(UPDATED COVERAGE, Aug. 4) Chiquita Brands International Inc. reported a drop in second-quarter profit, as the company’s slumping salad business offset stronger banana sales in North America.
Sales in Chiquita’s salads and healthy snacks unit, which includes Fresh Express products, fell to $253 million during the three months ended June 30, down more than 12% from the same period a year earlier, the company said in an Aug. 3 news release.
Chiquita’s salad sales have eroded for over two years, reflecting retailers’ shift toward cheaper, private-label products. Fernando Aguirre, Chiquita’s chief executive officer, said the weakness in the previous quarter was expected, but he anticipates sales volumes will improve by the fourth quarter as the company completes an overhaul of the business that includes cost cuts.
“The combination of our marketing investments… (and) better cost efficiencies are already delivering new distribution points which will result in better volume comparisons the rest of the year,” Aguirre said in the release, referring to salads.
On a volume basis, Chiquita’s salad sales fell 12% during the quarter, while pricing fell 1.3%, the company said. During 2009 and 2010, salad dollar sales fell 13% and 9.4%, respectively.
Fresh Express products include ready-to-eat salads, spinach and other vegetables. The business was the first in the U.S. to make ready-to-eat salads available at grocery stores nationwide, according to Cincinnati-based Chiquita’s website.
Chiquita is the last of the three largest, U.S.-based multinational fruit and vegetable companies to report second-quarter results, following Dole Food Co. on July 28 and Fresh Del Monte Produce Inc. on Aug. 2.
As with its two biggest U.S. competitors, Chiquita was helped by stronger banana prices in North America, as well as supplies that have returned closer to normal levels following storms and floods that destroyed some Latin American crops last year.
During the second quarter, Chiquita’s banana sales rose 1.5% from the same period a year earlier, to $555 million, as North American prices rose 11%. Banana sales volume in North America totaled 16.6 million 40-pound boxes, unchanged from a year earlier. Bananas account for nearly two-thirds of Chiquita’s total sales.
Europe has again become a trouble spot, however, with banana prices sliding amid economic turmoil and an E. coli outbreak in Germany that hurt produce demand. In 2010, Chiquita and other large fruit distributors saw profits come under pressure as excess supplies and soft economies led to weakness in Europe.
Chiquita said banana sales volume in Europe fell 5.4% during the quarter as prices declined 2.8% in local currency terms.
“Industry banana supplies have increased to more normal seasonal levels,” according to the Chiquita release. As a result, the company “expects to supply anticipated customer contract volume growth at lower cost than in 2010, primarily in the fourth quarter, which last year reflected extraordinarily high costs due to severe industry supply shortages.”
During the quarter, Chiquita posted income from comparable operations of $34 million, down from $64 million during the same period a year earlier. Net sales fell 5% to $870 million.
Earnings fell short of most analysts’ forecasts, sending Chiquita shares to the lowest level in more than two years. In late trading Aug. 4, Chiquita shares fell $2.08, or 18%, to $9.27. The stock earlier dropped to $8.92, the lowest intraday price since June 2009.