Fyffes Revenues Up 7%

The key drivers of performance for the Group’s tropical produce operations, and in particular in its banana business, are average selling prices, exchange rates and the costs of fruit, shipping and fuel, all of which can result in significant volatility in year on year profitability.

10/03/09 Fyffes has reported that total turnover for the year, including the Group’s share of revenue of its joint ventures, amounted to €758.2m, up 7.0% on 2007. Group revenue in 2008 amounted to €606.7m, up 9.6% on the previous year. This mainly reflects the first time contribution from a number of businesses acquired early in the year, including Sol Marketing Group, an importer of winter season melons into the US market. It also reflects higher average selling prices in Fyffes’ key banana category, on relatively flat volumes year on year.

Adjusted EBIT for 2008 amounted to €15.3m, compared to €17.4m in the previous year. Adjusted EBIT is operating profit excluding Fyffes’ 40% share of Blackrock’s results, exceptional items and amortisation of intangible assets, and before interest and tax (including the equivalent share of EBIT of its joint ventures). The calculation of Adjusted EBIT is set out in note 2 of the accompanying financial information.

The key drivers of performance for the Group’s tropical produce operations, and in particular in its banana business, are average selling prices, exchange rates and the costs of fruit, shipping and fuel, all of which can result in significant volatility in year on year profitability. During 2008, the Group experienced an unprecedented level of cost inflation, with the costs of fruit, shipping and, in particular, fuel all substantially higher year on year. The impact of this was mitigated by more favourable average exchange rates, due to the relative weakness of the US Dollar for much of the year. In addition, the Group sought and achieved increases in selling prices in all markets. However, the level of price increases secured was insufficient to offset the impact of the higher costs and, as a result, Adjusted EBIT in the Group’s banana category declined by €6.2m in the year.

Fyffes’ pineapple business delivered a small profit in 2008, in line with the previous year. As previously indicated, climatic factors caused an oversupply of product in the market place during the first half of the year and reduction in supply during the second half. This had a negative impact on selling prices and costs over the course of the year. The Group’s pineapple farming operations in Costa Rica achieved a significantly improved result in 2008.

Fyffes’ winter melon category comprises two separate operations; the Nolem joint venture which was acquired in 2006 and exports to Europe from Brazil, and Sol Marketing, acquired at the start of 2008, which imports into the US market from Honduras and Guatemala. While the Group’s share of losses in Nolem was somewhat lower than in the previous year, this business continues to face significant challenges. Fyffes’ US winter melon business made a satisfactory first time contribution in 2008. As a result, the Group’s combined winter melon operations achieved a €3.4m improvement in operating profit year on year.

Fyffes’ 40% share of after tax losses in Blackrock International Land plc which, as noted above, is excluded from Adjusted EBIT, amounted to €28.6m in 2008, compared to a profit of €4.5m in the previous year. This reflects the c.35% reduction in net asset value recognised by Blackrock following the most recent independent external valuation of its property portfolio at 31 December 2008. The total operating result for the year, which is the Adjusted EBIT of €15.3m less the Group’s share of Blackrock’s result and after exceptional items, amortisation and the Group’s share of joint ventures interest and tax, amounted to a loss of €1.4m for the year, compared to a profit of €11.1m in 2007.

On 15 October 2008, the European Commission published its Decision following the conclusion of its investigation into the supply of bananas in the Northern European region of the EEA. No adverse findings were made against Fyffes and no fine imposed on it.

At the same time, the European Commission found the Group’s German joint venture, Internationale Fruchtimport Gesellschaft Weichert & Co KG (“Weichert”) and Fresh Del Monte Produce Inc (“Del Monte”) jointly and severally liable for a fine of €14.7m for breaches of Article 81 of the Treaty of Rome and Article 53 of the European Economic Area (EEA) Agreement relating to the supply of bananas to the Northern European region of the EEA, in the period 1 January 2000 to 31 December 2002. Fyffes acquired its 80% interest in Weichert from Del Monte on 1 January 2003. The Commission found that Weichert was controlled by Del Monte throughout the period covered by the Decision.

Both Weichert and Del Monte have applied to the European Court of First Instance to have the Decision annulled. Weichert continues to assert that it did not breach EU Competition regulations. Based on legal advice, and pending the outcome of the appeals process, Weichert has provided for a net exceptional charge of €3.7m in its accounts in this regard. The Group’s Income Statement reflects Fyffes’ 80% share of the net exceptional charge recognised in Weichert’s accounts, amounting to €2.9m, on a prudent basis, pending the outcome of the appeal process.