Distribution and outsourcing company Bunzl has raised its full-year earnings outlook due to reduced cost pressures and strategic measures to enhance profitability.
For the first half of the year ending June 30, Bunzl reported a 4% increase in underlying pre-tax profits, amounting to £395.6 million. However, when accounting for currency fluctuations, profits were down by 0.8%.
Underlying operating profits also rose by 6.5% to £438.3 million, or a 2.5% increase on a constant currency basis. The FTSE 100-listed firm has revised its annual underlying earnings forecast to be “moderately higher” than 2022 at constant exchange rates, while also upgrading its profit margin projection.
Bunzl, which provides various products to global businesses, including coffee cups and food labels to establishments like department stores and hospitals, noted that cost inflation subsided due to reduced freight expenses and more typical wage growth.
The company commended its efforts to boost margins through multiple initiatives, including driving sales of more profitable in-house branded products. However, this drop in inflation could present challenges, as some of Bunzl’s product pricing is tied to inflation.
Though revenues increased by 4.5% to £5.9 billion for the first half, or 0.6% on a constant currency basis, the company acknowledged that Covid-related sales have receded, impacting its underlying business performance.
Bunzl’s growth has also been supported by a series of acquisitions, with 12 announced so far this year. These acquisitions have contributed to sales and profit margin expansion. Notably, the company has entered the Polish market for the first time and made another acquisition in the Netherlands.
Bunzl’s recent acquisitions, including the one in Poland, align with its business model and provide potential for expansion in the region. This marks the company’s 207th acquisition announced since 2004.
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