Fyffes pretax profit doubles on higher prices

Fruit importer Fyffes has reported a 124 per cent rise in first-half pre tax profits to €35.1 million on the back of higher prices introduced to offset rising costs.

For the six months to June 30th sales rose by 5.6 per cent to €302 million compared with the same period last year with the company saying this was largely due to higher selling prices as volumes were broadly steady.

The results include a net payment to Fyffes of €37.6 million following the settlement of its insider dealing litigation against DCC. This resulted in a net exceptional gain of €33 million once fees and costs were excluded.

Fyffes chairman David MacCann warned this morning the outlook for the second half of the year has "deteriorated".

"This results from further increases in the cost of fruit, combined with a significant strengthening of the US Dollar against the Euro and Sterling, while bunker fuel costs remain significantly higher than this time last year," he said in a statement.

While Mr McCann noted "some improvement in year on year average selling prices", he added this was not meeting the impact of "substantially higher costs".

As a result he said the company would seek to raise prices in all markets to "offset the unprecedented level of cost inflation being experienced".

Mr McCann said the group's target adjusted EBIT for 2008 has been lowered to the €12 million to €15 million range compared with €17.4m last year. This implys a second half trading loss.

Shares in Fyffes plummeted over 30 per cent on August 29th when it first announced it had lowered its profit forecast.

The company said costs have increased further in recent weeks, particularly for fruit procurement, leading to an expectation that input costs will rise by 20 per cent this year.

Recent gains by the dollar against the euro was also adding to the company's cost base. Overnight the dollar rose to a one-year higher against the euro at to $1.39.

Other exceptional costs over the period include fees of €0.8 million in relation to the ongoing EU competition investigation and €0.3 million in relation to unsuccessful acquisitions.

Adjusted earnings per share – excluding the group's share of it's subsidiary Blackrock – was €3.55 cent for the first six months, compared to €2.90 for the same period last year, a rise of 22.4 per cent.

The Fyffes board has declared an interim dividend of 50 cent per share.

At the end of the first-half of the year the company had net cash reserves of €53 million, boosted by the DCC settlement.