Limited avocado supply hurts Calavo earnings

by Eric Schroeder
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SANTA PAULA, CALIF. — A limited avocado supply and high fruit costs in the Calavo Foods business segment pressured net income at Calavo Growers, Inc. in the third quarter ended July 31, as earnings fell 54% to $2,713,000, equal to 18c per share on the common stock. Net income totaled $5,947,000, or 41c per share, in the same period a year ago.

Sales, meanwhile, rose 44% to $165,141,000 behind sharply higher avocado sales.

“While the fiscal 2011 third quarter presented challenges due principally to the limited avocado supply and strong avocado demand, Calavo’s ability to navigate them and remain solidly profitable underscores the strength of our business model,” said Lee E. Cole, president and chief executive officer. “Simultaneously, the company made measurable strides in building a stronger, larger and more broad-based enterprise. On June 1, we completed our acquisition of Renaissance Food Group and its portfolio of brands, which contributed to quarterly revenues that reached record levels. Calavo’s operating results, though, principally reflect the two-fold impact on gross margins due to the significantly smaller year-over-year avocado supply.

“Most significantly, the limited supply of avocados drove up fruit costs overall, and specifically, in our prepared avocado business, where fruit prices have risen by more than 70% from last year’s third quarter. This factor accounts for the majority of the decrease in our third-quarter operating results year over year. Secondarily, the cyclically lower volume of fresh avocados from California resulted in moving fewer overall units, which reduced production efficiencies and increased our per-unit packing costs. We expect this to change with next year’s anticipated larger crop.”

For the nine months ended July 31, net income was $7,428,000, or 50c per share, down 43% from $13,014,000, or 89c per share, in the same period of fiscal 2010. Net sales rose 29% during the nine months to $375,180,000 from $291,117,000.

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