FRUIT IMPORTER Fyffes plunged 30 per cent in trading yesterday after it failed to secure the price increases it was counting on ahead of the bumper back-to-school fruit-selling season.
Fyffes' share price lost 15 cent to close at €0.35 after the company issued a profit warning stating that the earnings outlook for the second half of the year had deteriorated since the company's last trading update in June.
Fyffes revised down its target earnings before interest and tax for the full year of 2008 to €12-€15 million, compared to €17.4 million last year.
The forecast includes anticipated trading losses in the second half.
"Significant" increases in prices commanded by fruit growers, a strengthening of the dollar against the euro and sterling and a surge in fuel costs all combined to push up the fruit group's costs.
In a statement to the Irish Stock Exchange, Fyffes said it had achieved some improvement in year-on-year average selling prices but that these increases had been "insufficient to offset the impact of substantially higher costs" incurred by the group.
"Early indications for the important 'back-to-school' month of September are that pricing is below expectations," the Fyffes statement said.
A spokesman for the group said negotiations with supermarkets and other buyers on further price increases was ongoing, but that it would come too late for the important month of September.
"A lot of mammies are putting a banana in their children's lunchboxes, so it is a very critical period for Fyffes in western Europe," the spokesman said.
Fyffes had been actively marketing bite-size fruit chunks products aimed at the lunchbox market in order to capture this reliable business, which is why securing the price increases it wanted ahead of September was critical to the group.
The "unprecedented level of cost inflation" being experienced by Fyffes include an 80 per cent surge in bunker fuel costs over the past year.
Bunker fuel is the fuel used on ships, which Fyffes depends upon to import bananas, pineapples and melons from the Caribbean, Central America and South America to Europe.
Fyffes said it expected that its results for the first half of the year, which are due to be published on September 11th, would still show a strong increase in adjusted earnings before interest and tax. This is expected to be €15.7 million for the period, compared to €11.7 million in the same period last year.
Although it is forecasting second-half trading losses, Fyffes said it believed it could improve its performance in 2009, "assuming higher industry costs are recovered through increases in selling prices in all markets".
Net cash balances at the group stood at €53 million as of June 30th.
Its target is to have net cash of €34-€37 million at the end of the year, as it plans to invest further in the expansion of a UK distribution centre, as well as incurring trading losses and issuing dividend payments.
