February 27, 2014

Chiquita reduces fourth quarter loss

Charlotte-based Chiquita Brands International announced Thursday that it had reduced its fourth quarter losses, as the company wrestled with harsh weather and a glut of bananas.

Charlotte-based Chiquita Brands International said Thursday that it had reduced its fourth quarter losses, as the produce company wrestled with harsh weather and a glut of bananas that drove down prices on the world market.

The company has worked to return to profitability for years, having trimmed expenses and cut unprofitable business lines such as snacks and new kinds of fruits.

Chiquita lost $31 million during the fourth quarter, down from a $333 million loss during the same quarter a year earlier. Sales ticked up about 1 percent, to $748 million, even as an unexpected oversupply of bananas from Ecuador and Guatemala pushed prices down.

“Chiquita weathered the banana impact thanks to the strength of our brand,” chief executive Ed Lonergan said during a conference call with analysts. Going forward, Lonergan said the world banana market “started the current year somewhat soft” but is expected to recover as the year progresses.

Bananas remain the lion’s share of Chiquita’s business, accounting for $488 million in revenue during the fourth quarter. Despite an increase in the number of bananas sold, the revenue figure is flat from a year ago primarily because of lower prices in North America and weak sales in Europe and the Middle East.

Chiquita kept prices in Europe higher, executives said, to emphasize the brand’s premium.

“This choice, while right for us, resulted in lower overall volume,” Lonergan said. The number of boxes of bananas sold in Europe fell 15 percent. Sales of bananas plunged 20 percent in the Middle East, which continues to be wracked by wars and political instability.

Chiquita also sells private label and Fresh Express-brand bagged salads, an area where the company has tried to increase its revenue. Sales of the company’s bagged salads rose 2 percent in the fourth quarter, to $228 million.

But salads were a challenge, too, for Chiquita. The company has been hit hard by persistent drought in the West, which hurt growing regions in Yuma, Ariz., California’s Salinas Valley and Mexico. Shortages of iceberg lettuce and other salad ingredients led to higher costs, Chiquita said.

Chiquita assumes the drought will continue, and is shifting production to other places such as the Southeast U.S. in order to compensate for the loss of much of its arable land.

The company is also buying or leasing more land in Central America to increase the proportion of banana production it directly controls. Currently, Chiquita grows about 38 percent of the bananas it sells, and buys the rest from third-party growers. But bananas from farms the company owns or leases have a lower cost per box.

So Chiquita looks to buy or lease land again in places such as Panama, the first time the company has done so in years. Executives said Chiquita recently bought 500 hectares in Honduras, the company’s first purchase there since the 1990s.

For the full year, Chiquita reported a $16 million loss, down sharply from a $405 million loss in 2012. The company’s sales in 2013 were down less than 1 percent, to $3 billion.

Chiquita’s stock dropped 8 percent in early trading Thursday, but closed up 9 cents, less than 1 percent, at $11.79 a share.

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