Sterling knocks €3m off DCC

DCC, the oil, food and IT products distributor, said profits will take a €3 million hit because of the weakness of sterling.

The company generates almost two-thirds of its profits in sterling. When this is converted to euro the hit to earnings in the current financial year, which ends in March, will be €3m.

The company said if the current exchange rate between euro and sterling were to persist for the next year, operating profits could be dented by €12m.

In a trading update the company said it expects operating to see “mid to high teen” growth in operating profits.

Goodbody Stockbrokers forecasts DCC to have operating profits of €164m in the year to end March 2008 taking into account the sterling hit.

DCC said revenues and operating profit growth at its energy, IT, food and environmental division has been “excellent” in the three months to end December.

Executive chairman Jim Flavin said the company is expecting strong trading in the current quarter: “The weakness of sterling is not healthy but DCC is well positioned to maintain its record of growth.”

Profits in the current financial year will be boosted by an exceptional gain of €34m following the sale of its stake in house builder Manor Park, and allowing for the cost of the insider dealing court case with Fyffes.

Shares in DCC closed down 7.3% last night at €17.50.

“DCC’s model of bolt-on acquisitive expansion should deliver incremental earnings upgrades to these projections, while stock buybacks are likely to follow expected price weakness,” said NCB Stockbrokers analyst John Sheehan.