Banana prices rise again, says Chiquita

By Lorraine Heller

- Last updated on GMT

Related tags Chiquita European union North america

Banana firm Chiquita is continuing its price increases for the
fruit, citing squeezed margins as cost pressures continue.

In its intraquarter update for the third quarter 2007, published this week, Chiquita reported "meaningful" year-over-year banana price hikes in July and August in all its markets.

The announcement comes after price rises had shown signs of slowing in June this year, following more than a year of continuous price hikes, as the firm struggled to offset the negative impact of new European import tariffs.

But according to Chiquita, cost pressures on the firm continue, and this has resulted in a 5 percent increase in North American pricing, a 17 percent increase in Europe (US dollar basis) and a 12 percent increase in Asia Pacific and the Middle East (US dollar basis).

In North America, Chiquita said the price rises reflect increases in base contract prices, higher year-on-year surcharges linked to a third-party fuel price index, and higher market pricing on non-contract volumes.

In Europe price increases reflected "favorable" comparisons to the year-ago quarter when excessive heat in Europe depressed demand for bananas and the market had excess supply.

Banana volume rose 2 percent in North America, was steady in Europe, and fell 4 percent in Asia Pacific and the Middle East.

Fernando Aguirre, Chiquita chairman and chief executive officer said: "we anticipate a slight improvement in the company's net sales in the third quarter compared to the same period in 2006, but margins will be squeezed as cost pressures continue".

"Despite the near-term issues, we believe we are on the right track and expect to report a greater level of year-on-year improvement in the fourth quarter, which would continue the positive year-on-year trend.

We remain confident in our strategy to generate sustainable, profitable growth by delivering innovative, higher-margin products and building a high-performance organization."

The company also provided an update on expected impacts from Hurricanes Dean and Felix.

In late August, Hurricane Dean damaged important European sources of bananas in the Caribbean, including Martinique, Guadeloupe, St. Lucia, Dominica and Jamaica.

Chiquita said it does not source from these areas; however, the banana industry overall has lost an estimated 300,000 to 400,000 boxes per week of normal supply, or approximately 6 to 8 percent of the five million boxes of bananas shipped weekly to meet consumer demand in the European Union.

This shortfall, and the corresponding favorable pricing environment, is likely to affect the European market for six to nine months, or longer, depending on the extent of the damage, said the firm.

In early September, Hurricane Felix made landfall in Central America.

Chiquita said it believes that damage to Chiquita's sources of supply has been minimal.

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