IRELAND: Fyffes - bananas prove a bane - COMMENT
Fyffes has announced a fall in annual profits. The Irish banana company has faced a difficult year. In addition to its much-hyped eCommerce losses, it has had to deal with bad weather, rising fuel and packaging costs, illegal competition and adverse exchange rates. With a heavy emphasis on cutting costs, the company aims to improve profits by E20 million next year but there is little it can do to really sort out its problems.
Fyffes is still licking its wounds from its failed investment in eCommerce venture, worldoffruit.com, but the Internet losses are just the start of its problems. 2000 was one of the worst years the banana market has had to face, and Fyffes has had major problems. Profits, before tax and excluding goodwill amortization, eCommerce and exceptional items, slipped over 60% from E83.1 million for the 12 months ended 31 October 1999 to E31.2 million for the 14 months ended 31 December 2000. But the fruit company is still putting a brave face on it, offering the same final and total dividends as last year. Fyffes will pay a final dividend of E3.2549 per share, bringing the total dividend up to E4.3.
The worldoffruit.com mistake was an expensive one, costing the company E15.6 million. It is now being treated as discontinued operations for accounting purposes, but is still being operated at a reduced level with relatively insignificant costs to the company. Fyffes also lost an additional E1.3 million on its joint venture company, ingredientsnet.com, which has been running since last summer as a platform for global food ingredients procurement.
Cost savings generated last year from tighter operational control were offset by higher fuel and packaging costs. Business was also hurt by illegal banana imports during the first half of the year. Fyffes has continued searching for ways to cut costs and has taken steps to reduce the amount of money spent on purchasing, ripening and distribution operations, in particular by restructuring its UK businesses. This should help over the coming year, especially if Fyffes can hit saving targets of E20 million per annum, but a lot will still depend on currency movements, weather and market conditions. Fyffes is not in a good position, with little it can do to improve on many of the problems it faced last year. Without diversifying into other markets, all it can do is continue to streamline the business and hope for better conditions.
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