(UPDATED COVERAGE, May 14)
Dole Food Co. Inc.âs first-quarter profit plummeted as economic weakness hurt fresh fruit results in Europe and Asia.
Operating income fell to $59 million for the three months ending March 27 from $123.1 million during the same period a year earlier, Dole said in a May 10 filing with the U.S. Securities and Exchange Commission. Net revenue rose 0.6% to $1.606 billion.
A weak economy combined with unusually cold weather pressured banana prices in Europe, while higher product and shipping costs also crimped profit, Westlake Village, Calif.-based Dole said.
Concern over Europeâs economic outlook has grown during the second quarter, Dole executives said.
Banana pricing in Europe âhas remained weak into the second quarter,â Dole chief executive officer David A. DeLorenzo said during a May 10 conference call with analysts. Economic turmoil in Europe has âintroduced more volatility and uncertainty into the market than we anticipated.â
Europeâs troubles have dimmed profit outlooks for big fruit and vegetable importers such as Dole and Chiquita Brands International Inc., sending shares of those companies tumbling.
Through midday trading May 13, Dole shares fell as low as $9.74, down 22% from a $12.50 initial public offering price in October. Chiquita shares are down 20% this year.
BB&T Capital Markets analyst Heather Jones slashed her earnings forecast for Dole, citing rapid deterioration of the euro and an âincredibly weakâ European Union banana market.
Jones now expects Dole to earn $1.18 a share in 2010, down from a previous estimate of $1.50.
âOur new estimate is likely conservative, but we would prefer conservatism at this juncture as the weakness in the EU market has been surprising in its magnitude,â Jones said in a May 11 report.
Dole had net earnings of $1.45 a share in 2009.
For next year, Dole may reduce its planned volume to the EU as it ascertains how long the weakness will last, Jones said. The company believes all importers âare losing money, including the small, marginal independent producers that are shipping on newly available liner services,â she said.
On April 29, Chiquita reported an unexpected $9 million quarterly loss and cut its 2010 revenue forecast, saying cold weather and a weak economy hurt banana sales in Europe.
Chiquitaâs 2010 sales are expected to increase 1% to 3% over 2009, down from a previous pro-jection for a 3% to 5% gain, Cincinnati-based Chiquita said.
Dole said lower banana prices hurt results in Asia, while in North America, banana earnings were âslightly lowerâ on higher costs. Europe and Asia weakness offset higher banana revenues in North America, the company said.
Revenue in fresh fruit rose less than 0.1% during the quarter to $1.123 billion, accounting for 70% of Doleâs total sales, the company said. Earnings before interest and taxes in the segment sank to $43.2 million from $98.8 million a year earlier.
Doleâs fresh vegetables and packaged foods units performed better, with earnings rising a combined 2.9%, to $39.5 million, and sales rising 1.8%, to $482.7 million.