analysts support the move Market behind Brambles move to quit...

analysts support the move Market behind Brambles move to quit Germany
October 15, 2005

Brambles' decision to sell off part of its waste management business will improve the quality of the group's earnings, analysts say. The logistics group will sell Cleanaway Germany to German-based waste management group Sulo for $893 million, ridding itself of a business that had been a drag on the group's growth.

Brambles will focus on its Australian operations and has bought information management business Ausdoc from ABN Amro Capital for $260 million.

Goldman Sachs JBWere analyst Paul Ryan said he supported Brambles' decision to exit the Cleanaway Germany business, following a deterioration of the German waste industry structure in recent years. "The decision to exit, at what we regard as an attractive price, increases the group's earnings quality profile," he said in a report to clients.

The move was a milestone for Brambles, which has been undergoing a major restructuring program since chief executive David Turner took on the top job in 2003. Mr Ryan said the group now had to work at increasing its organic growth and make better use of its balance sheet to accelerate that growth.

UBS analyst Stephen Wood also supported the Cleanaway Germany sale. "We believe this is a good transaction, given our belief that Cleanaway Germany has higher risk than the remainder of the global Cleanaway business," he said.

Mr Wood noted that the transaction would also provide a boost to Brambles' return on net assets (RONA). In 2004-05, the global Cleanaway business had a 13.1 per cent RONA compared with the 18.3 per cent for the Chep pallet business.