Shares in Fyffes plunged by as much as 18 per cent yesterday after the fruit distributor cut its full-year earnings target by 25 per cent.
In a statement to the stock exchange, Fyffes said it is now forecasting earnings before interest and taxation (ebit) of €15 million for 2007, down from an earlier target of €20 million. This compares with €19 million in 2006.
The company attributed the reduction to the recent significant increase in bunker fuel prices and higher than expected losses in Nolem, its Brazilian winter melon joint venture.
In addition, Fyffes said banana prices in Europe, an issue that has been of concern for the company for some time, had not recovered as the group had hoped.
In its last set of results in March, Fyffes blamed its expected but significant decline in pretax profit on the lifting of restrictions on European banana imports and its effect on prices.
Analysts' reactions to the news were mixed, with a general acknowledgement that volatile prices were a fact of life in this industry. However, most said that they would be taking another look at their numbers in the light of the announcement.
Liam Igoe, a food analyst at Goodbody, expressed concern that some of the issues raised by Fyffes regarding this year's financial outcome, in particular that of higher fuel prices, may in fact be longer-term issues.
In March, Fyffes highlighted problems in its melon business, saying that while banana and pineapple volumes increased in 2006, the melon business didn't fare quite so well as a result of currency issues involving the Brazilian real.
However, in yesterday's statement, Fyffes attempted to dilute the profit warning by saying that the company "continues to actively pursue its medium-term strategy of doubling its business within five years through organic growth and, in particular, further acquisitions and alliances".
By the end of the day, Fyffes' shares had recovered some ground, though they still closed down 9.3 per cent, or 9 cent, at 88 cent. Volume was decent, with 4.3 million shares changing hands.
