Fyffes Revenues Up 5.6% Over First Half

The key drivers of Fyffes’ short term performance 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.

11/09/08 Fruit giant Fyffes has said that Group revenue in the six months to 30 June 2008 amounted to €302m, compared to €286.2m in the same period last year, an increase of 5.6%. This reflects the impact of higher average selling prices in the period, with volumes broadly similar to last year.

Commenting on the results, David McCann, Chairman, said: “Over the last two years, our industry has experienced unprecedented increases in the costs of fruit, shipping and fuel. During the first half of 2008, Fyffes achieved increases in selling prices which, combined with more favourable exchange rates, enabled us to offset the impact of substantially higher costs. However, as announced on 29 August, the Group’s expectations for the remainder of the year have changed, as the increases in selling prices needed to offset further increases in costs, and less favourable exchange rates, are not currently being achieved. Fyffes will continue to actively seek increases in selling prices in all markets in this regard.”

Adjusted EBIT amounted to €15.5m in the seasonally stronger first half, compared to €11.7m in the same period last year. Adjusted EBIT is operating profit, excluding the Group’s 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 which is set out in note 2 of the accompanying interim financial information. Statutory operating profit, before these adjustments, amounted to €34.6m in the first six months of 2008, compared to €14.6m last year, reflecting net exceptional gains in the period of €24.7m.

The key drivers of Fyffes’ short term performance 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 this year, the industry experienced a continuation of the unprecedented level of cost inflation which emerged during 2007. Bunker fuel costs, in particular, were 76% higher than the same period last year. Fruit procurement costs and ship charter rates were also significantly higher year on year. The impact of these higher costs was partly offset during the period by more favourable average exchange rates, due to the weakness of the US Dollar. In addition, Fyffes succeeded in achieving increases in average selling prices to further offset its substantially higher cost base. As a result, the Group’s banana activities, including its share of profits from the Geest shipping business, delivered a €2.8m increase in profits for the first half of the year, compared to the same period in 2007.

Costs have increased further in recent weeks, particularly relating to fruit procurement, and the Group’s expectations are that input costs will be close to 20% higher year on year in 2008. The recent strengthening of the US Dollar against the Euro and Sterling has further increased the Group’s cost base. Consequently, Fyffes must actively pursue further increases in selling prices in all markets to offset the impact of these factors.

Fyffes’ winter melon category achieved an improved result in the first half of the year, with losses reduced from €2.8m in same period last year to €0.9m. This included the first time contribution from the Group’s US winter melon business. In addition, the level of losses in Nolem, the Brazilian based producer, were significantly reduced as production yields improved. This business is targeting further increases in selling prices for the forthcoming season to offset the continued strength of the local currency against the US Dollar.

Fyffes’ pineapple activities delivered a small profit in the first half of 2008, slightly down on the same period last year. Climatic factors caused an over supply of fruit in the market during the period which resulted in lower average selling prices. Fyffes acquired the second 50% of a large pineapple farm in Costa Rica in December 2007 and this operation, which produces about 20% of the volume sold by the Group, has achieved an improved result in the period.

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 €3.7m compared to a profit of €3.8m in the same period last year. This reflects the reduction in property values recognised by Blackrock in the period.