Chiquita 3Q losses more than double; new CEO optimistic

11/07/2012 05:29:00 PM
Coral Beach

In his first quarterly earnings report for Chiquita Brands International, Ed Lonergan reported the company lost more than twice as much in the third quarter this year as it did in 2011.

Net sales were also down, dropping about 1% in the quarter, compared to 2011, coming in at $714 million.

Lonergan, who took over as chief executive officer Oct. 8 — eight days after the third quarter ended on Sept. 30 — said during a conference call Nov. 7 that the report was better than he had expected.

“I’m excited to join this company,” the new CEO said. “I like where the company is heading.”

Reporting a $67 million loss during 3Q of 2012 compared to a $29 million loss for the 2011 third quarter, Lonergan said he believes the decision by the Charlotte, N.C.-based company to focus on bananas and bagged salads would turn the numbers around.

“In two to three years we will reach 4% margins in bananas and 7% to 8% in salads,” Lonergan said.

He repeatedly referred to recently-signed banana contracts in North America during the earnings call as one of the reasons for his optimism. For the quarter, net banana sales dropped 1.6% to $446 million compared to $453 million in 2011.

Salads and “healthy snacks,” which Chiquita lumps together in its balance sheet, were flat for the quarter compared to 2011, coming in again at $240 million.

Lonergan said salads, particularly private label salads, are a growth area for the company, though. One aspect of that growth equation, he said, will be reducing costs by doing less consumer advertising for salads in North America. He said most consumers are more interested in Chiquita’s new salad clamshell packaging and kits than brands.

A financial analyst on the conference call asked if reducing consumer advertising for bagged salads would damage the category overall. Chief financial officer Brian Kocher said it would not.

“We will still maintain our trade programs and in-store promotions,” Kocher said. “What we are dropping is consumer brand-related ads because they did not deliver the returns we needed.”

Lonergan further explained the strategy.

“Retailers make the decision for consumers on salads as to what brand is on the shelves,” Lonegran said. “(Therefore) trade advertising and programs are more important.”

The new CEO said Chiquita is dealing with its private label salad contracts one-by-one, discussing customer needs as they come up.


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