Fresh Del Monte Produce Inc., executives reported that an oversupply of bananas in 2015 and the use of banana ships in the global drug trade have had an adverse effect on quarterly earnings, despite gains made in the growing avocado business.
The fruit and vegetable company’s FDP, -4.89% shares closed down 4.9% at $38.52 on Tuesday 23 February, after it reported a loss of $1.39 per share, up from a penny per share the year before. Revenue totaled $977.9 million, up 5.2% year-over-year. The FactSet estimate forecast earnings of 4 cents per share and sales of $932 million.
Banana sales were $474.3 million, up 8% from $439 million, owing largely to increased sales volume in the Middle East, North America and Asia, the company said in its Tuesday earnings release. However, global pricing was down 82 cents, or 6% per unit.
“Banana pricing is the lowest price of any type of fruit in the market,” said Chief Executive Mohammad Abu-Ghazaleh during the company’s earnings call. The year started with a banana shortage, then experienced an “explosion” in places like Costa Rica and Guatemala.
“The oversupply was an unfortunate short-term situation that resulted in us missing several key financial targets in the fourth quarter and constrained our ability to deliver optimal earnings for the full year,” said Abu-Ghazaleh.
“Today I’m happy to report that supply is better and prices are climbing,” he said.
But that wasn’t the only problem plaguing the banana business. “Unfortunately we see a lot of drug smuggling in banana ships and pineapple containers,” said Abu-Ghazaleh, which had an impact throughout the year.
In addition to a banana turnaround, the company is seeing success in its avocado business.
Avocado sales for the quarter were up 27% to $39.1 million. Volume increased 42% and pricing decreased 10%. Abu-Ghazaleh highlighted the North American avocado market in his remarks.
Fresh Del Monte stock is down 13.1% for the past three months, but up 10.4% for the past year. The S&P 500 is down 8.8% for the past 12 months.
