Christian Salvesen profits will fail to meet expectations

Christian Salvesen, the logistics company, warned yesterday its profits could fall as much as 20 per cent below expectations and put its underperforming UK and German businesses under an urgent review.

Shares in the company, which distributes goods for Marks & Spencer and Ikea, fell by as much as 30 per cent initially to hit a 13-year low as the company said price hikes during the year had failed to recoup the spiralling costs in its business.

Analysts had expected Salvesen to make a profit of about £24m for its year ending in March, but have now brought forecasts down to about £19m. The company's shares closed the day down 13.3 per cent at 36p, valuing the business at £94.4m.

The majority of the company's problems have come in its British food and consumer business. Delays in opening a new site to store refrigerated goods in the run-up to Christmas had led to more disruption than anticipated, and the company has seen a fall-off in stock volumes in its warehouses since the start of the year.

The group's German operation, which has been undergoing a restructuring plan, is also suffering from the effects of a sharp economic downturn. The division made a £5m loss in 2001/02 and is expected to make a similar loss for 2002/03.

The company's management has put both the UK and German businesses under review in the past few days, and many analysts expect to see the company withdraw from Germany entirely.

Edward Roderick, the chief executive of Salvesen, said: "The continued underperformance in certain key business areas is disappointing in the extreme and is something that we are in the process of rectifying through immediate and decisive action."

The company's food, consumer and industrial divisions in the UK will be brought into a single division and job losses are expected. Mr Roderick also blamed increased driver costs, higher insurance premiums and costs incurred from traffic congestion for the hit on profits.