![Brambles said in light of its first-half performance, revenue and profit growth for the full year would come in below ...](/content/dam/images/1/m/p/h/9/x/image.related.afrArticleLead.620x350.gtwkuz.png/1485156165260.jpg)
Tom Gorman, the departing chief executive of Brambles, says he is "embarrassed" at presiding over a profit downgrade which wiped $3.1 billion off the market value of the logistics and pallets company just a few weeks before he ends his seven-year reign at the helm.
"This couldn't come at a worse time for me personally," Mr Gorman told an analysts briefing on Monday after Brambles cut its profit forecasts due to a sharp fall-off in demand in its US pallets business in December.
Brambles, which is best known for its CHEP pallets and IFCO reusable containers used by a range of retailers and wholesalers, plummeted $1.94 to close at $10.34, down 15.8 per cent for the day. This compares with $13.59 in July last year.
"I'm embarrassed," Mr Gorman said, although he emphasised that Brambles was in better shape as a company than when he first took over as chief executive in 2009.
Brambles has been regarded as being a reliable albeit unspectacular performer among the big blue-chip ASX stocks, with the stumble undermining investor confidence at a time when the broader economic data on the US economy is showing solid growth and when Brambles' top management is going through unprecedented change.
Mr Gorman is about to hand over the company to British-based packaging executive Graham Chipchase in late February, while chief financial officer Zlatko Todorcevski stepped down in mid-November to be replaced by former Coca-Cola Amatil executive Nessa O'Sullivan, who will re-locate to the United Kingdom in mid-2017.
Sean Fenton, portfolio manager with Tribeca Investment Partners, said on Monday that Brambles had been trading on a hefty multiple and had been punished for both failing to meet expectations and for questions left unanswered about why its sales had faltered at a time when US consumer goods companies were generally doing well in an improving economy.
"If you can't deliver then the market tends to get quite impatient," Mr Fenton said. "It's not a great look. It raises questions and doubts about the sustainability of earnings."
Brambles said it expects constant-currency revenue growth of approximately 5 per cent in the six months ended December 31, and constant-currency underlying profit growth of approximately 3 per cent. This will result in growth for the full year coming in below the current guidance range of revenue growth of 7 to 9 per cent and underlying profit growth between 9 to 11 per cent.
Mr Gorman said a full update with more specific projections would be made at the company's half-year results announcement on February 20.
Brambles had re-affirmed its full-year forecasts on November 16 at its annual general meeting, and Mr Gorman said the fall-off in December had come as a surprise.
"It was very unexpected for us to see this level of decline," he said.
He said US retailers have been reducing the amount of stock they've been ordering from a range of manufacturers across the consumer goods industries. This had also meant that Brambles had faced higher costs because of an increase in the number of pallets being returned, which bumps up transport costs. Other costs also increase because Brambles repairs those returned pallets as a matter of course.
Mr Gorman stressed that Brambles wouldn't embark on a short-term solution on scrimping on repairs to save money. "We're taking it on the chin for that issue," he said.
Brambles will shift its head office to the UK when Mr Chipchase takes over at the end of February from Mr Gorman, who earlier in his career was a president of car maker Ford Australia.
He emphasised that Brambles hadn't lost any market share to rivals in the US, but had been impacted by retailers deferring decisions to buy up new stock after having built up inventory previously.
"We do not believe that we have lost any business to any competitor," he said.
Asked whether the US election and the ascendancy of Donald Trump had been a factor, Mr Gorman said it would take some time to fully understand the impact of the "radical shift" in policies from the Obama administration to the Trump administration.
"I think it would be dangerous to pin it to that anyway," he said. He declined to comment specifically on the longer-term impact on Brambles of the protectionist policies being pursued by Mr Trump.
Mr Gorman said many fast-moving consumer goods companies in the US were now using third-party procurement agencies to help with their buying and stock levels amid shifting dynamics, where there was much more data analysis on consumer behaviour and buying patterns. This added time to the decision-making process, which in turn affected Brambles.
"That is taking a bit more time to reach a decision," he said. "We did see very significant de-stocking in the month of December."
The first-half results also includes a small loss due to Brambles' investment in the HFG joint venture, where its oil and gas container business is now part of an independent joint venture entity with Hoover Container Solutions.