Shares in Fyffes fell by 7 per cent yesterday after the company said higher oil prices would knock €9 million off its full-year profits. Jane O'Sullivan, Markets Correspondent, reports.
The fruit importer said the recent sharp rise in the cost of shipping fuel was greater than expected by the group and was not being recovered in current selling prices.
Fyffes imports bananas and exotic fruit such as pineapples to Europe from central and south America and has significant transatlantic shipping costs as a result.
A spokesman for the company noted that shipping fuel, which is at the premium end of the oil market, has risen by 25 per cent since the start of the year but Fyffes has been unable to pass the costs on, a situation it expects to persist in the medium term.
"Accordingly, and despite the impact of better than anticipated exchange rates, Fyffes currently expects that the impact of these factors on its full-year results in 2006 will be of the order of €9 million," it said.
Fyffes's shares fell by 15 cent, or 6.9 per cent, to €2.01 on the news as analysts set about cutting their forecasts for the company. Goodbody analyst Liam Igoe has cut his earnings per share (EPS) forecast by 16 per cent to 11.1 cent from 13.2 cent while he is now expecting pretax profits of €56 million compared to €65 million previously.
Merrion analyst Robert Brisbourne has also reduced his EPS forecast to 11 cent from 13 cent.
The Fyffes profit warning followed the release yesterday of weaker-than-expected first-quarter results by Fresh Del Monte, which said its figures were also hit by higher banana and fuel costs.
Another of Fyffes's rivals, Chiquita, releases results later this week and these are also expected to be affected by the higher fuel costs.
Fyffes, which holds an extraordinary meeting next Tuesday to approve the spin-off of its property interests to a new company, Blackrock Land International, has faced tough trading conditions this year.
The company reported a better-than-expected 25 per cent rise in 2005 earnings and announced a special dividend of €20 million on the back of high banana prices. But the situation has since deteriorated.
Earlier this year, the company, one of the five largest fruit distributors in the world, estimated that recent reform of the European Union's system for regulating banana imports is set to increase its duty costs by €40 million a year. It also faces higher fruit costs in addition to the rising price of fuel.
Last month, the company announced plans to appeal the judgment in its insider dealing case with DCC to the Supreme Court, a move that is expected to incur millions of euro in legal fees.
The 87-day High Court case, which ran for much of last year, is believed to have run up legal costs of approximately €20 million and earlier this year, the court ruled that Fyffes would have to pay its own costs and 80 per cent of DCC's costs.
