Salvesen shares fall on gloomy forecast

Christian Salvesen saw its shares plunge 14 per cent yesterday after it warned that it would see no profits growth in the financial year that has just started.

Christian Salvesen saw its shares plunge 14 per cent yesterday after it warned that it would see no profits growth in the financial year that has just started.

The logistics company, which has frequently warned on earnings in recent years, revealed that contract renewals that had been negotiated had been struck on less favourable terms. "The board expects underlying trading in the year to March 2005 to be broadly similar to the current year [to March 2004], with continuing pricing pressures on contract renewals that have affected the business over the past year," Salvesen said.

The company also alerted the market to problems in its stand-alone food processing business, which will mean that it will also fail to meet expectations for the year to the end of March 2004. The company will have to take a £3m charge over the issue when it reports results for the period "relating primarily to stock accounting procedures".

About half of this amount is an exceptional charge arising from a change in the valuation of stock "to a more prudent basis". The rest relates to stock written off as no longer being of suitable quality and other stock issues. Alistair Gunn, an analyst at Arbuthnot Securities, said that the City's concern was over the 2005 news, rather than the exceptional charge for the financial year just ended, as this was a non-cash item. "I'm disappointed. I thought they'd turned the corner... that as the economy picks up, volumes would return and prices follow," he said.

Arbuthnot slashed its pre-tax profits forecast for the year to the end of March 2005 from £25.1m to £19.5m.

Mr Gunn added that the whole sector was under pressure from clients - and retail clients in particular. Many retailers are finding conditions tough, he said, while others have merged or changed hands, meaning that supply contracts are renegotiated.