Banana boost for Fyffes as Europe prices soar

Fruit and vegetable distributor Fyffes today said trading in continental Europe had been so fruitful that the City should pencil in higher profits.

Shares in the Dublin-based group – known for labels such as Outspan and Cape – rose 6% after it continued to benefit from strong banana prices which boosted its performance in the opening months of this year.

Poor weather has resulted in banana producers in areas such as the Canary Islands harvesting less fruit, forcing prices higher.

Even though comparisons were now likely to become tougher, Fyffes said its earnings for 2005 were expected to be ahead of market forecasts.

Fyffes is the world’s oldest fruit brand with a history dating back to 1888. It employs about 3,000 people in more than 10 countries operating from over 75 locations.

In a trading update ahead of its half-year results in early September, Fyffes said it was maintaining its focus on improving the profitability of its businesses in the UK and Ireland.

Its UK operations have suffered in recent years from consolidation and expansion within the food retail industry.

The market is now dominated by a clutch of supermarket chains which have used their muscle to wring savings out of fruit and vegetable suppliers.

At the same time, Fyffes said it was facing significant hikes in costs across the group this year.

Fyffes invested €30m in commercial property in areas such as Dublin and Dundalk in Ireland last year and now plans to invest a further €22m in new properties across Europe, with the lion’s share in Edinburgh.

It owns the old fruit market in the Scottish capital and is looking to redevelop the 8.5 acre site as apartments, with its trading depot being moved to less valuable premises in the area.

Fyffes said its performance will be weighted towards the first half of the year – traditionally its strongest. Adjusted earnings for the six months to June 30 are expected to be as much as 40% ahead of the same period last year.

Underlying pre-tax profits last year increased by 32% to €94.7m on the back of €2.15bn in sales.

Today’s upgrade focuses on earnings per share, which is now expected to be in the “mid-teens” in percentage terms for the full year compared to analysts’ expectations of between 11% to 14% beforehand.