This summary is based on the second quarter fiscal 2008 earnings call conducted by Chiquita Brands International, Inc. (CQB) on July 31, 2008.
Management:
Director of Corporate Communications: Ed Loyd
Chairman, Chief Executive Officer, and President: Fernando Aguirre
Chief Financial Officer, Senior Vice President: Jeffrey M. Zalla
Key Investors Issues
- EPS were $1.37 per share compared to 20 cents per share last year.
- Net income was $62.1 million compared to $8.6 million in the year-ago quarter.
- Net sales were up 6%, to $995 million from $934 million last year.
Second Quarter Highlights
Net sales rose 6% to $1 billion dollars.
- On an adjusted basis, the company reported income of $59.5 million, or $1.31 per share. This compares to income of $5.4 million, or 12 cents per share in the year ago period. Including the results from discontinued operations, net income for the quarter was $62 million, or $1.37 per share. This year’s quarter includes a net gain of $6 million, or 13 cents per share, for the collection of a prior year refund on non income tax claim. Last year’s quarter included a charge of $3 million, or 7 cents per share, related to a settlement of US anti-trust litigation.
- The company reported operating income of $72 million, compared to operating income of $31 million in the year ago quarter. This improvement was principally due to higher banana pricing in each of the company’s markets, strengthening of the Euro, and savings from business restructuring. These improvements were partly offset however, by disappointing performances in salads.
- Operating cash flow was $121 million, an increase of $45 million from the year ago period due to improvements in operating income.
In banana segment, year over year sales rose 17% to $563 million and operating income rose to $89 million dollars from $43 million in the year ago period.
Segment operating results benefited most from higher banana revenues in Europe and North America, as well as favorable impact of the Euro. These benefits allowed overcoming much higher industry costs, including the costs of purchased fruits and fuel, and lower volume primarily in the European market.
In North America, year over year pricing increased 35% on flat volume.
Due to increases in base contract prices, a fuel related surcharge, as well as a continuing surcharge to mitigate higher purchase fruit costs due to constrained industry-wide availability. The price trend in North America remained about the same.
In core European market, pricing increased 6% on lower base, and 23% on a dollar basis in the second quarter.
Volume decreased by 8% due to tight industry volume conditions and continued greater focus on maintaining premium product quality and price differentiation rather than market share. July trends in Europe show volume continuing to improve somewhat, but remaining below year ago levels, while local currency pricing comparisons softened to be about flat with year ago.
Salad and healthy snack segment net sales increased by 4% from the year ago quarter to $350 million.
Operating results were a loss of $6 million, compared to income of $10 million a year ago. Operating results were impacted by higher industry and production costs, as well as by $5 million of incremental spending behind the successful expansion of Just Fruit in a Bottle to six countries in Europe. These higher costs and investments were partially offset by improved pricing in retail and food service. Net revenue per case in value-added salad rose 4% in the second quarter versus a year ago on flat volume. Healthy snacks category including Just Fruit in a Bottle in currently generating operating losses as the company invests in establishing these new products.
In other produce segment, net sales decreased 30% to $82 million through the elimination of third party sales in Chile, and of low margin sales of Mexican vegetables.
Operating income increased to $5 million compared to break even a year ago, due to higher margins on sales of branded whole fresh fruit other than bananas. These results demonstrate that decisions to exit operations in Chile and to sell Atlanta have reduced risk and improved returns in other produce segments, which now generates an attractive return on limited invested capital.
- The company reached agreement to sell Atlanta AG, German distribution business, to UNIVEG, for at least $85 million in proceeds, which will primarily be used for debt reduction.
Year-to-Date Financial Highlights
