Bunzl lifts FY adjusted operating profit forecast as H1 profits rise

Distribution specialist Bunzl on Tuesday upgraded guidance for annual adjusted operating profits as it reported a rise in half-year earnings.

The company reported interim pre-tax profit of £317m, up 6.9%, with revenue up 4.5% to £5.9bn.

“We now expect adjusted operating profit to be moderately higher than in 2022 at constant exchange rates, with operating margin remaining strong and moderately higher than that achieved in the prior year.”

Inflationary pressures across Europe and the UK were still evident, Bunzl said, but it had managed to pass on high raw material costs to customers through price hikes. US freight costs fell, wage growth slowed and overall inflation eased.

"Inflation easing in the US is a double-edged sword. 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," said Hargreaves Lansdown analyst Matt Britzman.

"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. Aside from lower costs, margins also got a bump from consumers shifting to own-brand products in response to ongoing pressures on income."

Bunzl also announced it had signed an agreement to buy a business in Poland, and one in the Netherlands for an undisclosed sum.

Reporting by Frank Prenesti for Sharecast.com