Fresh Del Monte income slips on challenging banana market

by Staff
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CORAL GABLES, FLA. — For the full year and fourth quarter of 2006, Fresh Del Monte Produce Inc. reported decreases in net sales and income as the company failed to overcome a tough European banana market and increased costs.

For the year ended Dec. 29, 2006, the company suffered a loss of $145,100,000, which compared with net income of $106,600,000 in 2005. The drop in income for the full year was largely attributable to asset impairment and restructuring charges of $148.3 million. Increased procurement and logistics costs coupled with lower sales volume and selling prices of bananas in Europe also affected earnings.

Net sales for the year totaled $3,214,300,000, down 1% from $3,259,700,000 in the previous year. The decrease in sales was due to continued struggles with the company’s prepared food business as well as lower volumes and prices in the European banana market.

For the fourth quarter ended Dec. 29, the company sustained a loss of $59,900,000, which compared with a loss of $3,500,000 in the same quarter last year. The loss for the quarter mainly was due to the lower sales volumes and prices of bananas in Europe and higher procurement and logistics costs.

Net sales for the fourth quarter fell 3% to $737,600,000, from net sales of $757,900,000 in the fourth quarter of 2005. The decrease in net sales was the result of continued rationalization in the company’s "other fresh produce" segment, primarily in the North American vegetable product line. The challenges of the European banana market also impacted sales negatively.

The challenges of the fiscal year were among the greatest the company has seen in a decade, said Mohammad Abu-Ghazaleh, chairman and chief executive officer. The company has implemented several strategic measures to counteract these challenges, including closing underperforming operations; eliminating unprofitable products; managing the company banana supply in key regions; driving improved performance in the tomato and fresh-cut operations; and leveraging the company’s strengths in emerging markets, said Mr. Abu-Ghazaleh.

"During the final month of 2006, these efforts had begun to have a positive effect on our business — an effect that we see continuing," he said. "We are optimistic that we will see a significant turnaround in our business in 2007. In the meantime, we continue to manage our business to offset those uncontrollable cost factors that can negatively impact our operations. This includes looking for additional ways to streamline our business, conserve our resources, and address the challenges from our prepared food business. Our goal, as always, is to deliver improved shareholder value over the long-term."




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