Fyffes’ profits rise almost 28%

FYFFES has reported a near 28% rise in profits for 2005 but says earnings this year will be hit by changes to the EU banana import regime and higher costs.

Pre-tax profits reached €105.8 million, from €82.7m, as higher banana prices and favourable foreign exchange rates offset lower volumes and increased costs. Total revenues for the year increased 11.3% to €2.17 billion. When Fyffes’ share of sales from joint ventures and associates are stripped out, revenues were €1.74bn, 15.2% up on 2004.

The company’s tropical produce division, which includes banana sales, made operating profits of €77.5m (51% up year-on-year) on revenues of €473.9m. Fyffes’ chairman Carl McCann yesterday said the rise in profits was down to its operations in Europe.

But with EU banana importation rules changed since January the company was facing extra costs of €40m this year. Mr McCann said the company would also take a €15m hit from increase fuel, shipping and currency costs. The company hopes to take the sting out of the combined €55m cost increase by raising its prices.

Fyffes’ general produce division saw operating profits rise by 15% to €36.6m on revenues of €1.7bn. The company said profits were buoyed by the inclusion of figures from acquisitions, despite difficult trading conditions in the in the final six months of 2005.

Investors will get a final dividend of 5.2 cents a share, but the total dividend for the year is up nearly 90% following the payment of a second interim dividend of 5.72c. The company said the special dividend was to reward shareholders for the strong 2005 results.

According to the results, Fyffes’ failed insider dealing action against its one-time shareholder DCC cost the company €10.1m in legal fees. Having lost the High Court challenge it will have to pay most of DCC’s cost, which it says could amount to €7.5m.

The company said it is considering whether to appeal Ms Justice Mary Laffoy’s ruling to the Supreme Court. A number of brokers yesterday lowered their forecasts for earning this year.

NCB Stockbrokers said: “With European banana markets becoming increasing competitive, it seem prudent to reduce our forecasts.

“Our previous assumption that Fyffes would recover at least €25m of the increased costs and tariff charges is now too optimistic and we are reducing our (earnings before interest and tax) forecast by a further €15m which reduces our (earnings per share) forecast from 17c to circa 14c or 18%.”