Fyffes says oil price caused profit slump

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Fyffes, Europe's largest distributor and importer of fruit and vegetables, warned yesterday that its 2006 profit was likely to be €9m (£6m) lower than expected because of higher-than-anticipated oil prices, sending its share price tumbling.

"The recent significant increase in the cost of shipping fuel has been higher than anticipated by the group and is not being recovered in current selling prices," Fyffes said. "Accordingly, and despite better-than-anticipated exchange rates, Fyffes currently expects that the impact of these factors on its full-year results in 2006 will be of the order of €9m."

Fyffes reported a better-than-expected 25 per cent rise in 2005 profits in March thanks to high banana prices, but analysts said trading in 2006 would be tough given rising competition.

Investors had been expecting the group to report pre-tax profit of about €60m this year. Shares in the group fell by 13.75p to 136p.

One of the five largest fruit distributors in the world, Fyffes has estimated that revisions to the European Union's system for regulating banana imports are likely to increase the group's duty costs by €40m a year.

At the time of its results in March, Fyffes also said higher fruit, shipping and fuel costs, coupled with unfavourable exchange rates, had been expected to cost it a further €15m this year.