Chiquita Brands International, Inc. released positive financial and operating results for the second quarter 2009.
“Our second quarter results mark our best quarterly performance in the past decade and are a testament to our strategic focus and our pricing and cost discipline,” said Fernando Aguirre, chairman and chief executive officer. “We are particularly pleased with our value added salads business which is showing significant and sustainable profit improvement. The plans we began executing several months ago to achieve network efficiencies and manufacturing cost reductions are working well. Additionally, our profit focus continues to deliver strong results in bananas which benefited from record high pricing in Europe and sustained pricing in North America.”
Aguirre added, “While our results will continue to reflect normal seasonality, especially in our European banana operations, we are encouraged by our strong first-half results and now expect that, in the absence of any major unforeseen weather or other event risks, our second-half comparable income will improve versus a year ago by at least as much as we have improved in the first-half.”
Background: Click the link for information on the History of the Banana Trade in Honduras.
2009 Business Outlook
Based on the strong performance of its profit-improvement strategies and cost reduction initiatives, as well as better-than-anticipated first-half results in both salads and bananas, the company expects to deliver significantly improved full-year results in 2009, on a comparable basis, versus 2008. The company’s results in the third and fourth quarters are generally weaker than in the first half of the year due to the typical seasonality in European banana pricing, as well as seasonally lower consumption of salads in the fourth quarter. In addition, the company plans to increase its investment in consumer marketing and innovation in the second-half of 2009, consistent with its long-term plans to drive profitable sales growth. Even so, in the absence of any major weather or other negative event risks in the balance of the year, the company expects to improve its second-half comparable net income year-over-year by at least as much as in the first half of the year.
In the Banana segment, overall supply and consumer demand remain relatively stable. Banana sourcing and production costs are expected to increase in the balance of 2009 compared to 2008 due to increases in purchased fruit contract pricing and government-imposed exit prices. Reductions in fuel-related costs are expected to be partly offset by fuel hedging results, which at current market-forward rates would represent a gain in the balance of 2009, in an amount similar to the year ago period. Banana pricing is expected to remain relatively stable in North America for the remainder of the year, despite a significant decline in fuel-related surcharges as a component of pricing. Local European banana pricing, which was at record levels in the second quarter, is more difficult to predict but may return to more normal seasonal levels in the remainder of the year. Based on current market-forward rates, negative year-over-year comparisons in the value of the euro will continue through the third quarter of 2009, versus the average of $1.51 per euro in the 2008 third quarter. The company is approximately 75 percent hedged at about $1.41 per euro in the balance of 2009 and $1.39 per euro in the first half of 2010, compared to a spot rate of approximately $1.42 per euro at July 31, 2009.
In the Salads and Healthy Snacks segment, the company’s profit-improvement strategy in salads is on track to outperform the previously announced target of three to four percent operating margin for the full-year 2009, and is now expected to be at least six percent for the full-year 2009. However, the magnitude of improvement in salads in the balance of the year is not expected to be as robust as in the first half due to the company’s planned investment in consumer marketing and innovation as well as typically lower consumption of salads in the fourth quarter. In healthy snacks, the company expects reduced operating losses in 2009 from the roll-out of Just Fruit in a Bottle in seven European countries, in line with the target for individual markets to reach breakeven by the end of their third year following market launch.