This is a summary of the fourth quarter fiscal 2008 earnings call conducted by Chiquita Brands International, Inc. (CQB) on February 19, 2009.
Management:
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Chairman, President and CEO: Fernando Aguirre
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CFO and Senior Vice President: Jeffrey Zalla
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President, North America: Brian Kocher
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Director, Investor Relations: Brian Brown
Key Investor Issues:
- The company posted a net loss of $412 million, or $9.28 per share, compared to a loss of $26 million, or 68 cents per share, a year ago.
- Net sales slid to $839.3 million from $840.4 million.
- For the full year, Chiquita reported a net loss of $323.7 million, or $7.40 per share, versus a loss of $49 million, or $1.22 per share, in 2007.
- Net sales rose to $3.6 billion from $3.5 billion.
- For full year 2008, banana sales rose 12.4 percent to $2.1 billion, and operating income jumped 64.6 percent to $184.2 million.
Fourth Quarter Highlights:
On a comparable basis the full year income from continuing operations was $49 million or $1.12 per diluted share, and the fourth quarter loss from continuing operations was $33 million or $0.74 per diluted share.
On a reported basis, Chiquita Brands recorded a net loss in the fourth quarter of $411 million, which includes a non-cash impairment charge of $375 million for Fresh Express goodwill which resulted from the annual intangible asset impairment review. This non-cash charge was necessary to reduce the book value of Fresh Express goodwill through its estimated fair value in light of weak, economic and financial conditions as well as lower growth trends in the value-added salads category. Importantly, this charge does not have any impact on the day-to-day operations, on the investment plans for salad or on the Company’s liquidity, covenant compliance or borrowing capacity.
In the bananas segment, year-over-year sales grew 9% in the fourth quarter to $496 million and comparable operating income was $13 million versus $32 million on a year ago period.
The decrease in operating income was due to higher product sourcing costs, lower fuel hedging results, and lower average euro exchange rate. The result included about $8 million of higher products by cost as a result of flooding in Panama and Costa Rica.
Fuel hedging represented an $8 million loss in this year’s fourth quarter, compared to a gain of $7 million in a year ago quarter or a $15 million negative variance.
In North America, year-over-year banana pricing increased 34% in the fourth quarter due to increases in base contract prices and surcharges on flat volume.
January price trends remained about the same while volume was lower due to a shorter first week of the month. In the core European market in the fourth quarter, banana pricing was flat on a local basis and 7% lower on a dollar basis. Volume decreased by 2% due to tight industry volume condition and the continued focus on maintaining the company’s premium product quality and price differentiation rather than market share.
In January, local prices were about flat and dollar prices were about 8% lower than the year ago quarter on volumes that Chiquita Brands is down in double digit mostly due to the shorter first week of January and the exit of certain unprofitable volumes in the UK.
In the
salads and healthy snack segment, net sales decreased by 10% from the year ago quarter of $295 million primarily due to reduction in food service volume, which declined to 25% as Chiquita Brands exited certain contracts that were not efficiently profitable.
Net revenue per case in retail value added salads grows 6% in the fourth quarter versus the year ago period.
The fourth quarter of 2008 was impacted by higher industry and production costs which were partially offset by improved pricing. Comparable operating results were a loss of $14 million versus a loss of $2 million in the year ago quarter. These results for the quarter include $8 million of investment spending and the successful expansion of Just Fruit in a Bottle in six countries in Europe versus $5 million a year ago. The total investment in Just Fruit in a Bottle throughout 2008 was $26 million.
In January, retail value added salad volumes were down in mid single digits as expected due principally to the exit of unprofitable SKU and pricing per case continues to trend up about 5% versus year ago. Chiquita Brands has a clear plan to improve margins in this segment.
In the other produced segment, net sales decreased 17% of $48 million primarily due to the reduction of lower margin sales of Mexican vegetable.
Comparable operating income was $2 million versus breakeven results a year ago. This segment will continue to be seasonal but Chiquita Brands expected to deliver stronger operating income and cash flow in future years.
Higher product supply costs in bananas, a significantly lower euro exchange rate and sluggish local banana pricing in Europe at the start of this year.
