Brambles Ltd (ASX: BXB), the industrial giant with widespread operations in the United States, has announced about the impact of USA tax changes and as per its current estimate (subject to further analysis and clarification of a number of items), there will be a one-time non-cash benefit as at 31 December 2017 to the group’s income tax expense of between US$125m and US$155m. This benefit has been highlighted against a reduction in the group’s USA net deferred tax liability due to the decrease in the USA federal corporate tax rate from 35% to 21%. The preliminary assessment of the total tax reform package indicates that any change to the group’s effective tax rate is unlikely to be significant.
However, BXB has also signalled for a number of measures which could negatively impact the company apart from the tax rate reduction. As of now, companies like BXB which have extensive operations in the US expect to benefit from the US tax changes. With Brambles highlighting some negatives, the space needs to be watched out for.
BXB stock, which edged slightly down on the news on January 02, 2018, trades at a relatively higher level with an unreasonably high price to earnings ratio given the potential to be witnessed. It might be better to avoid the stock at the current trading scenario as the group intends to touch upon the impact during the release of its first half results scheduled for February 2018.
Earlier, the group reported sales revenue from continuing operations of US$1,374m for the first three months of the financial year ending 30 June 2018 (FY18), which is an increase of 8% at actual FX rates and 6% at constant currency over the prior corresponding period.
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