Fyffes shares rise on 40% growth outlook

Shares in Fyffes rose sharply yesterday after the company said it was expecting to post growth of 40 per cent for the first half of the year.

In a pre-close statement issued to the stock exchange, Fyffes said the trading momentum it had experienced at the start of the year had lasted through the first six months. The company said its operations in continental Europe had performed particularly well.

Fyffes has drawn significant benefit from poor spring weather conditions in banana-producing regions such as the Canary Islands, with production shortages allowing for price increases.

Despite forecasting growth "in the order of 40 per cent" for the first six months however, Fyffes was reasonably cautious yesterday on its outlook for the full financial year.

The firm said it was targeting percentage growth in the "mid-teens" for 2005 as a whole, marking a slight increase on earlier guidance.

Analysts were quick to note the guarded tone of the statement, which they said implies a projected fall in earnings per share (EPS) growth for the second half of the year.

Liam Igoe at Goodbody Stockbrokers said the outlook was "clearly very conservative".

"In effect they assume that second-half EPS will fall by 9 per cent," he said, suggesting the company may be taking an "overly cautious" stance.

Shares in Fyffes reacted well to the overall tone of the statement, which is the second positive trading update to be issued by the company in just over a month.

The stock closed nine cents stronger at €2.42, having touched a high of €2.50 in early trade.

Fyffes also said that it was maintaining its focus on improving profitability at its operations in the Republic and the UK.

The company highlighted efforts to counteract "significant cost inflation" across the group.

The trading statement also updated the market on the fruit distributor's plans for its property portfolio. Property investments have yielded profit windfalls of €30 million for Fyffes over the past few years.

The company said yesterday that it was planning to invest €22 million in new properties to accommodate the development of its produce division.

The bulk of this relates to Edinburgh, where Fyffes is expected to raise at least £21 million (€31 million) by selling an 8.6 acre fruit market site. The company wants to sell the site after securing planning permission and will need to move its operations to a new property in the Edinburgh area.

Property purchases in Germany and Denmark are also nearing completion.

Fyffes made no comment on the ongoing EU Commission cartel investigation into the European banana trade.

A spokesman confirmed however that the firm has had no contact with the Commission since its offices in Dublin were raided at the start of this month.