Company likely to consider expansion into transport

SHORTLY BEFORE DCC’s last financial year ended on March 31st, the country was bathed in sunshine and temperatures more reminiscent of May.

Since the beginning of May, the country has been subject to rain and wind more reminiscent of March. More than anything else, the weather in this part of the world is a byword for unreliability.

The problem for DCC is that a large part of its business depends on the weather. Its energy division accounted for €7.8 billion of its €10.7 billion sales in its last financial year. Much of that division depends on the market for home heating oil.

Thanks to a milder than usual winter in Ireland and Britain, which between them accounted for 86 per cent of sales, its profits were down 39 per cent at €83.5 million.

That has to be taken against a much colder than usual winter the year before, but it is a pretty sharp fall nonetheless, and it meant that overall, DCC’s profits were down by the order of 20 per cent last year.

The company says the outlook for the division depends on the return to more normal winter temperatures this year. This begs the question, what is normal?

The real answer is that temperatures will be up and down, but presumably average out over time. The same thing can be reasonably expected to happen to DCC’s profits. The problem is that it has to report results every year, not every few years, and there are inevitably going to be ups and downs.

Chief executive Tommy Breen’s answer is to continue expanding the business into areas that do not depend on the weather. In short, this means transport.

Mr Breen pointed out yesterday that the company already supplied 1,400 service stations in Britain.

These are independently owned, so their volumes are lower than those controlled by the majors, but there is scope for growth there.