Chiquita's modest results provide cautious hope

Following a net loss of $20 million (€16.6m) in the same period a year ago, the fruit giant believes that its business is now in better shape. Net sales were $954 million, up 44 per cent from $662 million in the third quarter 2004. Operating income was $20 million, compared to $10 million in the year-ago period, primarily due to the acquisition of Fresh Express. "We doubled our operating income and reported a modest net profit during a quarter in which the company historically has incurred financial losses," said Fernando Aguirre, chairman and chief executive officer. "During the third quarter this year, we managed quite well through various difficult issues, including mitigating the continuing impact of higher fuel, paper and ship charter costs facing the entire industry as well as successfully dealing with logistical challenges from several major hurricanes." However, the company remains embroiled in a bitter banana war with the European Union, a dispute now being mediated by the WTO. The firm is bitterly opposed to the bloc's proposal to replace its current system of licenses and quotas with a duty that will be placed on bananas imported from Latin America. The change in the EU banana import policy is an outcome of a long-running dispute initiated by the US government, primarily on behalf of Chiquita, challenging the protection system that Europe put in place favouring its former colonies, known as the ACP countries (Africa, Caribbean, and Pacific). In 2001, an agreement was reached between the US, the EU, and major exporting countries that provided an interim arrangement that promised to move to a single duty by 1 January 2006 to bring the system into compliance with WTO rules. But the EU has insisted that this duty should not apply to the ACP countries. As the proposed new tariff system would not apply to bananas imported from certain countries in Africa, the Caribbean and the Pacific, Chiquita claims that this would put its Latin-America-sourced bananas at a disadvantage. Chiquita has argued for a low duty so that Latin America can compete in the lucrative European market. Last week, the WTO again threw out the Commission's proposal for a single tariff of €187 per tonne for bananas imported from countries - mainly in Latin America - enjoying Most Favoured Nation status, giving hope to Chiquita that this issue will be resolved in their interests. Chiquita has other reasons to be optimistic. The acquisition of the Fresh Express unit of Performance Food Group earlier in the summer has helped increase Chiquita's consolidated annual revenues. Fresh Express is the retail market leader of value-added packaged salads in the United States. "We are on track with the integration of Fresh Express," said Aguirre. "Since the completion of the acquisition on 28 June 2005, cross-functional teams have been making good progress on plans to capture synergies from joint procurement efforts, optimisation of transportation and logistics networks, and facility consolidations, among other programmes. Chiquita is one of the largest banana producers in the world and a major supplier of bananas and other fruit in Europe and North America. World trade in bananas is dominated by Dole, Chiquita, Del Monte, Noboa and Fyffes.

Chiquita's modest results provide cautious hope

Chiquita's modest improved net income of $0.3 million for the third quarter 2005 suggests that the company is performing better, though EU trade issues still cloud the horizon.

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