Higher costs and the recent strengthening of the US dollar have prompted leading tropical fruit company Fyffes to revise its pre-tax earnings forecast for 2008 down to between €12m and €15m, compared with €17.4m made during the last financial year.
The company said it expects its results for the first half of the year, which are due to be published on 11 September 2008, will show a strong increase in adjusted earnings (before interest and taxes) to €15.7m, compared with €11.7m during the same period last year.
However, the group warned that its earnings outlook for the second half of the year has deteriorated since its last trading update on 25 June, following further significant increases in the cost of fruit, combined with a strengthening of the US dollar against the euro and sterling.
In addition, bunker fuel costs remain around 80 per cent higher than at the same time last year and, although there has been some improvement in year-on-year average selling prices, Fyffes said this had been insufficient to offset the impact of substantially higher costs.
The company added that early indications for September – an important ‘back to school’ month in several of Fyffes key markets across Europe – suggest that pricing is 'below expectations'.
'Fyffes will continue to actively seek increases in selling prices in all markets to offset the unprecedented level of cost inflation being experienced in the industry,' it said in a statement.
It also revealed that its net cash balances at 30 June 2008 amounted to €53m, while target year-end net cash is now in the range €34m to €37m, reflecting further capital expenditure on the expansion of one of its UK distribution centres, along with the anticipated second-half trading losses and dividend payments.
'Fyffes believes it can achieve an improved performance in 2009, assuming higher industry costs are recovered through increases in selling prices in all markets,' it added.
