Fresh Del Monte Produce saw profits tank in the third quarter thanks to low margins on bananas due to oversupply.
Overall net sales for Del Monte increased slightly to $952.7 million, but banana gross profit plummeted to $5.7 million from $39.6 million from the same quarter last year.
The steep decline in the banana segment contributed to much lower gross profit for Del Monte as a whole, $58.3 million versus $118.8 million in 2016.
Prepared food also had a rough quarter, with profit down to $8.2 million from $17.2 million.
Helping offset those issues, fresh-cut and avocados — part of the “other fresh produce” segment — were bright spots for the Coral Gables, Fla.-based company.
Fresh-cut net sales were up 18% to $158.8 million thanks to a 15% increase in volume and a 3% increase in pricing, and avocado net sales were up 35% to $90.4 million due to an 8% volume increase and a 25% pricing increase.
Avocados and fresh-cut account for slightly more than half the sales in the “other fresh produce” segment. For the other members of that group, gold pineapple and non-tropical, net sales were down, and overall profit for the segment fell to $44.4 million, down from $62 million in 2016.
“While we faced a number of challenges during the third quarter, we remained firmly focused on our diversification strategy as the catalyst to further strengthen our competitive advantage,” Mohammad Abu-Ghazaleh, chairman and CEO, said in a news release. “During the quarter we saw strong sales growth in the other fresh produce business segment, supported by our value-added fresh-cut and avocado product lines. We also increased our penetration within new distribution channels, bringing Del Monte-branded products closer to the end consumer.
“However, the quarter was marked by one of the industry’s worst oversupply of bananas in several years,” Abu-Ghazaleh said. “Looking forward, we are confident we have in place the strategies and capabilities to further enhance our competitive strength to deliver growth and shareholder value over the long-term.”