager David Lane labelled Lindsay’s half-year result as “exceptional” and were helped along by a boom in the agricultural sector.
But he warned the company still faced bottlenecks.
“The outlook for the business is very strong … and their recent investments into growing their capacity in their fresh and rail divisions are paying off,” Lane noted.
“The only capacity constraint is they have issues getting truck drivers, and they’ve transferred a lot of their business across to rail and there are capacity constraints there as well.”
Ord Minnett recently upgraded its FY22 forecast for NPAT by 20%, citing the company’s plan to have 400 rail containers in service by the end of the year as among the reasons.
The broker is rated Buy on Lindsay, with a target price of $0.53, with upside potential of circa 20%.
Lindsay's share price has pushed higher over the last six months.
In research published February 28, Ord Minnett noted that Brambles had been able to pass on many of the price increases to its customers.
But the analyst was disappointed with higher capital expenditure, which may lead to negative cashflow in FY22 and possibly into FY23.
But Brambles was still a solid business, the broker noted. It retained its buy rating, with a target price of $12.25, down from $12.70.
Brambles share price has underperformed over the last six months.
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