Sharp swings in currency rates coupled with higher fuel costs are playing havoc with earnings forecasts made by Louis Public Co. (LUI), with Group Chairman Costakis Loizou saying no firm prediction is possible.
Addressing shareholders during the Annual General Meeting of shareholders, Loizou said the recent abrupt fluctuations in exchange rates, especially in the value of the dollar are playing havoc with the group’s forecasts.
Since the start of this year, the dollar is up about 10% against the Cyprus pound. This is seen as extremely positive as regards the operations of the group, which gets most of its revenue in dollars. But in valuation terms, especially for the end of the first half and more importantly end of the year, a higher dollar could mean millions in unrealised exchange losses, arising from the accounting conversion of the loans, mostly in dollars into Cyprus pounds.
“If the dollar remains strong until the cruise season is over (Sep/Oct) but then weakens end of the year for valuation of the loans, then we could make massive profits, over and above target,” said Loizou. He was quick to point however, that the reverse would happen if the dollar would remain strong through the end of the year, which would result in huge unrealised exchange losses.
Another problem playing havoc with group forecasts are the rising fuel costs. With the cruise season now in full swing, the group is likely to be burdened by higher fuel bill.
“Even though we hedge our exposure, but we are at the mercy of developments in the oil and currency markets as well as the ups and downs of the tourism market,” said Loizou, adding that it was very difficult for the Group to stick to its profit forecast of “remaining around the same levels as in 2004” for this year.
For 2004, LUI reported net profits of CYP 10.68 mln compared to CYP 2.07 mln profits reported for 2003. The AGM approved a Board proposal of paying a final dividend of 0.75 cent per share, with the ex-dividend date set for July 11 and the actual payment of the dividend by end of July. Based on the current share price of 21 cent, the dividend yield amounts to 3.6%.
Despite the uncertainties and difficult operating environment, the Chairman said the Group will continue with its efforts to expand abroad, diversify its product range and strengthen its relations with the major tour operators.
The Louis Group has set up Louis Hellenic Cruises, which is currently serving the Greek cruising market with two ships and has a near-lock on the Greek and Turkish cruising market. The group owns 11 cruise liners and in excess of 20 hotels and hotel management contracts in Cyprus and Greece. It is the fourth largest market capitalisation company on the Cyprus stock exchange valued at CYP 90 mln. Trading around 21 cent per share, the share price is up 40% since the start of the year.
