Q1 2013 results
Chiquita banana sales remain weak in Europe
The company had $2 million in profits during the quarter, up from an $11 million loss during the same quarter last year. Sales fell just over 2 percent compared to the same quarter last year, however. Chiquita’s sales totalled $774 million, down from $793 million.
Chief executive officer Ed Lonergan, who was brought in last year to help the company restructure its operations and return to growth, said positive effects of the restructuring can already be seen. The company has eliminated hundreds of corporate jobs, eliminated unprofitable product lines and consolidated its headquarters in Charlotte to save on costs.
While noting that, “one quarter does not a trend make,” Lonergan said the company’s restructuring is starting to pay off.
“We are pleased that our first quarter results reflect the initial benefits from these strategic decisions and actions,” said Lonergan. The company discontinued small product lines, such as grapes and avocados, and cut back on its research and development efforts to create new products.
“They represent a distraction for our team,” Lonergan told analysts. Diversifying product lines and developing new products had been a central tenet of former CEO Fernando Aguirre’s plans.
Chiquita decided to relocate to Charlotte in 2011, lured by more than $22 million worth of state and local incentives. The company said its relocation costs were less than $1 million in the first quarter this year, down from $4 million in the same quarter last year.
Chiquita’s total banana sales fell 3 percent, to $505 million. The company said that was largely due to weakness in Europe, one of its main markets, lower prices in North America, and shedding unprofitable contracts. European banana sales fell more than 13 percent.
Sales of salad and healthy snacks rose less than one percent, to $240 million, and sales of other produce fell by 26 percent, to $26 million.
Though Chiquita’s total revenue was down, some improvements in profitability and sales volume were apparent in the company’s results. The number of 40-pound banana boxes sold in North America jumped almost 11 percent, as the company lowered prices 3.3 percent. The operating profit margin on bananas rose 0.5 percent, to 5.3 percent, and the operating margin on salads more than tripled, to 3.2 percent.
But challenges remain. The banana market is well-supplied, and supplies could soon exceed demand.
“There is plenty of fruit in the markets,” said Lonergan. That could result in lower prices and hurt profits.
Unseasonable weather this March in Yuma, Az., and Mexico, where Chiquita gets much of its produce besides bananas, hurt the salad business. Chiquita said it was at times unable to get spinach, and that resulted in some unfulfilled orders during the quarter.
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Source: charlotteobserver.com
