AAP

rambles Ltd expects strong profit growth for fiscal 2008 on the back of solid sales growth from CHEP, its pallets and containers business and Recall, its document and information management division.

"Overall, Brambles expects to deliver another year of strong profit in 2008," Brambles chairman Don Argus told shareholders at the company's annual general meeting in Brisbane on Friday. The board is confident of the positive outlook for our business, notwithstanding ongoing volatility in global capital markets, because of the strength of CHEP's business model and the breadth and quality of our customer base."

Brambles' bullish outlook saw its shares surge 51 cents, or 4.29 per cent, to $12.40 as the broader market fell.

In the four months to the end of October, Brambles said the sales and profit performance of CHEP and Recall were ahead of the comparative period in the prior year, with all regions performing to expectations. Both CHEP and Recall were expected to deliver solid sales growth and strong profit growth for the full year.

Argus said in the four months to the end of October, CHEP had achieved like-for-like sales growth of six per cent, led by CHEP Americas where sales rose nine per cent. CHEP Europe sales lifted two per cent, and CHEP Rest of World sales rose eight per cent. Recall delivered sales growth of nine per cent.

Brambles reported a net profit for 2006/07 of $US613.4 million ($A766.5 million), down from the $US647.1 million ($A808.6 million) in the prior year. But on a like-for-like basis, accounting for the effect of businesses sold during the year, comparable operating profit was up 21 per cent to $US932.8 million ($A1.17 billion).

Brambles chief executive Michael Ihlein told shareholders Brambles was in an excellent position to accelerate profitable growth. "We are continuing to win new business in both new and existing markets," Ihlein said.

In the past few months, Brambles had signed deals with some notable customers, including Pepsi in Canada, personal care products maker Body Blue, Italian tissue paper manufacturer Sofidel, UK meat supplier Anglo Beef, and Australian supermarket firm Woolworths.

Brambles had exciting growth opportunities, including in new segments in existing geographies, such as the US beverages market where Brambles had a penetration of less than 20 per cent. "We are also intensifying our focus on other opportunities in the US, such as home improvement, food service and office supplies," Ihlein said.

Brambles was also looking towards the growing economies of central and eastern Europe. Brambles' newly established CHEP business in China was making pleasing progress. The company was also looking at acquisition opportunities in businesses offering related supply chain solutions.

Argus told shareholders that neither transport infrastructure company Asciano Group nor logistics firm Toll Holdings Ltd had made a takeover proposal for Brambles. In August, Brambles notified the market that it had become aware that Asciano and Toll had taken small stakes in Brambles, fuelling speculation that one of the two could make a takeover bid. Since then, there had been three meetings with representatives of Toll and one meeting with representatives of Asciano. "Each of the discussions we have held with them has been general in nature, and no offer of any nature has been received from either Toll or Asciano," Argus said.

Brambles had heard nothing from Toll since September 28.

Brambles had met with Asciano on November 9, and after the meeting, Asciano notified the market that it had no current intention of making a takeover bid for Brambles. Asciano has said it would retain its 4.09 per cent shareholding in Brambles.

Argus said no suggestion had been made by Toll or Asciano which had not been considered in Brambles' own strategic review, and the board did not believe it would be in shareholders' interests to add lower-growth, lower-margin assets to the company's portfolio.

Westfield Group has reassured investors it won't be burnt by the sub-prime mortgage meltdown, saying global demand for retail space is strong and sales still are up.

The world's largest shopping mall owner reported, in an investor briefing yesterday on its third quarter update, that its strategy of targeting affluent shoppers through its A$10 billion ($11.9 billion) future development programme, equipping malls for a higher quality shopping experience, should offer protection.

"Of course, we are probably not immune to fluctuation, but the reality is you have got to come back to what our business is - we are really focused on having the best shopping centres in the best markets," Westfield's joint managing director Steven Lowy said yesterday.  "These centres penetrate much more powerfully. You can see, out of the Australian and New Zealand business and with many US assets, where we have done that, we have been able to build centres that are a lot more immune to fluctuations.

"In slower times, they [retailers] keep the shops in the best centres and get rid of the more marginal shops. That is really what we have seen in the 47-year history of the company."

Westfield released figures yesterday showing occupancy levels at its malls across the globe remained above a tight 93 per cent in the third quarter and that leisure shops were doing the best in the weeks the credit crunch has taken hold, with retail growth levels of more than 14 per cent in both Australia and the United States.  Lowy said investors would have seen Westfield shift "not so suddenly" to developing and owning the best centres in the best markets.  "We have shifted our business in the United States to better quality assets," he said.

In Australia, Westfield's quarterly retail sales were up 5.6 per cent, in the UK, up 2.1 per cent, up 1.9 per cent in the US, and up 2.2 per cent in New Zealand.  Specialty store sales in the US had grown at 1.9 per cent in the three months, while in Australia, specialty store sales had grown at 7 per cent.  They were flat for the quarter in New Zealand, reflecting growing competition in Auckland.

"For the broader economic data coming out of the US, obviously, there are mixed signals regarding the strength of the economy," Lowy said. "[But] retail sales in the US and retail demand for space remains solid. Overall, on a sales per square foot basis, sales increased 4.4 per cent, from the same period last year."  Lowy said that, for the company's own portfolio, on a comparable basis, sales for the third quarter from the West Coast of the US were up 3.6 per cent, while the Mid-West and East Coast portfolios were flat.

"[In Australia], our shopping centre in Bondi Junction continues to power ahead from development completions, achieving current annual sales in excess of A$870 million at the end of September, with specialty store growth of 11.7 per cent for the nine months and 12.2 per cent for the quarter.  "The development of the mall in Chirnside, Brisbane, sees the centre now rank as the second highest grossing Westfield centre in the Australian portfolio for the September quarter.

Lowy said the retail sales slowdown was often not seen in retail rentals until nearly two years later.  "You need a long slowdown for it to affect rents," he said.  "We don't see any downward pressure on rents and would need a sustained slowdown to see one.

Ex-Woolworths boss Roger Corbett says the buyer of Coles Group could pay too much for the retailer in the current bidding war and it is clear some of its assets are in great distress.

Wesfarmers, which is battling for control of Coles Group, yesterday stood by its A$19.7 billion ($22.17 billion) offer, and its rival bidder, led by the private equity group Kohlberg Kravis Roberts (KKR), remains in the picture after signalling last week that it could trump the Wesfarmers bid.

Corbett, who works as a consultant for Woolworths, said it was early days but the current bidding climate had created a scenario where rational thought was tossed aside.

"Some of the assets in Coles Myer are clearly distressed and you get a competitive type of bidding process and that gets overrated and the due diligence process and careful rational thought get underrated.

"It is a great danger in a process like this," he said, "so very clearly there is a danger - a big danger - that people are overpaid for some of these assets."

Corbett said the buyer should weigh things up carefully as there would be great difficulty in turning the Coles supermarkets around, adding "they are a long way behind in the technology stakes".

"K-Mart is run down pretty badly, so a site is one thing, but rejuvenating a brand is another, so there are some great challenges," Corbett said.

It was a great pity that the business had not succeeded as it did hold some excellent assets, he said.

"But clearly, they have run down hill and that is very sad because there are many people in that Coles organisation who have been immensely loyal and who are long-serving people.

"I think the whole scenario is sad for lots of people."

Corbett said Wesfarmers had been a takeover-oriented company for some time but he was still surprised by its bid.

KKR was involved in a failed A$15.25 a share bid for Coles last year, which eventually opened the door to the sale of the retailer.

Woolworths chief executive Michael Luscombe said his company was interested in Target and office supplies store Officeworks.

Luscombe has not ruled out joining the rival bidding consortium led by KKR, and there have been rumours of another bid by UK-based Tesco.

Asked about possible interest from the US retail giant Wal-Mart, Corbett, who sits on its board, said: "I think Wal-Mart has got its own plans in the world, and I wouldn't imagine that there is any plans at this stage for Australia."