Shares in Fyffes dropped 2 cent to 94 cent in a weak market after the fruit importer reported a 31 per cent drop in pretax profits to €13.2 million for 2007, writes Arthur Beesley, Senior Business Correspondent
The frim, listed on the small-cap IEX market since the demerger of its distribution and property interests, is increasing prices to offset higher costs for fruit, shipping and fuel. The rise is some 5 per cent, it is believed, but is mitigated by the dollar's weakness.
"We have significant cost inflation on the dollar side. We benefit from the currency, but we do require price increases. We're not unusual, that's a reality for most food companies at the moment," said Fyffes chief executive Jimmy Tolan. Asked about current trading, he said it was difficult to have visibility for the year at this early stage, but said Fyffes was guiding "mid single-digit" growth in like-for-like earnings before interest and tax this year.
Adjusted earnings before interest and tax declined to €17.4 million last year from €18.4 million. Goodbody said this was "slightly ahead" of guidance given in a pre-close statement and an upgrade to forecasts, which took account of the weaker US dollar and firm banana pricing.
The adjusted figures, which are used by stock market analysts to assess Fyffes' performance, exclude Fyffes' 40 per cent share of the profits from the property interests owned by Blackrock International Land, as well as exceptional charges, the amortisation of intangibles and a share of joint venture tax.
Adjusted earnings per share, calculated on the same basis but without joint venture tax, declined to 4.42 cent from a comparable sum last year of 5.70 cent. Fully diluted earnings per share fell to 2.63 cent from 6.29 cent. Fyffes declared a final dividend of 1 cent per share (down from 1.7 cent), bringing its annual dividend to 1.5 cent per share.
Net exceptional charges of €8.2 million took account of a €7.5 million write-back of a provision for legal costs in relation to Supreme Court hearings in the insider dealing case against former shareholder DCC. Fyffes won the case, but it has not yet accounted for the likely receipt of damages.
"We've concluded that the best way to deal with that is on a cash receipts basis," Mr Tolan said. Asked about reports which mooted a possible settlement of the forthcoming High Court action for damages, he said he was "not aware" of any overtures from DCC. Exceptional charges included €2.7 million in professional fees in relation to an EU competition investigation into the banana trade in northern Europe. Fyffes said it was vigorously defending itself against an EU statement of objections. "It's a significant matter and it requires a significant defence," said Mr Tolan.
Revenues rose last year to €553.4 million from €407.7 million. The banana business dominates Fyffes. Its European water melon unit had an operating loss of €2.8 million. Its pineapple unit made a "modest profit". "We believe we're on target to achieve the 2006 strategic plan which is to double the size of the business by 2011," Mr Tolan said.
