Bunzl acquires Nisbets, issues 2024 margin warning amid global inflation ease

Bunzl acquires Nisbets: Bunzl, a UK-based company, has acquired catering distributor Nisbets in the UK and Pamark in Finland. However, despite these acquisitions, Bunzl is cautioning investors about a potential dip in its operating margin for 2024 compared to the previous year. This warning comes as inflation rates are easing globally, and the company faced a slower-than-expected start to the year in North America.

Bunzl, known for its distribution of items like plastic utensils, food packaging, and gloves saw a surge in demand during the pandemic, particularly for personal protective equipment (PPE). However, with the disappearance of this demand and a decrease in price pressures, the company's performance is being affected.

As a result of these factors, Bunzl's shares have experienced a nearly 5 per cent decrease. Analysts, like Matt Britzman from Hargreaves Lansdown, suggest that while Bunzl faces pricing weaknesses, its strategy of acquiring new businesses could help mitigate margin pressures in the future.

In its latest financial report, Bunzl disclosed an 8 per cent operating margin for the year ended December 31, 2023, with a modest 3.4 per cent increase in adjusted profit before tax. However, revenue saw a slight decline of 2 per cent.

In North America, which represents Bunzl's largest market, the company experienced a 5.6 per cent decline in underlying revenue growth, primarily due to lower volumes and inflation-related challenges in the food service sector. Nonetheless, profitability in the region improved as input costs became more manageable.

Bunzl's acquisition of Nisbets, its largest to date, amounted to £339 million, with Bunzl acquiring approximately 80 per cent ownership of the UK and Ireland-based company, which also operates in Northern Europe and Australia.

CEO Frank van Zanten expressed optimism about the potential for significant acquisitions in 2024, suggesting it could be Bunzl's "biggest year ever for acquisitions."

(With Reuters Inputs)