Dole Food Co., which is scaling back its struggling European banana operations, reported improved quarterly results on stronger fresh vegetable and packaged foods revenue.
The company saw a âstrong turnaroundâ in fresh vegetables, with profit for the unit rising 9% on higher pricing and increased packaged salad sales, Dole said in a Nov. 22 statement.
âOur packaged foods segment also continued to perform well, with successful new product introductions and year-to-date results ahead of last year,â Dole chief executive officer David DeLorenzo said in the statement.
Still, Doleâs fresh fruit segment, the companyâs largest business, continued to be a drag on profit. Fresh fruit earnings before interest and taxes fell 20%, to $36 million, as Dole recorded a $24 million restructuring charge.
During the quarter, Dole began downsizing its European banana operations, which slumped over the past year as excess supply and weaker demand pressured prices. The restructuring, which includes cutting shipments to the region by about 10 million boxes, next year, is expected to result in a direct savings of about $34 million, Westlake Village, Cal.-based Dole said.
âWe believe our restructuring efforts will reduce our costs, improve our profitability and generally better align our operations with the current European market,â DeLorenzo said.
Reduced banana volumes into Europe probably will probably boost prices, especially if other major fruit companies cut shipments, BB&T Capital Markets analyst Heather Jones said in a Nov. 23 report. Chiquita Brands International Inc. is also a large banana supplier to Europe.
Over the past few weeks, the European banana market has improved considerably because of lower volumes from Latin America and the Caribbean, Jones said. However, Japan and other Asian markets remain weak, which likely will further pressure Doleâs profit during the current quarter, she said.
âThe weakness in Japan will more than offset the favorable developmentsâ in Europe, said Jones, who lowered her estimate for Doleâs fourth-quarter earnings and maintained a âholdâ rating on the companyâs shares.
âAlthough we believe earnings are close to a trough for Doleâ¦ we would like greater visibility with regards to the timing of a bottom in the Asian banana market,â Jones said. âFurther, we await some confirmation that Doleâs competitors are following through on commitments to cut production before becoming too bullish on market prospects next year.â
For the three months ending Oct. 9, Dole had comparable income from continuing operations of $31 million, compared with a loss of $25 million a year earlier, Dole said. Revenue totaled $1.99 billion, up 2.6% from a year earlier.
In fresh fruit, which accounts for two-thirds of Doleâs sales, revenue fell 0.2% to $1.33 billion.
Sales in fresh vegetables rose 9%, to $326 million, Dole said. In packaged foods, sales rose 8.1%, to $335 million.