Bunzl shares slump as sales growth slips at start of 2019
Bunzl’s shares plunged this morning as the business supplies group warned investors of slowing growth.
Bunzl saw sales rise at the start of 2019, but blamed the US and macroeconomic factors for the slowdown in growth.
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The distribution giant said group revenue grew four per cent year on year in the first quarter of the year.
However, that dropped to just 2.5 per cent without currency fluctuations.
Its share price fell 11.25 per cent to 2,264p on the trading update.
The business supplies group said acquisitions and net disposals contributed one per cent of the 2.5 per cent, with underlying revenue growth only amounting to 1.5 per cent.
Bunzl pointed to “mixed” macroeconomic conditions for slowing sales, with its US business suffering from growth of just one per cent.
That was due to a lack of growth in the US’s retail and grocery sectors, thanks to a lack of product price inflation.
The UK & Ireland, continental Europe and the rest of the world contributed sales growth of two per cent.
Bunzl also bought Netherlands distributor Coolpack to supply specialist packaging to supermarkets and pharmacies, whose revenue totalled €4m (£3.5m) last year.
“Growth through acquisitions to consolidate the markets in which the company operates is an important part of Bunzl's consistent and proven strategy,” Bunzl 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.”
Russ Mould, investment director at AJ Bell, said Bunzl’s update was proof markets were right to fear a global economic slowdown.
Calling the business-to-business supplier an economic bellwether, Mould said: “Bunzl calls itself ‘GDP-plus’, meaning its earnings should grow in excess of GDP in the countries in which it operates.
“Analysts should have already factored in slowing GDP growth to their earnings forecasts because of plentiful signs of economic weakness around the world. Yet life is much worse than expected for Bunzl judging by its sharp share price decline on the news.
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“The fact that underlying revenue growth during its first quarter seems to have slowed in all markets is a major alarm bell. The big question is whether life is getting to get even tougher in its second quarter.”