Sterling weakness to hit operating profits at DCC

STERLING WEAKNESS is set to knock up to 10 per cent off operating profits at industrial holding company DCC, the group told shareholders yesterday.

The company, which has interests in energy, services, healthcare, and food and drink, said at its annual general meeting yesterday that it expected profits for the 12 months to March 31st, 2010, to be slightly behind or broadly in line with this year’s outturn of €108 million.

However, it pointed out that as it earns a significant proportion of its profits in sterling, and the average translation rate is 87p sterling to €1, compared with 82.62p to €1 last year.

The company warned that as a result operating profits would be 5 per cent to 10 per cent behind last year’s result.

DCC said that overall, operating profit for the first quarter of its financial year – March 31st to June 30th – was behind the same three-month period last year.

Operating profit in its energy division, the company’s biggest business, was ahead of budget and broadly in line with the first quarter of last year.

DCC Sercom, its services division and second largest business, was slightly behind last year, on a constant currency basis.

“As expected and as reflected in the group’s outlook statement on May 19th, DCC’s other businesses were impacted relative to the first quarter in the prior year by the effects of the marked economic slowdown experienced in the second half of the group’s financial year to March 31st,” said the company.

DCC also expects to benefit from a reduction in its net finance costs resulting from lower interest rates.

However, this will be offset by a higher tax charge in Britain which is due to lower interest deductions against its taxable profits.