Chiquita Brands International Inc. reported an unexpected, $8 million third-quarter loss, and Fresh Del Monte Produce Inc. also posted disappointing quarterly results, with both companies hurt by slumping banana markets in Europe.
Weak salad sales, reflecting retailersâ shift toward cheaper, private-label products, also squeezed Chiquitaâs Fresh Express subsidiary, which cut its 2010 profit forecast for the second time in four months.
Banana prices in Europe eroded late in the third quarter because of excessive imports from major African, Caribbean and Pacific producing regions, Chiquitaâs chief executive officer, Fernando Aguirre, said in a statement announcing the companyâs quarterly results Nov. 2.
âWe are disappointed by recent trends in local European pricing,â Aguirre said in the statement. âThis has been one of the most challenging operating environments in Europe. Notwithstanding the recent strengthening of the euro, if market conditions do not im-prove in the near term, our full-year comparable income is expected to be lower than previously estimated.â
Large multinational fruit growers and shippers have struggled to recover from global recession and a cold winter that crimped demand for their top products. In late October, BB&T Capital Markets analyst Heather Jones cut her 2011 profit outlooks for Chiquita and Dole Food Co., citing excess supplies and weak consumption.
âThe environment is still one of too much supply and too little demand,â Jones said in an Oct. 28 report. âBarring some kind of weather disruption that meaningfully interrupts supply and/or great improvement in demand, there will be too much fruit next year.â
During the third quarter, Chiquitaâs banana sales fell 9% from the same period in 2009, to $431 million, the Cincinnati-based company said Nov, 2. European banana prices fell 5.4% in U.S. dollar terms during the quarter, though North American prices rose 3.6%. The company doesnât disclose actual prices.
In New York terminal markets, bananas from Colombia averaged $18 per 40-pound carton Nov. 2, according to the U.S. Department of Agriculture.
Salad sales fall
In salads and healthy snacks, Chiquita said net sales fell 13% to $251 million due to lower volumes in retail value-added products, even as the company spent an additional $3 million on consumer marketing. Salad volume was âlower than we expected, reflecting retailersâ conversion to private label and generally soft category demand,â Aguirre said in the statement.
Chiquita also said it expects full-year comparable net income of $50 million to $60 million, down from an estimate of $80 million to $90 million the company released in July. Revenue is expected to decline 5%, Chiquita said.
On a per-share basis, Chiquita posted a net loss of 19 cents during the quarter, compared with an 11-cent profit a year earlier. Analysts expected the company to earn about 32 cents before special items, according to Thomson Reuters I/B/E/S.
Also Nov. 2, Fresh Del Monte said third-quarter net income plunged 54%, to $13.4 million. In addition to weakness in Europe, adverse weather in banana-producing areas in Guatemala led to higher costs, the Coral Gables, Fla.-based company said in a statement.
âWe are operating in a very challenging environment,â Mohammad Abu-Ghazaleh, Fresh Del Monteâs chief executive officer, said in the statement. Still, the companyâs sales growth âshows that our expansion into new markets and distribution channels has been well-received.â
Fresh Del Monteâs net sales rose 3.5%, to $791.3 million. In bananas, the companyâs largest business, net sales increased 5.5%, to $370.1 million.
Chiquita, Dole and Fresh Del Monte Produce Inc. account for about 85% of U.S. banana imports, BB&Tâs Jones estimated.