CORAL GABLES, FLA. – An industry-wide oversupply of bananas, unfavorable exchange rates and a spike in fruit costs spoiled an otherwise positive third quarter for Fresh Del Monte Produce Inc.
During what is considered a generally difficult time of year for the produce industry, Fresh Del Monte reported a 9% increase in net sales to $861 million during the quarter ended Sept. 27, up from $788.8 million of the prior-year period. But net income attributable to the company dropped to $6.4 million, equal to 11c per share on the common stock, from $23.5 million, or 40c per share, during the same quarter last year.
“… we were faced with a number of difficulties that limited our ability to deliver optimal earnings for the quarter,” said Mohammad Abu-Ghazaleh, chairman and chief executive officer, during an Oct. 29 earnings call with analysts.
Price increases across almost all of Fresh Del Monte’s business segments weren’t high enough to offset a range of higher operating costs, he said. Additionally, a competitive banana market in North America and challenging conditions in Europe pressured the company.
Despite the challenges, Fresh Del Monte gained new customer relationships and expanded distribution channels during the quarter to drive additional sales and increase global market share. In October, the company announced its acquisition of approximately 7,200 total acres of agricultural production land, packing houses and farm equipment located in Florida and Virginia. The company said the acquisition underscored its commitment to the tomato category and relationships with third-party producers.
The company also introduced new value-added fresh-cut and prepared fruit product lines in response to growing demand for convenient, better-for-you snacks.
“Going forward, we’ll continue to introduce new products that we can sell through a variety of distribution channels in all markets,” Mr. Abu-Ghazaleh said.
During the quarter, the banana segment had operating income of $1.3 million, down sharply from $12 million last year. Net sales for the segment increased 12% to $402.3 million, compared with $359.8 million during the third quarter of 2012.
Operating income for the other fresh produce segment dropped to $41 million from $50.8 million last year. Net sales for the segment increased 9% to $366.1 million from $335.2 million, with higher sales in tomato, melon, non-tropical and fresh-cut product lines, offset by a decline in gold pineapple.
The prepared food segment also saw a dip in operating income to $10.7 million from $11.6 million during the same quarter in 2012. Net sales declined 1% to $92.7 million from $93.8 million, due to lower sales volume in the company’s poultry product line, offset by growth in canned deciduous fruit products.“We are very bullish on our long-term prospects,” Mr. Abu-Ghazaleh said. “We will continue to do everything we can to keep our expenses low. However, where we have seen signs of rationalizations in some markets, we also recognize that selling prices of bananas need to improve across the industry.”