Chiquita has outlined a massive restructuring plan designed to save it up to $80 million a year as hundreds of jobs go and it turns it back on prepared fruit salads.
The changes are designed to improve efficiency and profitability by consolidating operations and simplifying overheads.
“As a result of these changes, the company expects to generate new, sustainable cost reductions of approximately $60m-80m annually, beginning in 2008, after a one-time charge of approximately $25m in the fourth quarter 2007 related to severance costs and certain asset write-downs,” the multi-national said in a statement. “Realized savings will improve profitability, and resulting additional cash flow will be used primarily to reduce debt, consistent with the company's previously announced target to achieve a debt-to-capital ratio of 40 per cent.”
Chairman and ceo Fernando Aguirre said since 2005, market dynamics have been changing, limiting Chiquita’s profitability and hindering its strategy. “While we have already taken various actions to strengthen our balance sheet, improve our risk profile, and diversify the company, we continue to endure rising industry costs, punitive European banana import regulations, and a slower-than-expected recovery in the value-added salads category,” he said. “We began a major analysis in the summer when we realized the effects of these negative forces were impacting our profit plans longer than originally anticipated. As a result of this analysis, we are taking several significant broad-based actions across the business, which are designed to improve our performance in areas we can more directly influence and control.”
Some160 management positions world-wide are being axed streamling management at the three highest levels by a fifth. There will also be changes to the business model with the organisation’s structure realigned by geography rather than product line.
The company's recent acquisition of the Verdelli Farms facility mans that Chiquita’s Fresh Express subsidiary is to close tow of its nearby operations for fresh-cut salads in the eastern US. Chiquita will also pull out of the fresh-cut fruit salad market and concentrate on concentrate on the value-added salads and healthy snacks. And in Europe, the position of Chiquita’s Atlanta AG acquisition is being reviewed with the possibility of a sale in the near future. Aguirre concluded: "With these actions, we are taking a major step forward to create a more positive future for Chiquita…however, we will need to redefine our growth targets, since the negative impacts of rising industry costs, the EU tariff regime and the E. coli event have slowed down our strategic growth plan considerably, such that reaching our goals will take us longer than we originally estimated. We expect to provide more information about these long-term financial goals early in 2008."
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