DCC raises forecast as profits at energy arm soar 19pc
Oil distribution and fuel card businesses perform strongly
Published 10/11/2010 | 05:00
DISTRIBUTION group DCC tweaked its expectations for full-year operating profit yesterday after its energy division spearheaded a 14pc increase in first-half underlying profit.
The Dublin-based group, whose interests range from oil to cosmetics, said it now expects full-year profit to rise in the "mid to high single digits", following a particularly strong performance in its oil distribution and fuel card businesses.
DCC forecast in July a full-year operating profit up 5pc at constant currencies. Underlying pre-tax profit for the Irish conglomerate's first half has jumped 37.3pc to €60.4m on revenue of €3.96bn.
The company's sales in the second half are usually greater than the first half, as consumers buy more oil in the winter months.
"DCC had a very strong first half with all five divisions reporting operating profit growth," said chief executive Tommy Breen. Profits at the company, which makes 70pc of its sales in the UK, can fluctuate as sterling moves against the euro.
Mr Breen said his company is in a "good place" to make acquisitions and the Dublin-based company should be able to continue to boost profit through non-organic growth.
DCC, which usually buys a few companies every year, could spend as much as €500m over the next three years, he added. DCC, which controls 14pc of the UK oil distribution market, aims to increase that to 20pc in the "medium term", he added.
"This is a very good start to DCC's fiscal year," said Davy Stockbrokers analyst Caren Crowley. "We retain our 'outperform' rating."
The company's largest division, DCC Energy, saw operating profit soar 19pc to €30.1m following a strong performance in its oil distribution and fuel card business.
Operating profits in its SerCom division inched up 4pc to €14.3m while the group's healthcare division rose 29pc to €11.1m. The environmental division rose 50pc to €7m and the food and beverage divisions jumped 26pc to €5.4m.
The company's healthcare division may suffer as both Ireland and the UK cut spending, but most cuts are likely to involve expensive equipment rather than the sort of goods sold by DCC, Mr Breen added. The division is also likely to benefit after winning a tender to supply several London hospitals, he said. "It's a tough enough market but we've managed our costs," he added.
While profit at the food and beverage division advanced, sales fell 11.2pc to €138.3m as consumers stayed clear of so-called indulgence foods.
DCC shares hit a 52-week high of €21.85 during trading on the Dublin stock exchange before closing 2.5pc higher at €21.85. That gave the company a market value of €1.82bn.