Fresh-cut produce was the single business segment to post net sales increases for Fresh Del Monte in the second quarter, which showed the company’s top line item of bananas with a 9% net sales decrease.
Overall though, the Coral Gables, Fla.-based company posted higher earnings during 2012’s second quarter, compared to 2011, and beat predictions from analysts. Del Monte officials discussed the quarter during a conference July 31.
“We are extremely pleased with the strong earnings growth,” said chairman and chief executive officer Mohammad Abu-Ghazaleh, downplaying a 7.9% decrease in net sales.
Company officials said earnings per diluted share were 99 cents for the quarter, compared to 59 cents in 2011’s second quarter. The Wall Street Journal reported analysts polled by Thomson Reuters had forecast the company’s earnings would be 91 cents.
Fresh Del Monte reported a profit of $57.2 million for April through June, up from $35.2 million compared to the same time last year. However, overall its net sales dropped to $957.6 million from slightly over $1 billion in 2011’s second quarter.
Abu-Ghazaleh said the company has taken steps to improve its financial footing. Among those was the sale of an unprofitable fresh-cut facility in Europe and rationalization of tomatoes and melons.
He said he hopes bananas in Ecuador can be rationalized and controlled soon in a manner that will allow growers to survive but that will stabilize supplies. Abu-Ghazaleh blamed the company’s decreasing banana sales on lower volumes in the Mid-East and Europe and low prices in North America and Asia.
The appearance of Philippine bananas in China hasn’t helped Del Monte, neither has the performance of the euro, Abu-Ghazaleh said. One analyst asked him if the company plans to tighten supplies to combat those problems and how long such a measure would take.
“That’s the million-dollar question,” Abu-Ghazaleh said.
“Europe will not improve in the near term. In three to five years, when we see who is still standing, we will know the answer.”
He spoke more confidently about Fresh Del Monte’s melon and fresh-cut programs.
Even though net sales of melons dropped 14%, a decrease in volumes of 35% helped boost pricing 32%. Abu-Ghazaleh said “the melon business has been rationalized and will be more steady.”
“I believe we have the right mix now with three or four varieties,” Abu-Ghazaleh said. “We are also working with watermelon, which is an important component for our fresh-cut program.”
The fresh-cut program holds promise, Abu-Ghazaleh said, in virtually all regions of the world.
“We began in Saudi Arabia less than two years ago and as we speak we are increasing and growing stronger in fresh-cut markets and juices in the Middle East,” Abu-Ghazaleh said.
He said Fresh Del Monte would increase its offerings of added-value fresh produce in the Mid-East by the end of this year.