Fyffes Raises Targets Despite Drop in Profits

Total operating profit for the six months ended 30 June 2009, including the Group’s share of Blackrock’s losses, exceptional items, amortisation and the joint ventures tax charges amounted to €12.1m, compared to €34.6m in the first half last year.

4 Sep 2009 --- Irish fruit company Fyffes has reported that total revenue, including the Group’s share of its joint ventures, amounted to €400m in the first six months of 2009, unchanged from the same period last year. Sales were 4% higher in the banana category. The Group achieved higher average selling prices in this category in the period but this was partly offset by a 1.7% reduction in volumes and the impact of exchange rates on Sterling denominated revenues. Total revenue was also impacted by a difficult market for pineapples, with volumes and average prices lower, and the cessation of the Group’s Brazilian winter melon business.

Adjusted EBIT amounted to €18.1m in the seasonally stronger first half, compared to €15.5m in the same period last year. Adjusted EBIT is operating profit, excluding Fyffes’ 40% share of Blackrock’s result and before exceptional items, amortisation, interest and tax, including the equivalent share of joint ventures operating profit. The calculation of Adjusted EBIT is set out in note 2 of the accompanying interim financial information.

The key drivers of the short term performance of Fyffes’ tropical produce operations, and its banana category in particular, are average selling prices, exchange rates and the costs of fruit, shipping and fuel, all of which can result in volatility in year on year profitability. During the first half of 2009, the banana industry experienced further cost inflation, continuing this trend into a third year. The impact of this was compounded by less favourable exchange rates due to the relative strength of the US Dollar. Input costs were c.20% higher in the first half compared to the same period last year, taking into account the stronger Dollar. Fruit costs in particular were up significantly reflecting, amongst other things, the impact of higher government imposed minimum export prices. These factors were partly offset by lower fuel prices year on year and the impact of favourable currency and fuel hedging. Market conditions, particularly in Continental Europe, were generally favourable, especially during the second quarter. This was mainly driven by lower market volumes and enabled Fyffes to achieve increases in its average selling prices. Overall, the Group’s banana activities, delivered a €2.9m increase in profits for the first half of the year, compared to the same period in 2008. The Group must continue to pursue further increases in selling prices in all markets to offset the impact of higher industry costs and less favourable exchange rates.

The result in Fyffes’ pineapple category was a small operating profit, in line with the same period last year. Market conditions were generally difficult during the period due to an oversupply of fruit. Fyffes has made further advances in its pineapple production activities this year, with higher profits on its existing farm in Costa Rica and the acquisition of a new farm in Panama which is expected to improve the Group’s own supply curve.

In the Group’s winter melon category, activities in Nolem in Brazil ceased during the period. Overall, Fyffes delivered an improved result on its winter melon activities as the Group’s US business achieved a satisfactory profit despite difficult market conditions during the period and as a result of the elimination of losses in Nolem.

The Group’s 40% share of the net loss after tax of Blackrock International Land plc, which is excluded from Fyffes’ Adjusted EBIT as noted above, amounted to €1.5m compared to €3.7m in the same period last year.

Total operating profit for the six months ended 30 June 2009, including the Group’s share of Blackrock’s losses, exceptional items, amortisation and the joint ventures tax charges amounted to €12.1m, compared to €34.6m in the first half last year when the Group recognised a large exceptional gain on the successful settlement of it’s litigation against DCC in April 2008.

Commenting on the results, David McCann, Chairman, said: “During the first half of the year, Fyffes’ key input costs were c.20% higher, including the negative impact of exchange rates. The Group has focused on the recovery of higher industry costs, achieving increases in average selling prices, and has also benefitted from its currency hedging. As a result, Fyffes is reporting a strong increase in profits and earnings per share for the period. Trading conditions in Continental Europe during the summer months have been better than anticipated and, as a result, Fyffes is increasing its target Adjusted EBIT for the full year 2009 to the range €18m-€22m. Fyffes continues to pursue increases in selling prices in all markets in the context of the higher industry costs.”