(UPDATED CONTENT 11:53 a.m.) Fresh Del Monte Produce Inc. posted a net sales increase of 3% and a gross profit increase of almost 40% for the third quarter this year compared to its performance in 2013.
Chairman and CEO Mohammad Abu-Ghazaleh credited the positive results to higher sales volumes and increased banana prices worldwide in a news release Oct. 28.
“As we look forward, we will adhere to our long-term strategic plan to further diversify our product line, expand our distribution channels and presence in new and existing markets, and increase value for our shareholders,” the CEO said in the release.
The Coral Gables, Fla.-based company reported net sales for the third quarter of 2014 of $884.6 million, compared with $861.1 million in the third quarter of 2013.
Gross profit for the third quarter of 2014 increased 39% to $73.9 million, compared with $53.0 million in the third quarter of 2013. The company reported it benefitted from good exchange rates, lower ocean freight and distribution costs and ongoing operational efficiencies.
During a conference call Oct. 28, Abu-Ghazaleh said the company is moving ahead with plans that call for about $150 million in capital expenditures this year and a similar amount in 2015. He said work on farms in the Philippines is going as planned with about 7,400 acres being planted as scheduled. He said he anticipates about 20% more banana volume out of Asia in 2015.
Net sales of bananas in the quarter increased 5% to $423.8 million, compared with $402.3 million in the third quarter of 2013. Worldwide pricing increased 3% to $14.77 per unit, compared with $14.30 per unit in the third quarter of 2013. Volume was 2% higher than the prior year period.
Gross profit on bananas for the quarter was $22.5 million, compared with $1.3 million in the third quarter of 2013. Unit cost was 2% lower than the prior year period. Abu-Ghazaleh said banana costs accounted for 32% of the company’s costs in the third quarter.
Abu-Ghazaleh briefly commented on other banana companies that have been in the news recently, saying he does not see a threat “at all” from a new small Miami-based company that recently launched its own brand. He did not name AgroAmerica’s One Banana specifically, however.
“I would say good luck to them,” the Fresh Del Monte CEO said. “In my life I have seen so many come in and out, like a revolving door. The banana business is not easy. I don’t see it as a threat at all.”
Regarding the failed merger of Chiquita Brands International Inc. with the Irish company Fyffes Plc., Abu-Ghazaleh said many had expected it would help stabalize the commodity, but he did not necessarily agree.
“Don’t forget the buyers’ power,” he said. “The supermarket buyers are so significant it doesn’t leave much room for us to decide price.”
Chiquita’s board unanimously approved a buyout offer of $1.3 billion from two Brazilian firms, Cutrale Group and Safra Group, which set up an acquisition company named Cavendish Acquisitions Inc. Chiquita will remain incorporated in New Jersey as a wholly-owned subsidiary of the Brazilian company.
In its tomato business, the company is seeing sales increases related to its new farms in Virginia, Abu-Ghazaleh said. Production out of new tomato operations in Florida is beginning small right now, he said, and is expected to provide significant volumes next year.
The company’s balance sheet showed tomato net sales increased $3 million, or 12%, to $24.8 million for the quarter. Volume increased 63%. Pricing decreased 31%. Unit cost was 25% lower.
Fresh Del Monte logged lower sales volumes on fresh-cut products, melons and non-tropical lines, according to the financial report. Specific details reported on certain commodities included:
- Gold pineapple: Net sales increased 13% to $129.7 million. Volume increased 22%. Pricing decreased 7%. Unit cost was 5% lower;
- Fresh-cut: Net sales decreased 9% to $96.0 million. Volume decreased 12%. Pricing increased 3%. Unit cost was 4% higher. Because of lower sales in Europe and the United Kingdom;
- Non-tropical: Net sales decreased $1 million, or 1%, to $80.5 million. Volume decreased 7%. Pricing increased 7%. Unit cost was 4% higher; and
- Melons: Net sales decreased $1 million, or 13%, to $8.6 million. Volume decreased 16%. Pricing increased 4%. Unit cost was 9% higher.