ICG: ‘Prices rising’

Irish Continental Group (ICG) has braced customers for price increases as the rising cost of fuel hits it in the pocket.

The owner of Irish Ferries is also considering cutting back on some sailings at the end of the year to reduce its fuel bill.

But freight customers and passengers could be left perplexed at the warning of cost increases as ICG openly admitted to a company policy of not hedging its bunker costs.

“It is the group’s current policy to purchase [bunkers] in the spot markets and to remain unhedged,” ICG said in announcing its first-half result which saw it post a strong operational performance and return to profit.

“Fuel costs remain high and, in these circumstances, it is inevitable that prices, for both passenger travel and freight, will have to rise,” the Dublin-based ferry owner said.

Finance director Garry O’Dea defended the decision to continue to buy bunkers in the spot market saying to TradeWinds on Friday: “We’ve had a constant policy going back 20 years of buying spot. It’s important that our investors know where we are [on bunker purchases].”

O’Dea continued: “What can happen is, if people start hedging it becomes more complicated in a way. It’s not a black and white issue that hedging will get you lower prices. It works both ways.”

Asked about the possible future direction of the oil price, O’Dea added: “I don’t like to speculate on the price of oil; there are plenty of other people who do that. [ICG is] planning that oil stays at about the same price as at the moment.”

Along with announcing the probably hike in prices, ICG also warned: “Irish Ferries will also be actively reviewing the schedule of the Jonathan Swift [800-passenger, built 1999] fast ferry with a view to reducing frequency in the less busy winter season and thereby conserving fuel.”

Despite the hike in fuel prices and waning passenger, cars and freight numbers, ICG saw profit shoot up in the six months to the end of June as last year’s figures included a substantial non-recurring item.

The failed takeover approaches from Aella and Moonduster consortia meant ICG booked a non-trading charge of EUR 16.5m ($24.33m) in the first half of last year, later reduced to EUR 10.1m in the full-year accounts when the Aella bid finally crumbled.

This charge was instrumental in sending the owner to a first-half loss last year of EUR 1.6m. The situation was much rosier this year as ICG racked up a profit of EUR 16.5m.

A significant factor in the growth was the gain on the sale of the 2,165-passenger Normandy (built 1982) which bagged ICG a profit of EUR 3.8m.

Although revenues in the group increased from EUR 163.2m to EUR 166.1m, operating profits in many divisions were down.

The terminal division had a strong six months posting a 6.3% rise in sales of EUR 82.2m but operating profit slumped from EUR 4.2m to EUR 3.4m.

Revenues from the ferry division fell 2% to EUR 83.9m and operating profit was only sent upwards by the sale of the Normandy.

Passengers numbers came off 1.2%, the number of cars carried went down 2.3% while freight volumes slumped 3.1%. However, ICG flagged the “extremely strong” cars and freight numbers posted in the first half of 2007.

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