Fyffes anticipates further earnings growth this year

LOWER prices will result in a profits standstill at Fyffes in the first half of 1996, although the group is expecting to increase profits in the second hall, according to chairman Mr Neil McCann.

"The 1996 financial year should be one of reasonable profits growth, with stronger expectations for 1997. The group sees 1996 as a transition year because of its investment in Geest," says Mr McCann. Fyffes - in partnership with the Windward Islands Banana Development Company - acquired Geest for £147 million late last year.

"I'm very optimistic the acquisitions we have made have been put to bed in a sound way. We hope to make more good acquisitions. We have come out of 1995 very well, at least compared to some of our friends in the industry."

On the current level of banana prices, Mr McCann was sanguine. "Prices are much the same as they were this time last year. We are working in a regulated market and the pricing mechanism should work in a reasonable way. There is no reason to believe that this year will be any worse than last year."

The comments on current trading come with Fyffes' results for the year to the end of October which came in marginally ahead of analysts' forecasts, with pre tax profits up 16 per cent to £42 million and earnings per share up almost 13 per cent to 7.91p. Fyffes' shareholders are to receive a 10 per cent increase in dividend to 1.667p a share.

Fyffes' shares were unchanged on 110p yesterday and are still trading in a narrow range, having substantially underperformed the Irish market over the past year.

Fyffes' operating profit in 1995 improved 20 per cent to £38.3 million, although the group realised an exceptional gain of £1.5 million on the sale of its, Vangen distribution in Britain. Interest income fell by more than half from £4.3 million to £2.2 million.

Fyffes, which has operated with a strong net cash position since its Irish Distillers windfall eight years ago, ended the year with net cash of £68.5 million - up from £58.3 million a year previously. This strong cash position came despite £29.5 million being spent on acquisitions and capital expenditure, outflows that were partly compensated by the £15.7 million received for Vangen.

Fyffes' growth in recent years has been largely acquisitions led, and the group now has an extremely strong strategic position in the European market, being the biggest European distributor of fresh produce and the fifth largest banana producer in the world.

Since the end of the financial year in October, Fyffes' cash balances have fallen by around £30 million as part of the group's investment in the Geest acquisition. Finance director, Mr Carl McCann said: "Plenty of work needs to be done to get results from Geest." Geest is unlikely to have any impact on profits and earnings in the current year but should begin contributing in 1997, if all goes to plan.

Fyffes and its partners now have two priorities at Geest - deciding that to do with the two refrigerated ships and what to do with the loss making banana plantation in Costa Rica. The belief is that Fyffes will try and sell off these assets as soon as possible, although company executives would not be drawn yesterday.