Bunzl PLC (LON:BNZL) shares took a tumble on Wednesday as the consumer supplies distributor said its underlying revenue growth slowed in the first quarter of 2019 amid a tough retail market.
The FTSE 100-listed group said the slowdown was largely due to its North American business, which saw underlying revenue growth ease to 1% in the quarter following weaker sales in the grocery and retail sectors.
READ: Bunzl weak as Credit Suisse cuts rating to ‘neutral’ from ‘outperform’ amid concerns over margin pressure
However, Bunzl said there was “good growth” in the safety, processor, agriculture and convenience store sectors.
Underlying revenue growth in Continental Europe, the UK and Ireland and the rest of the world was about 2%. At actual exchange rates, group revenue in the first quarter increased 4%; at constant exchange rates and adjusted for the impact of the number of trading days, revenue edged up 2.5%.
Bunzl also announced that it has bought Coolpack, a distribution business based in the Netherlands. Last year, Coolpack recorded revenue of €4mln.
“Growth through acquisitions to consolidate the markets in which the company operates is an important part of Bunzl's consistent and proven strategy,” the group said.
“The pipeline of potential acquisitions is promising and, with ongoing discussions taking place, the company expects to complete further transactions as the year progresses.”
Profit-taking "to be expected"
In afternoon trading shares in Bunzl topped the FTSE 100 fallers board, down 10.5% at 2,283p.
In a note to clients, analysts at Shore Capital said: “Whilst it remains early in the year and we have had a slowdown in our revenue forecasts from slowing global GDP growth, the Q1 impact is a little greater than we had anticipated.
“We expect margins to be solid across the group, but the short term profit nuance from slowing revenues is slightly negative to our forecasts – in the c1% to 2% range.”
They added: “Given that Bunzl’s shares have been trading at all-time high levels in recent days, we expect some profit taking to follow this statement. In the medium to long term, Bunzl remains very strongly positioned for delivery with solid cash generation characteristics. We retain a BUY stance.”
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