UK's Bunzl keeps revenue growth forecast, says US turnaround bearing fruit

(Reuters) -British business supplies distributor Bunzl on Tuesday maintained its annual guidance and resumed a share buyback programme, sending the company's shares 5% higher on hopes that challenges which have been hurting its profits are abating.

The group, which supplies businesses with items from stationery to food packaging, has been offsetting overall pricing pressures, and challenges in North America - including weak sales and high costs - by changing leadership and cutting costs.

Bunzl on Tuesday restarted a 200-million-pound ($270.2 million) share buyback programme, which it had paused in April, saying it wanted to preserve financial flexibility. It also reiterated annual guidance that was lowered in April, with an outlook of moderate revenue growth and an operating margin moderately below 8%.

The company's shares were the biggest gainer on Britain's blue-chip FTSE 100 index early on Tuesday, rising 5.5% to 2,516 pence by 0746 GMT, compared with a 0.6% decline in the broader market.

"Actions taken in our largest business in North America have re-energised the team and we are seeing early positive indicators of success," CEO Frank van Zanten said.

"While the benefits of some actions are not expected to drive improvements until well into 2026, we are focused on creating a stronger platform for its long-term profitable growth," he added.

Bunzl, whose strategy includes acquiring smaller businesses to bolster its operations, also said that it had bought Mexico-based personal protective equipment distributor Guantes Internacionales, and Quindesur, a Spanish distributor of foodservice and cleaning products.

"It looks increasingly like (the April warning) was 'one and done' and the focus can now return to the long-term attractions of the compounding model," Peel Hunt analyst Andrew Nussey said.

Bunzl's adjusted operating profit fell 7.6% at constant currency to 404.5 million pounds for the six months ended June 30.

Revenue overall rose 4.2% to 5.76 billion pounds, but North America, which accounts for more than half of total sales, logged a 2.3% decline.

($1 = 0.7402 pounds)

(Reporting by Unnamalai L and Pushkala Aripaka in Bengaluru; Editing by Rashmi Aich, Aidan Lewis)