Chiquita has responded to problems in the European banana market with an update, while simultaneously unveiling a tie-up on beverages with Danone.
The company responded to “unusual market conditions” by providing the information on “a one-time basis”.
Additionally, the company reaffirmed its full-year 2010 target for comparable income of $110 million (£72.6m) to $120m.
For the first quarter of 2010, European banana pricing, which is set weekly, has not followed the normal pace of seasonal price improvements and is approximately 11 per cent lower than the first quarter of 2009.
Pricing did not improve sequentially during the quarter at the same rate as in recent years, due to soft demand throughout the company's core European markets, according to Chiquita.
Banana pricing in the company's core European markets in January was two per cent lower compared to the same period in 2009 on a local currency basis.
But local currency prices in February were eight per cent lower than 2009 levels and an estimated 18 per cent lower in March. Volume was lower by approximately 13 per cent during the quarter.
Chiquita also announced a joint venture with France-based Danone to market fruit beverages, based on the former’s Just Fruit in a Bottle platform in Europe.
Within four years, Chiquita’s Just Fruit in a Bottle product has become one of the market leaders in Europe’s fruit smoothie category, with distribution in 12 countries and sales of €20m in 2009. This joint venture will, according to Chiquita, offer the company a new platform for expansion of the product.
Chiquita’s chairman and chief executive officer Fernando Aguirre said: "As widely reported in recent weeks, European banana pricing was negatively impacted by the harshest winter weather in 30 years and depressed economic conditions, which have affected commerce all over Europe, particularly in the south.
"We expect banana pricing to strengthen in comparison to 2009 levels as the year progresses, as tightening industry supplies in Latin America and Asia begin to restore the balance of supply and demand.
"Very importantly, we continue to be confident of achieving our full-year target of $110m to $120m of comparable income, even as our first quarter results will be substantially lower than 2009. As we previously reported, we expect that the quarterly flow of earnings will differ from 2009, with first half results lower than the record levels achieved last year. We expect that second half results will improve versus 2009 as we have already begun to take aggressive pricing actions, are executing significant cost improvements throughout our supply chain and will realise profit improvements from our Just Fruit in a Bottle joint venture. Taken together, this should allow us to overcome these early headwinds in our European business.
"We are very excited about our newly announced partnership with Danone, which will enable us to expand and drive profitability of Just Fruit in a Bottle, our best innovation in Europe. Revitalizing our European business to return its profitability to previous levels is one of our most important business priorities in 2010 and we will provide additional updates on our progress on our first quarter conference call."
No comments yet