Avocado marketer Calavo Growers Inc. posted a 23% drop in fourth-quarter profit, the third consecutive quarterly earnings decline, as lower supplies and a freeze in key growing regions in Mexico pushed costs higher.
A cyclically smaller supply of fresh avocados and higher Mexican fruit costs combined to send Calavo’s expenses up 44% during the fourth quarter, offsetting an increase of 37% in sales, the company said in a Jan. 5 statement. Similar factors pressured Calavo’s profit earlier in the year.
Calavo faced “stiff operating headwinds” from a “unique set of factors” through its fiscal 2011, chief executive Lee E. Cole said in the statement.
Diminished avocado supplies had a two-fold effect, Cole said.
“It sharply increased the cost of fruit used in our prepared avocado products and hindered the company’s fresh avocado volumes impacting the company’s unit-driven business model,” he said in the statement.
During the three months ended Oct. 31, Calavo’s fiscal 2011 fourth quarter, net income fell to $3.64 million from $4.75 million for the same period a year earlier, the Santa Paula, Cal.-based company said. Sales during the quarter totaled $147.3 million, up from $107.2 million.
The three primary U.S. avocado suppliers, California, Chile and Mexico, produced smaller crops last year, resulting in lower than average supplies and higher prices. California’s production plunged 54%, to 253 million pounds, according to a U.S. Department of Agriculture report released Nov. 29.
As supplies shrank, Calavo’s avocado shipments during the fourth quarter fell 16% compared with the same period a year earlier, to 3 million units. Costs in Calavo’s fresh products business, which includes avocados, surged nearly 140%.
But U.S. avocado supplies “are poised to make a comeback” during the 2011-12 marketing season, which began in November, as all three regions generate stronger crops, the USDA said.
In the statement, Cole said he expects Calavo to benefit from expanding supplies, increasing awareness of the health benefits of fresh avocados and the $45 million the industry spends each year on promotions. He forecast U.S. avocado consumption at 1.4 billion pounds this year, up 17% from last year.
As a result, Cole said he’s confident Calavo’s 2012 profit will surpass its current full-year earnings record of $1.22 per share, reached in 2010.
In fiscal 2011, Calavo’s net income fell 38% to $11.1 million, or 75 cents a share, even as sales rose 31% to $522.5 million, a record for the company.