(UPDATED COVERAGE, Aug. 9) Announcing a 92% drop in profits for 2012’s second quarter compared to 2011, Chiquita Brands International Inc. officials said they are looking for a new chief executive and plan to restructure the company into a leaner operation.
The company’s stock dropped 41% in the past 12 months. It also logged four straight quarters of declining revenue, according to information presented during a quarterly conference call Aug. 7. Net income came in at $6 million for the second quarter this year, compared to $78 million in 2011.
Bananas posted a net sales drop of 4% for the quarter compared to 2011. Packaged salads and healthy snacks, reported as one segment, posted a 0.4% decrease in net sales. Other produce net sales were down 22.5% for the quarter.
“Our results exceeded our expectations, in spite of the significant impact from the dramatic reduction of the value of the euro and difficult pricing comparisons to 2011,” CEO Fernando Aguirre said during the teleconference.
A statement from Chiquita’s board said the search for a new leader has begun. The Charlotte, N.C.-based company has already hired an executive search firm. Chiquita officials said they hope to fill the top spot by the end of 2012.
Formerly with Procter & Gamble, Aguirre led Chiquita for almost nine years. A prepared statement from Chiquita’s lead independent director Kerrii Anderson said Aguirre “has led us through thick and thin.”
Aguirre will remain with Chiquita until a new CEO is hired. A filing with the Securities and Exchange Commission shows he will receive $40,000 a month as a during the transition process.
“I remain one of the largest shareholders of the company and my main interest is to increase the value for all shareholders,” Aguirre said.
During Aguirre’s time at Chiquita the company expanded research and development and invested heavily in diversification.
That strategy is history. Chiquita officials said the company is getting back to the basics.
“Chiquita will simplify and reduce its administrative and manufacturing overhead structure with the goal of achieving operating margins of 4% in bananas and 7% to 8% in salads over the next two to three years,” according to a company statement.
Chiquita officials expect to save at least $60 million annually, starting with $8 million in the fourth quarter of 2012, and achieving full realization in 2013. The plan includes eliminating about 310 jobs out of its international staff of about 21,000.
Spokesman Andrew Ciafardini said “other senior leader changes will be announced when appropriate.”
Changes were apparently under way months ago. In February, chief financial officer Michael Sims left and Brian Kocher moved into that position.
Kocher said the company should see an annual savings of $4 million by moving and consolidating staff. Costs of relocating the corporate headquarters from Cincinnati to Charlotte this year were offset by incentives, he said.
The Charlotte Chamber of Commerce helped put together the incentive package to attract Chiquita. Chamber president Bob Morgan said the company’s staff cuts could put the cash incentives in jeopardy.
“If the jobs do not come to Charlotte, the incentives do not get paid,” Morgan said in a prepared statement. “The headquarters must remain in Charlotte for 10 years, the average salary must be more than $100,000 and the company needs to keep 90% of its jobs in the city for 10 years.”
Another key component in Chiquita’s restructuring is the consolidation of three salad plants in Franklin, Ill., into one plant in Streamwood, Ill. Chiquita broke ground on the new plant in June. Ciafardini said it should be operating by February 2013.
The company has been banking on packaged salads to boost its bottom line, but “quality issues” have plagued the segment, said Kocher. He did not detail the quality issues. Those issues are being addressed and unprofitable products will be dropped from the line, he said.