Industrial services group Brambles Industries has lost a third of its market value after warning investors that problems at its European pallet division look set to dent profits.

The firm said oversupply of pallets - wooden platforms used to transport goods - had led to a sharp drop in prices, cutting into revenues and profits at its pallet and container division CHEP.

It said profits for the group as a whole would come in "below earlier expectations" as a result.

The warning over the company's European pallet business - the second in three months - alarmed investors, triggering a sharp fall in Brambles' share price.

Investors flee

Brambles shares were changing hands at 128.5p in early afternoon trade in London, 34% down on the day.

The company's shares are down sharply from a peak of 370p in November 2001, three months after the company made its London stock market debut.

Based in Australia and with stock market listings in Sydney and London, Brambles is part of the UK's elite FTSE 100 group of publicly quoted companies.

Brambles has launched a restructuring programme aimed at reducing spending on new pallets by relocating and recovering used ones.

The exercise is expected to boost profits by about �15m in each of the next two financial years, the company said.