Chiquita Brands International is reversing four quarters of cash depletion as the banana grower cuts costs, jettisons grape and avocado businesses, and boosts sales of packaged salads to shore up its balance sheet.
Chief Executive Officer Ed Lonergan, who took over in October, is reshaping the company as a high-volume, low-cost producer of bananas and packaged salads by abandoning product lines such as healthy snacks in Europe and winding down its smoothie joint venture with Danone SA. Lonergan is streamlining operations by consolidating facilities in Illinois and expects to save $25 million this year and $60 million annually.
Chief Executive Officer Ed Lonergan, who took over in October, is reshaping the company as a high-volume, low-cost producer of bananas and packaged salads by abandoning product lines such as healthy snacks in Europe and winding down its smoothie joint venture with Danone SA. Lonergan is streamlining operations by consolidating facilities in Illinois and expects to save $25 million this year and $60 million annually.
The company’s $425 million of 7.875 percent secured notes due February 2021 have climbed 6.8 cents to 106.1 cents on the dollar to yield 6.82 cents since they were issued in January, while all B-rated bonds declined 3.7 cents over that period, Bank of America Merrill Lynch data show. The company sold the bonds to extend its maturity profile, using proceeds to retire loans and 7.5 percent secured notes, according to a company filing.
“During the past year, Chiquita has undertaken a strategic transformation to reduce its costs and improve our competitive positioning by focusing on our core businesses; salads in North American and bananas globally,” Ed Loyd, a spokesman for the company, said in an emailed statement.
Sales of avocados, grapes and healthy snacks such as dried banana and pineapple in Europe were unprofitable, Lonergan said during an Aug. 8 conference call to discuss second-quarter results with analysts and investors. Chiquita entered those businesses to offset volatility in the price of bananas, which make up 64.5 percent of the company’s $3.1 billion in sales, Kim Noland, an analyst at Gimme Credit, said in an email. Chiquita lacked the “know-how” to compete in those areas and instead increased costs, she said.
