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Pallet and logistics giant Brambles Limited (ASX: BXB) is facing a potentially hefty penalty after the Federal Court partially upheld claims in a shareholder class action alleging the company misled investors about its profit growth outlook almost a decade ago.
The judgment found Brambles engaged in misleading or deceptive conduct and breached its continuous disclosure obligations in relation to its FY17 underlying profit growth guidance issued to the market.
The ruling covers shareholders who acquired Brambles shares between 18 August 2016 and 17 February 2017.
The class action, led by Maurice Blackburn and Echo Law, centres on guidance Brambles provided of 9 per cent to 11 per cent underlying profit growth and 7 per cent to 9 per cent sales revenue growth for FY17 - targets the company ultimately fell short of, triggering two sharp share price drops.
Brambles shares plunged almost 16 per cent on 23 January 2017 and a further 10 per cent on 20 February 2017 after successive downgrades to the guidance.
The court upheld claims relating to the underlying profit growth guidance for the period 16 November 2016 to 21 December 2016, and upheld claims on both underlying profit growth and sales revenue growth guidance for 21 December 2016 to 23 January 2017.
All other FY17 guidance claims covering earlier and later sub-periods were dismissed, as were all claims relating to Brambles' medium-term FY19 targets.
The judgment runs to more than 1,200 pages following a trial that took place between 8 August and 9 September 2022, with closing submissions heard on 26 and 27 October 2022.
Brambles says total potential damages are "currently uncertain" and will not be determined until a quantification process is completed and all appeal avenues are exhausted. Some media reports estimate the latest court ruling could cost Brambles $100 million.
The company notes in its ASX announcement today that it has insurance arrangements in place, while also flagging possible grounds for appeal.
"Whilst Brambles has insurance arrangements in place, Brambles notes that the total quantum of the potential damages is currently uncertain and will not be known until the process for quantification of total damages has been completed and/or all avenues for appeal by either Brambles or the applicants are exhausted," says the company in a statement to the ASX today.
"As a result, it is not possible at this stage to determine the financial impact of the judgment on Brambles, if any. Brambles will keep the market informed in accordance with its disclosure obligations."
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