Chiquita Brands International, Inc. said it is “well-positioned” to grow salad volume in the food service industry following the widespread cyclosporiasis outbreak linked to competitor Taylor Farms de Mexico, the salad supplier for such national chains as Olive Garden.
“I have been involved in the food business for a long time, and food safety is always a real question mark about how we should handle it,” said Ed Lonergan, president and chief executive officer, during an Aug. 8 earnings call with analysts. “The reality is, any event in our industry is an event for the industry, and consumers make choices about what they see and hear in the marketplace.”
Describing food safety standards that “exceed the benchmarks of the industry,” Mr. Lonergan said Chiquita has the “capacity and capability” to add salad business.
“But our objective as an industry is to make a safe industry and an industry that consumers trust, and we all benefit,” he added.
A modest growth in salad sales contributed in part to a successful second quarter for Chiquita, which reported a 42% jump in net income, despite a 3% decline in net sales.
Growth in overall prepackaged salads as well as contract wins for branded and private label customers reversed a five-year decline in Chiquita’s retail salad business, but operating income for the salads and healthy snacks segment plunged 73% to $3 million from $11 million during the same period of the prior year, due to costs related to raw product, weather impacts and plant consolidation.
For the banana segment, operating income climbed to $55 million from $29 million during the same period of the prior year. Chiquita’s banana business benefited from higher volumes in North America and lower sourcing costs, but segment sales dropped to $519 million, down from $533 million during the same quarter of the previous year, due to lower volume sales in Europe and the Middle East, as well as lower prices in North America.
Strategic exits from unprofitable businesses have contributed positively to Chiquita’s bottom line, Mr. Lonergan said.
“Our plans to drive increased revenue and profitability in our core bananas and salads business are progressing well,” he said. “Overall, we are pleased with the early results of our strategic turnaround, as reflected in the first-half 2013 results.”
Net income leapt 65% for the first six months of fiscal 2013 to $33 million from a loss of $6 million during the same period of the previous year.
“Some of the factors we believe will positively contribute to Chiquita’s results for the balance of 2013 include banana contract wins that are driving U.S. market share growth; shipping and related logistics efficiencies; balance supply and demand of bananas, which is likely to continue at least through the summer and should support pricing at a time when excess supply typically pressures prices, agricultural practices and logistics process; improvements implemented beginning (in the fourth quarter of fiscal 2012) that are projected to continue to deliver improved results throughout the year; branded and private label wins in our salad business that will result in year-over-year volume growth for the first time since 2008; and the continued benefits from the 2012 (selling, general and administrative) restructuring,” Mr. Lonergan said.
