DCC says mild weather to hit profits

ENERGY AND distribution group DCC expects this year’s profits to fall 5 per cent, unless last winter’s big freeze makes a return.

DCC said yesterday that operating profits fell 14 per cent to €58.3 million from €67.9 million in the six months ending September 30th, the first half of its financial year. The company expects full-year operating profits to fall 5 per cent from the €217 million recorded in the 12 months which ended March 31st. Those numbers however reflected the boost that its heating oil and fuels businesses earned during the exceptionally cold 2010-11 winter.

Chief executive Tommy Breen said DCC was “keeping its fingers crossed” that its main markets – Ireland and Britain – would experience similar conditions this year, but the group was operating on the basis that normal, milder winter weather would prevail.

DCC earns the bulk of its revenues and profits in the second half of the year. Yesterday it reported that sales for the first six months were up 11 per cent at €4.4 billion on the €4 billion it reported for the same period in 2010.

Profits before exceptional items and tax were down 17.3 per cent at €50 million, while earnings per share – excluding exceptionals – were also down by more than 17 per cent, at 47.53 cent.

The group is proposing to pay an interim dividend of 27.42 cent which is 5 per cent more than the 26.11 cent it paid out to shareholders at the half-way stage last year.

Operating cash flow was up almost 25 per cent, at €71 million. The group’s net debt at the end of the first half stood at €145.5 million, up from €98.6 million at the same point in 2010.

Operating profits in its energy division, which includes heating oil, liquid petroleum gas and fuel cards businesses, were down 38 per cent at €18.7 million. DCC blamed milder weather in March to September for the fall in profits, noting that these conditions led to falling demand and margins.

Operating profits in DCC Sercom, which sells and distributes electronics and IT products, were up 6.7 per cent, at €15.2 million, while revenues were up 14 per cent, at €910.5 million. Acquisitions including Comtrade and Advent Data boosted this division’s performance.

Operating profits in its healthcare division were flat at €10.5 million. The group said that destocking by a major customer held back the overall performance in this business. Its environmental business generated operating profits of €8 million, up 12 per cent. Food and beverage profits were up 11 per cent, at €6 million.