Shares in DCC dropped by more than 7 per cent in a downbeat market after the industrial holding company said sterling's weakness would cut its operating profit in the current fiscal year by €3 million and potentially reduce next year's profit by €12 million.

While sterling would account for some 63 per cent of DCC's operating profit in the year to March, the company said the figure would rise to 73 per cent in the final three months of the fiscal period due to seasonal factors. This would erode some of the "strong growth" in operating profits that DCC anticipates in the final quarter of the year.

"The translation into euro of expected sterling profits will reduce euro operating profit by approximately €3 million in the year to March 31st, 2008. DCC now expects to achieve mid- to high-teen growth in operating profit in the year," it said.

DCC had upgraded its full-year profit forecast to "high-teen growth" when publishing its half-year results last November. In an interim management statement yesterday, the company also said the potential adverse impact of sterling's current weakness would be in the region of €12 million in the next financial year.

NCB analyst John Sheehan lowered his earnings per share forecast in the current year to 162 cent from 167.7 cent as a result of sterling's weakness and a projected €3 million rise in interest charges. He cut his earnings forecast for the coming year to 173 cent per share from 191 cent per share, citing sterling and a likely increase of €4 million to €5 million in interest charges.

"This downward revision to forecasts is disappointing and the extent of it is greater than expected. DCC's model of bolt-on acquisitive expansion should deliver incremental earnings upgrades to these projections, while stock buybacks are in our view likely to follow expected price weakness in light of today's announcement," Mr Sheehan said in a note.

Shares in DCC closed down 7.31 per cent last night to finish €1.38 weaker at €17.50. The Iseq index of Irish shares lost 4.25 per cent after weak data from the US service sector intensified fears about a recession in that market.

DCC executive chairman Jim Flavin said sterling's weakness was "not helpful" but said DCC was well-positioned financially and commercially to maintain its growth record.

"We achieved accelerated operating profit growth in the quarter to 31st December 2007 and we expect strong growth in the final quarter," he said.

Mr Flavin was backed by his entire board last year when the Supreme Court ruled that he engaged in insider trading when disposing of DCC's stake in Fyffes in 2000. A €50 million provision arising from that ruling resulted in a pretax loss of €14.86 million in the first half of the DCC's fiscal year.

Since then the company has sold its 49 per cent stake in Manor Park Homebuilders to co-investor Joe Moran, a transaction that yielded a €172 million dividend for DCC and a profit of €95 million over the book value of its investment in the company.

After allowing for the insider trading charge, the "most material" of its exceptional costs in the current period, DCC expects to report an overall exceptional profit of €34 million for the year.

Mary Carolan adds: The High Court has fixed June 17th for the hearing to decide what compensation must be paid by DCC to Fyffes and four institutional investors over the insider dealing case. The hearing, expected to last several days, is likely to be the final act of the legal battle between DCC and Fyffes.

The Director of Corporate Enforcement may ask the court to consider making disqualification orders arising from the case.