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Brambles First-Half Profit Disappoints, CEO Retires

Pallet supplier Brambles Industries posted a lower-than-expected first-half profit on a sluggish performance at its U.S. unit, and said its chief executive would retire.

Chief Executive David Turner, who led a turnaround at the world's top pallet supplier, said he would resign in June. "There are very strong internal candidates and of course the board is
sounding out external candidates," he said.

The result was dragged down by a sluggish U.S. retail environment, which kept sales growth in its Americas pallet business at the low end of expectations.

Brambles, which has sold its waste management, material handling and logistics businesses in the past 18 months, said net profit for the six months to Dec. 31 was US$982.6 million compared to $251.9 million a year ago.

Three analysts on average were expecting a net profit of $999 million for the company. "I think there was too much expectation. No matter how good the results are, there'll always be an aspect of disappointment," said Brent Mitchell, research manager at Shaw Stockbroking.

The result included a $770.8 million profit on the sale of its Cleanaway UK business which it sold last year to France's Veolia Environnement and restructuring costs of US$83.1 million.

China Growth

Brambles has generated US$3.6 billion from selling businesses in the past 18 months and grown the the U.S. arm of its core CHEP business. It now hopes to grow earnings from a China pallet-leasing business although Turner said it would be "some time" before that business was profitable.

The company, which exited the London bourse last year after creating a single Australian holding company, said it expected strong profit growth in the second half with good progress at CHEP and data management division Recall.

Brambles said CHEP sales were 8% higher in the Americas in the first-half, at the lower end of the company's expectations for a 8-11% rise, due to a sluggish U.S. retail environment.

Brambles, which leases 200 million pallets for shifting goods around the globe, said net profit from continuing operations rose 50% to US$270.6 million.

It declared a special dividend in October last year which included an amount of 13.5 Australian cents in lieu of a 2007 interim dividend.

When Brambles announced the sale program it said $2.2 billion of surplus capital would be used for share buybacks. So far, it has bought back about $1 billion.

However, the company said on Wednesday it was looking at other capital management initiatives and there was no decision on the timing or exact size of future share buybacks

When asked if Brambles would consider a merger or takeover of another major transport company, Turner said: "That is not in the plan". Analysts say Brambles is a potential target for a private equity buyout.