First-half profits at Fyffes rise by 5.8%

Fruit distributor, Fyffes, has reported a 5.8 per cent increase in pre-tax profits to €38.9 million in the first six month of 2002 in line with market expectations. The shares closed down 5 cents at €1.43 on the Dublin exchange.

The group described its performance as satisfactory given difficult trading conditions and said it had renewed its focus on acquisitions. "Continuing initiatives to reduce operating costs and the disposal of certain businesses have resulted in an improved operating margin and further growth in profits before tax and earnings per share," said chairman, Mr Neil McCann.

Earnings per share increased by 8.6 per cent to 7.84 cents. The company has declared an interim shareholder dividend of 1.26 cents per share, an increase of 10 per cent.

At the end of June, Fyffes reported strong operating cash flows and net cash resources of €162.9 million, which can be used for future acquisitions. Fyffes has been mentioned as a possible purchaser of Chiquita, the US company that is currently bankrupt.

Turnover for the six months was down at €930 million compared to €1.05 billion in the same period last year. This had been expected and was mainly due to the sale of two businesses, J A Kahl GmbH & Co in Munich and its 50 per cent interest in Sofiprim in Paris. The two groups had a combined turnover of €115 million in a full-year, with the impact over the six month period of the order of €40 million.

It also disposed of Fyffes Multifresh in the UK to its Capespan joint venture, which reduced turnover by another €43 million. These disposals formed part of a restructuring programme that began in 2000. Turnover was also affected by lower profit margins from some banana supply sources, the company said.

The sale of its interest in Sofiprim resulted in a loss of €1.5 million and a charge of €5.3 million in respect of goodwill previously written off to reserves. This was partially offset by a gain of €1.3 million from the sale of a banana-ripening centre in the UK. resulting in a net exceptional loss of €5.6 million for the six months.

Fyffes operating profits tend to be stronger in the first half of the year. In the six months to the end of June 2002, operating profits rose to €36.5 million compared to €36 million at the end of June 2001.

Fyffes' banana division achieved a broadly similar performance to last year's, although the trading was affected by more difficult market conditions and and the impact of the stronger dollar. This was partly offset by further reductions in supply costs and lower operating costs.

Operating profits from Fyffes joint venture and associate companies were lower largely due to a weaker-than-expected performance from Capespan. This business has now moved to smaller premises in the UK and further cost-cutting measures are to be implemented. Fyffes is also seeking to raise prices in response to higher operating costs.