International fresh produce group Chiquita Brands International has reported on a weaker set of results for the second quarter of 2011, with year-on-year declines in both comparable income and net sales.
Quarterly sales for the period fell five per cent year-on-year to US$870m, down from US$916m last year, while net income fell from US$95m in 2010 to US$78m.
According to Chiquita, comparable income declined as a result of lower salad volumes and higher sourcing costs, partially offset by stronger performance in bananas.
Indeed, net sales decreased 12 percent to US$253m in the group's salads and healthy snacks segment (including its Fresh Express operations), with comparable operating income down to US$4m for the second quarter of 2011, primarily due to lower retail value-added salad volume from customer conversions to private label in 2010 and increased costs.
Chiquita also endured a tricky time in its 'other produce' segment, with net sales decreasing 23 percent to US$63m due to the discontinuation of certain low margin produce items such as melons and vegetables.
There was slight growth in the company's banana sector, however, with net sales up 2 per cent to US$555m, as Chiquita achieved higher pricing to overcome increased supply costs due to lower banana volumes from 'industry-wide supply constraints'.
'Our second quarter results reflect the challenges we highlighted previously,' said Fernando Aguirre, Chiquita chairman and CEO. 'As expected, salad volumes in the second quarter were lower than last year. However, the combination of our marketing investments, Fresh Rinse technology and better cost efficiencies are already delivering new distribution points which will result in better volume comparisons the rest of the year. Also, in bananas, we delivered another solid quarter of performance despite softening of local European pricing in late May and June.'
Through the second quarter, Chiquita successfully refinanced its secured credit facility in a manner that, it said, would reduce the company's interest payments and add further operating flexibility as part of a broader refinancing of the company's capital structure.
'Importantly, we have taken several additional steps in the execution of our strategies to improve our performance,' Aguirre added. 'We recently initiated organisational changes to realign our salad business overhead cost structure and embed our global innovation and marketing functions into our business units. These actions will save approximately US$15m annually.
'We also completed the first phase of debt refinancing, which eliminated our most expensive debt and will reduce our interest costs by US$11m annually while providing more operating flexibility,' he noted. 'Overall, our confidence in our ability to generate future profitability in North America was the key to recognizing an $87m tax benefit this quarter.'
Looking ahead, the group said that it remained on track to achieve a net sales increase of at least 3 per cent this year, as well as 'significantly improved' comparable operating profitability for the full year 2011 – although Chiquita noted that these expectations did not include any unforeseen weather, event risks or major currency fluctuations.
