Chiquita banana prices still on the up

By Laura Crowley

- Last updated on GMT

Related tags: Percent, Banana, Chiquita

Banana prices in all markets continue to rise for Chiquita as the
company attempts to counter increasing industry costs.

The firm's report on fourth quarter results, ending December 2007 and released today, showed that banana pricing in North America was up 7 percent compared to the same quarter in 2006. Meanwhile, the leading banana supplier announced that its net sales were up 6 percent in this quarter, up to $1.2bn, meaning net sales for the whole financial year increased 4 percent to $4.7bn. Still, the company reported continued net losses. The volume of bananas sold in North America was up just 1 percent, and represented 43 percent of all bananas sold worldwide. The most substantial increases in volume were recorded in Chiquita's trading markets, which consist primarily of European and Mediterranean countries that do not belong to the European Union. There, volume increased 55 percent, taking a 7 percent share of the overall volume. Prices went up significantly, by 14 percent since 2006. The greatest price increase was witnessed in the core European markets, with an 18 percent rise when measured in US dollars, and 5 percent at local currencies. European banana sales made up 36 percent of the total volume. Prices were up 6 percent in Asia Pacific and the Middle East, where 14 percent of the total volume of bananas was sold. The cost and market pressures Chiquita has faced in recent years have made their way repeatedly to the company's balance sheet, with the final quarterly results being no exception. Chiquita reported an operating income loss ranging from $10m to $20m in the final quarter, which is slightly improved on last year's estimated range of between $23 and $33. Increased net sales have helped alleviate company debt by 21 percent, although it still remains heavily in the red. Its current debt lies at $814m, down from $1.03bn at the same point last year. Some of the recent hits to the firm's business have come from a new EU banana import regime, an E coli contamination in the US, a terrorist funding scandal, and overall increased industry costs. In response to these pressures, Chiquita recently announced a wide sweeping restructuring plan. "We will remain focused on three priorities in 2008 to drive progress on our strategy to achieve sustainable, profitable growth,"​ said Fernando Aguirre, chairman and CEO. "First we will complete the restructuring we began implementing in October to improve profitability by consolidating our operations and simplifying our overhead structure. Second, we will seek to improve execution and market performance in our core businesses, while managing through a difficult cost environment. " Third, we will continue to invest in long-term growth opportunities by expanding the introduction of innovative, higher-margin products that can help diversify our business by product, channel and geography." ​ The company says it expects improved year-on-year performance in sales and operating income in 2008, primarily due to contract and market price increases, including fuel-related surcharges, and the benefits of the business restructuring, which remains on track to deliver $60-80 million in year-on- year cost savings in 2008. However, it still expects significant year-on-year increases in industry and other costs, which may exceed $120 million in 2008, before fuel hedging gains. As announced in October, the company is exploring strategic alternatives for its German distribution business, Atlanta AG, including a possible sale.

Related topics: Fruit, vegetable, nut ingredients

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