Two ASX supply chain shares to look at amid Omicron concerns

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Two ASX supply chain shares to look at amid Omicron concerns

 Two ASX supply chain shares to look at amid Omicron concerns
Image source: Who is Danny,Shutterstock

Highlights

  • The latest surge in Omicron cases can pull back slowly recovering economy.
  • The variant can aggravate global shipping constraints.
  • In addition, worker shortages are likely to escalate costly supply chain jams.

The latest surge in Omicron cases has raised concerns among investors as supply chain-related issues can easily spiral into major challenges, pulling back slowly recovering economy. The businesses could also face global shipping constraints if this new COVID-19 variant spreads at an alarming pace. In addition, worker shortages are likely to escalate costly supply chain jams over the coming months.

On this note, we discuss two ASX-listed stocks of the companies related to supply chain business amid ongoing Omicron-related concerns.

(However, one needs to do thorough research before taking any exposure, as sinusoidal market trends are evident.)

Supply Network Ltd (ASX:SNL)

Supply Network operates under the multi-spares brand. It has many trading entities, and each trading entity has its own management team and its own operating focus within a broad market definition of replacement parts for road transport equipment.

The stock has given a year-to-date (YTD) return of over 2.5%. In the past year, the stock rose over 113%.

In FY2021, the company’s revenue stood at AU$162.6 million. The profit after income tax (PAT) was AU$13.8 million.

The worker shortages are likely to escalate costly supply chain jams over the coming months.

Source: ©  Bakhtiarzein  | Megapixl.com

In his recent address to the shareholders, the company’s chairman said that the first half revenue is expected to be around AU$95 million. “We expect revenue to continue to grow in the second half, but costs associated with the current expansion projects and an opening economy will dampen profit growth, and we expect second half Profit After Tax to be similar to the first half,” he added.

Pro-Pac Packaging Ltd (ASX:PPG)

Pro-Pac Packaging is a diversified manufacturing and distribution business, which is primarily involved in providing a combination of product and service solutions for packaging as a whole.

The Pro-Pac Packaging share price has fallen in the past few months, largely on account of concerns around Omicron variant. The stock has given a negative year-to-date (YTD) return of over 2%. In the past year, the stock fell over 92%.

In its December’s trading update, the small cap firm announced that it experienced labour shortages, inflationary pressures and ongoing global supply chain problems that negatively impacted the business.

Pro-Pac expects 1H22 profit before tax (PBT) to be impacted due to COVID-19, resulting in an underlying PBT of nearly AU$4 million. However, the influx of orders and the other actions already taken by management will have a material positive impact on the second half result.

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