Fyffes is to demerge its General Produce and Distribution business into a new, separately quoted company to be fully owned by the company's shareholders. This new company will be listed on the Irish Stock Exchange's IEX market in Dublin.
The spin-off is subject to shareholder approval and other consents.
Fyffes also announced half yearly results for the six months to the end of June this morning. It said that adjusted pre-tax profits fell to €39.6m from €76.1m. The figure was above the guidance of €37-39m it gave earlier this year.
The company had warned in May that its 2006 profit was likely to be €9m lower than expected because of higher than anticipated oil prices.
Revenues for the six months rose by 5.9% to €1.177 billion from €1.111 billion. Earnings per share amounted to 7.96 cent in the first half of the year, down from 15.10 cent the same time last year.
Fyffes said that changes in the EU's banana import regulations, along with industry wide cost inflation, saw adjusted operating profits in its Tropical Produce division fall to €16.9m from €52.6m the same time last year. Adjusted operating profits in its General Produce and Distribution business rose marginally to €22m from €21.2m the same time last year.
Fyffes' current operations comprise two broadly distinct businesses, its Tropical Produce business and its General Produce business.
Fyffes' two trading divisions operate within distinct parts of the distribution chain, with different risk profiles and with separate management and facilities.
The company said it believes the proposed demerger will enable both businesses to separately pursue their respective strategies with greater focus and clarity than at the moment.
'The General Produce and Distribution division can deliver stable, appreciable growth each year and, as a stand alone business, it can attract a higher valuation multiple than the current combined group because it will not be affected by the greater variability in earnings of the Tropical Produce division', the company said in a statement today.
It added that it also believes its 'ambitions to continue to pursue further industry consolidation in its three key tropical produce categories will be unaffected by the proposed demerger'.
Fyffes said that while the market will ultimately determine the value of the group, it believes the potential minimum sum of the parts valuation of the group is close to €2 a share.
It is proposed that Carl McCann will be the chairman of the demerged business, while Rory Byrne will take the CEO position.
Fyffes also plans to make David McCann the Chairman of the continuing business of Fyffes, while Jimmy Tolan will become its CEO.
Fyffes' General Produce and Distribution business is one of the leading operators within the European fresh produce distribution sector with facilities in Ireland, the UK, Sweden, Denmark, Spain, Italy, Holland and the Czech Republic. It provides fresh produce for its retail and wholesale customers all year round.
It is also one of the leading distributors of Southern Hemisphere fresh produce in Europe, especially from South Africa and South America. Its annualised sales will be in the order of €2 billion after recent acquisitions.
The company's Tropical Produce business buys bananas, pineapples and melons from Central and Latin America, which it markets in Europe and the US under the Fyffes, Turbana and Nolem brands. In 2006, total sales are expected to hit €500m.
'Following the successful completion of the demerger of its property business and reflecting the Board's continuing determination to maximise shareholder value, Fyffes intends, subject to shareholder approval, to demerge its General Produce and Distribution business into a new, separately quoted company to be 100% owned by Fyffes' shareholders,' commented Fyffes Chairman Carl McCann.
'This proposal has the potential to significantly increase the current market value of the existing group for the benefit of shareholders,' he added.
In its results statement, Fyffes said it expects its results for the full 12 months of 2006 to be in line with its previous announcements.
Fyffes shares closed up five cent at €1.64 in Dublin.
