News: UPDATE 2-Australia's Brambles says U.S. competition prompted outlook cut, shares plunge

• Competition, not U.S. retailer destocking, bigger reason for cut
• Brambles withdraws guidance for return on capital investment
• Shares plunge as much as 11 percent to lowest since 2014
• Posts 3 percent rise in first-half underlying profit

(Recasts, adds share price, CEO and analyst comment)

Brambles Ltd (BXB) said fierce competition with rival PECO Pallet Inc in the U.S. market was responsible for the downgrade in its annual earnings forecast announced last month, sending shares of the Australian group plunging 11 percent.

The pallets and container group had initially attributed the lower forecast to unexpected destocking by U.S. retailers that impacted volumes and resulted in increased costs associated with higher-than-expected pallet returns. But Tom Gorman, Brambles' outgoing chief executive officer, said on an earnings call on Monday that strong competition was a bigger reason for the cut.

That places more pressure on Graham Chipchase, who takes over from Gorman as CEO on Monday, to improve the performance of the U.S. division, which accounts for most of Brambles' revenue but has lower margins than its European business.

"The U.S. competitive landscape has clearly changed," BT Investment Management analyst Sondal Benson said. "The new owners of PECO have a willingness to invest significant capital to grow at much lower return hurdles than the returns Brambles is expecting to generate on incremental capital."

Brambles on Monday withdrew its guidance for return on capital investment to reach 20 percent by June 30, 2019 from 15.9 percent at Dec. 31, 2016.

Shares of the company, which fell to an intraday low of A$9.33 ($7.16) - the weakest since 2014 - were trading down 9 percent at A$9.55 as of 0301 GMT.

Earlier in the day, Brambles reported a 3 percent rise in first-half underlying profit to $468.9 million on a constant-currency basis. It added that its profit in the year ending June 30 was expected to be flat, well below the range of a 9-11 percent rise offered before the downgrade in January.

Gorman said Brambles had won less new business than expected due to stronger competition from PECO, owned by private U.S. investment firm The Pritzker Group, and lower prices in the recycled pallets market. He added rising inventories had led to higher storage and repair costs in the first half.

"Over time we have to become more efficient in the way we are managing our assets in North America," Chipchase told analysts at the briefing.

The company declared an interim dividend of A$0.145 ($0.1111) per share, steady with a year ago. ($1 = 1.3033 Australian dollars)