Calavo earnings decline due to higher costs

by Keith Nunes
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SANTA PAULA, CALIF. — Calavo Growers, Inc., a producer and marketer of fresh and prepared avocados and other food products, saw its net income decline during the second quarter due to higher costs in the company’s prepared avocado business due to a lack of fruit volume and weather-related delays of fresh tomato shipments, according to the company. Net income for the quarter ended April 30 was $2,404,000, equal to 16c per share on the common stock, a decline compared with the same period in fiscal 2010 when the company earned $4,793,000, or 33c per share.

Sales for the quarter increased slightly to $118,720,000 in 2011 from $109,219,000 in 2010.

“Calavo continues to execute its operating plan well,” said Lee E. Cole, chairman, president and chief executive officer. “Our second-quarter results instead reflect fluctuations inherent to our Fresh and Calavo Foods segments: adverse weather and cyclically higher fruit costs, which resulted in a drag on margins in our prepared avocado business. The impact of these two factors, as well as the lower volume of fresh avocados, account primarily for the difference in our second-quarter operating performance year over year.”

In the company’s Fresh business unit sales grew 11% to $107.7 million during the second quarter of 2011. In the Prepared Foods business unit, sales declined to $11.1 million in 2011 from $12 million in 2010.

“Insufficient volume in the marketplace at present is creating over-reliance on fruit sourced from Mexico and causing avocado prices to surge,” Mr. Cole said. “These high prices are indicative of the strong industry demand for fresh avocados, but have precisely the opposite effect on our prepared guacamole business: soaring fruit costs are constraining margins in that segment.”

For the first six months of fiscal 2011, Calavo’s net income was $4,715,000, or 32c per share, down from $7,067,000, or 49c per share, during the first six months of fiscal 2010.

Sales during the first six months of 2011 were $210,039,000, up from $176,539,000 in the same period of fiscal 2010.

The company also announced it completed the acquisition of Renaissance Food Service Group L.L.C. on June 1.

“The acquisition of R.F.G. is a game-changer for Calavo,” Mr. Cole said. “We immediately re-shape our company — and, specifically, our Calavo Foods business unit — into a significant competitor in the rapidly expanding fresh refrigerated packaged goods category through an array of products for both the produce and deli departments of grocery retailers. The extensive current portfolio of R.F.G. products — fresh-cut fruit, as well as ready-to-eat and recipe-ready vegetables, to name just a few items — are highly complementary to Calavo Foods and our company provides a strong platform and resources to facilitate future growth.

“Through R.F.G., we gain entry to a high-demand grocery category, a capable management team with demonstrated ability to grow the acquired company, and recognizable brands, including Garden Highway and Chef Essentials. Furthermore, R.F.G.’s rapid product-development capabilities are impressive and we expect to leverage that strength further, as well as the new subsidiary’s ability to supply retailers with high-quality goods through just-in-time delivery nationwide on a same- or next-day basis.”

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