DCC reduces earnings outlook on back of milder weather

Energy-to-technologies conglomerate DCC is eyeing further European expansion, after yesterday cutting its earnings outlook for the year on the back of the unseasonably mild weather of recent months.

The Dublin-headquartered London-listed group said it now expected growth in operating profit and adjusted earnings per share would be in the range of 5 - 10 per cent over the previous year. This is down from the previous estimate of 10-12 per cent and reflects the impact of the particularly mild weather in September and October.

Tommy Breen, DCC's chief executive, said yesterday the mild weather impactnegatively affected its performance to the tune of £5 million. In the corresponding period last year, unseasonably cold weather boosted its performance by £6 million more than usual. "That €11 million swing is significant, but the underlying energy business is strong," he said.

Mr Breen confirmed that the company was trying to lessen its exposure to the volatile home heating fuels market, where weather patterns can cause huge swings in revenues. “Its a deliberate strategy. [Next year] home heating oils will drop below 20 per cent of the volumes in our energy division. I’m not saying we’d never invest again in a home heating business - it’s not suddenly a bad sector. But we are trying to reduce some of the volatility,” said Mr Breen.

The company committed £148 million on acquisitions in the first half of its financial year. Recent high-profile buys include 274 Esso-branded fuel stations in France, the drugs distributor Williams Medical and CapTech businesses in Sweden.

“The amount of money we have spent [on acquisitions] doesn’t mean we will be taking our foot off the pedal. Whether it is our LPG (liquid petroleum gas) business, our oil business or our IT business, we remain active in pursuit of buying opportunities. There will be more deals over the next 12-18 months,” Mr Breen added.

In interim results yesterday, the company said its operating profit rose 6.4 per cent to £73.2 million in the six months to the end of September. Revenue rose by 1.9 per cent to £5.5 billion during the period.

Volumes in its main business division, DCC Energy, increased by 5.3 per cent but its revenue was broadly flat, primarily due to the impact of lower oil prices, the company said. Excluding the impact of acquisitions, DCC Energy’s volumes were in line with last year despite the milder weather in the current year, it added.

It also recently agreed the disposal of its Irish food and beverage business, which included the Robert Roberts coffee brand, although DCC retains a 50 per cent stake in the Kylmore cafes business.

Mr Breen said DCC remained a “happy holder” of its cafes stake.