Fyffes shares jumped more than 9 per cent yesterday, their biggest one-day gain in a month, after analysts said the fruit distributor may benefit by as much as €40 million from a new ruling on banana import tariffs. Claire Shoesmithreports.
Earlier this week the World Trade Organisation (WTO) is believed to have ruled that new European Union practices for banana imports, which were introduced in January 2006, are illegal.
Analysts believe the ruling spells good news for banana distributors such as Fyffes.
According to a report by AFP, the WTO this week upheld a complaint from Ecuador challenging EU rules that impose custom fees of €176 a tonne on bananas from countries outside the so-called Caribbean-Pacific-Africa area. The figure was previously €75 a tonne.
No one at the WTO was available to confirm the report and Fyffes declined to comment.
In a note yesterday morning, Davy analyst John O'Reilly said such a reduction would save Fyffes about €40 million a year. He said how much of the saving the company could actually hold on to would depend on the overall supply-demand balance in the banana market.
However, Mr O'Reilly estimated that, even in the worst-case scenario of the company holding on to only 10 per cent of the €40 million, this would represent a 25 per cent increase on the broker's current forecast for full-year 2008 earnings before interest and taxation.
"If, as we believe, the supply-demand situation is trending favourably, then the prospect is more positive still," he said.
Shares in Fyffes climbed 9.4 per cent, or eight cent, to 93 cent as 3.5 million units changed hands.
