Del Monte posts gains amid concerns about banana pricing - The Packer

Del Monte posts gains amid concerns about banana pricing

04/30/2014 12:56:00 PM
Coral Beach

Del MonteEven though banana business was up compared to the first quarter of 2013, Fresh Del Monte Produce Inc. officials say the company’s off-shore melon business was the pot of gold at the end of this year’s first quarterly report.

The Coral Gables, Fla.-based company posted gross profits of $106.7 million for the first quarter of 2014, compared with $98.6 million in 2013, said Richard Contreras, chief financial officer, during a conference call April 29.

The company’s net sales of melons dropped 1% to $51.2 million and volumes declined 19%, but pricing increases of 23% gave the company a big boost.

“The majority of our gross profit increase this quarter is attributable to this year’s off-shore melon season,” Contreras said.

Fresh Del Monte’s net banana sales — which accounted for 29% of its gross profit for the quarter — increased, as did overall volumes, but unit costs also increased.

“If it wasn’t for our other areas I don’t think we would have been able to deliver a quarter like this,” said Mohammad Abu-Ghazaleh, chairman and chief executive officer. “Our melons were very important.”

Banana business

Abu-Ghazaleh said the first quarter demonstrated Fresh Del Monte is making progress with strategic initiatives. He said he is closely watching several factors related to the banana side of the business, though.

Banana disease has and continues to be a concern even though it hasn’t hit main growing regions. The CEO said production volumes are also a concern. He said many fields have been producing bananas for 50-60 years and the land is becoming exhausted, meaning higher yields are more and more difficult to achieve.

But disease and yields are not his top banana concern. “Pricing isn’t that much improved,” he said, adding that costs keep rising.

“If pricing doesn’t go along with cost increases, I don’t see how the industry can survive in the long term,” Abu-Ghazaleh said. “My worry is … the market and the retailers and buyers don’t seem to realize this. One day they will end up with no fruit to sell and they will lose their golden goose.”

Abu-Ghazaleh alluded to the pending merger between Chiquita Brands International and Fyffes Plc., although he did not mention the companies by name, saying that consolidation in the industry has the potential to help everyone in the banana business.

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