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Danish shipping firm DFDS A/S has announced a change to its profit forecast for 2008 due to a rise in bunker costs and increasingly difficult market conditions.

In a statement the company said the prospect of a longer lasting weakening in the economy was now apparent, which included increasingly difficult market conditions during the second half of the year.

Based on these reasons, DFDS has altered its profit expectations for this year and now predicts revenue growth to be approximately 2 percent instead of the 3-5 percent it had been previously forecast.

Operating profit before depreciations (EBITDA) is now expected to be 15-20 percent lower than in 2007. An increase of 0-2 percent had been previously predicted.

Pre-tax profit has also been adjusted downwards from approximately DKK 500 million(US$97.7 million) to a level of DKK 325-375 million (US$64.8 to $US74.7 million).

The profit adjustment is primarily due to three factors according to DFDS: higher bunker costs, increasingly difficult market conditions and restructuring costs.

Approximately one third of the profit adjustment can be attributed to an expected rise in bunker costs, which are expected to increase by a total of approximately DKK 400 million (US$79.7 million) compared to 2007. Oil price surcharges compensate for a major share of the increase in the freight area, while coverage is lower for passenger activities.

Commenting on the difficult economic climate, DFDS said "Lower market growth than expected, due amongst other things to the high oil price, implies lower volumes and more competitive pressure due to excess capacity in some market areas.

"The impact is greatest for traffic from east to west in the Baltic region and the Irish market. Haulage costs have also increased due to higher fuel prices, which can only be passed on to a limited extent due to market conditions. About half of the profit adjustment can be attributed to the change in market conditions."

Additional costs from the restructuring and adjustment of activities will result in one-off costs which the company says is higher than previous expectations.

To counteract the change in market conditions several activities have already been adjusted. During the second half of the year the company says further adjustments will also be implemented in business areas where required. Adjustments include reallocation of tonnage, reduction of capacity, cost reductions, price changes and a stronger focus on sales activities.

DFDS’ half-year report will be issued on August 26th 2008 as planned. The report will give a more detailed account of profit development for the first half of the year and expectations for the second six-month period.