Profits increased five-fold at Charlotte-based Chiquita Brands International in the banana giant’s most recent quarter even while sales fell slightly, as the company cut costs amidst its restructuring.
The company said Tuesday that it had profits of $31 million for the quarter that ended June 30, up from $6 million during the same quarter last year.
Sales, however, fell short of analysts’ expectations, coming in at $812 million. That’s down 2.5 percent from last year.
“The market for bananas is balanced and our banana business is performing well,” said chief executive Ed Lonergan,. “We experienced improved profitability in this segment as a result of volume growth in North America, our ability to maintain prices in Europe, and the previously announced efficiency improvements in our value chain and organizational structure.”
Even though sales fell, the company’s cost of sales fell more. The company’s cost of sales was down 4.8 percent, to $693 million, and administrative costs fell 4.6 percent, to $62 million. In recent months, Chiquita has cut costs in part by trimming executives’ ranks, cutting 310 employees – including 15 in Charlotte – last year. Those moves helped lower costs
Lonergan said the company has sold or discontinued several non-core businesses, such as avocados and grapes, to cut costs. “While these businesses accounted for more than $57 million worth of revenue in our 2012 base, they were unprofitable,” he said, adding a $6 million annual drag to the company’s results.
Lonergan was brought in to oversee the restructuring, which also includes seeking out $60 million in annual cost savings. Lonergan told analysts during a conference call that the cost-saving measures, dubbed “Project Evolution,” will continue. A team of outside consultants has been working this year to examine all costs at Chiquita and find more ways for the company to cut expenses, Lonergan said.
The number of employees at Chiquita is “essentially unchanged” since the restructuring, Lonergan said.
Chiquita’s salad business, sold under private labels and the Fresh Express brand, performed well, Lonergan said. Salad sales were up 3.4 percent, to $260 million. The number of 12-count salad boxes sold rose 6.7 percent, to 13 million. But profitability in the salads segment was hurt by higher than expected costs to consolidate salad processing plants and very hot weather in Yuma, Ariz. and California, key lettuce-growing regions.
Bananas, which remain the core of Chiquita’s business, didn’t fare so well. Sales of bananas were down 2.5 percent, to $519 million. The company said it was hurt by weak banana sales in Europe, which fell 8.6 percent, to 9.2 million 40-lb boxes. Sales of bananas in North America jumped 11.1 percent, to 18.5 million boxes, Chiquita said. But the company cut banana prices 2.9 percent in order to help achieve that figure.
Sales of bananas in the Middle East, which has been wracked with political upheaval, plunged by almost half, to 900,000 boxes.
Chiquita’s stock is up more than 70 percent since Lonergan was named CEO last year. Early Thursday, Chiquita was trading up more than 2 percent, at $12.49 a share.
Portillo: 704-358-5041 On Twitter @ESPortillo
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