Fyffes set to increase banana prices on the back of strong US dollar
Fyffes is looking to push up the price of bananas this year. A spokesman for Fyffes told the Sunday Independent the company would look for low to mid single-digit increases (in cent terms) in the price charged to its customers.
Retailers will ultimately determine whether the price increase is passed on to the consumer.
The move has been sparked by the strength of the US dollar against the euro and sterling. Bananas as a commodity are priced in dollars and the strength of that currency means they cost more in euro terms.
Fyffes sources its bananas from Central and South America. The company secured price increases in some markets in 2015.
"Fyffes is pursuing increases in selling prices in all markets in response to the continuing strength of the US dollar against both the euro and against sterling," Fyffes chairman David McCann wrote in the company's newly issued annual report.
"Having achieved a further step up in profitability in 2015, Fyffes is focused on consolidating at this higher level of earnings.
"The Group's initial target EBITA (earnings before interest, tax and amortisation) for 2016 is in the range €42m-€48m, compared to €45.8m in 2015."
The company invested heavily in expansion in 2015, with €29.5m going on melon- and banana-farming businesses.
"The investment in additional production assets in the melon business is particularly significant, as it will increase the Group's capacity in the category by around 25pc on a full-year basis.
"The integration of these farms is progressing satisfactorily," wrote McCann, whose remuneration package of €1.25m for 2015 remained unchanged from 2014.
"Trading conditions have been satisfactory in the year to date in 2016. The Group remains focused on always improving the efficiency of its global operations in order to enhance its competitiveness.
"Fyffes is determined to continue to grow its business and is actively pursuing a number of attractive acquisition opportunities at all points in the supply chain from production to distribution," he added.
The report was issued a day prior to Fyffes announcing to the markets that it had stepped in to purchase Canadian mushroom producer Highline Produce for €98m, inclusive of a debt refinancing.
It's a new foray for the Irish food importers, which had previously been focused on three tropical fruits - bananas, pineapples and melons.
Fyffes said the deal would immediately add to its bottom line. The significant transaction is a boost for the company after it failed in late 2014 in its plan to merge with rival banana company Chiquita.
"This transaction fits perfectly with Fyffes' strategic objective of adding an additional product to its existing range through the acquisition of an established, successful and integrated operator in a category with significant scale," McCann said when the Highline Produce deal was announced.
The move was welcomed by investors, with Fyffes shares trading up almost 8pc in Dublin on Friday. The existing management team at the mushroom producer will remain in place, the company added.
"The acquisition brings Fyffes into a new category which is higher margin... and in fact the mushroom industry is already similar to Fyffes' categories, as it features a large scale volume production, with logistical efficiency being the key to strong profitability," Goodbody equity analyst Patrick Higgins said in a note circulated to investors on Friday.
Sunday Indo Business