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Chiquita confident despite profit fall

By Lorraine Heller , 12-Nov-2007

Struggling banana supplier Chiquita again saw profits plunge in its latest quarter, although a modest improvement from last year has prompted the firm to remain upbeat.

The company reported a net loss of $28m in the third quarter, which compares to a $96m loss in the year-ago period.

 

 

 

Chiquita's business has taken some severe hits recently from a new EU banana import regime, an E coli contamination in the US, a terrorist funding scandal, and overall increased industry costs.

 

 

 

But Fernando Aguirre, chairman and chief executive officer said: "While we continue to face rising industry costs and other market challenges, we expect to deliver further year-over-year progress in operating results in the fourth quarter and in the year ahead."

 

 

The company saw a modest increase in net sales for the period, although this improvement was down to higher pricing and favorable currency rates. In terms of volumes, the firm saw a decline during the quarter.

 

 

 

Chiquita was also hit by a number of charges, including $9m linked to industry concerns about fresh spinach, following an E coli contamination earlier this year. The firm also forked out $4m related to its downsizing in Chile.

 

 

 

Yet despite the challenges faced by the company in recent years, this quarter's results show signs of improvement for its banana segment as it starts to emerge from the major hit received after new EU banana import tariffs were implemented.

 

 

 

Net sales for the division increased three percent to $458m in the quarter as banana pricing in Europe started to stabilize. The firm reported $4m segment operating income, compared to an operating loss of $32m last year.

 

 

 

At the end of last month, Chiquita announced a wide sweeping restructuring plan in an effort to streamline its business and improve profitability.

 

 

The strategy, which is expected to lead to annual cost reductions of $60m to $80m, includes consolidating operations and slashing 160 management jobs in order to improve efficiency and innovation.

 

 

 

The firm said that its "strategic growth plan" has been significantly slowed down by the challenges it has faced recently. "Reaching our goals will take us longer than we originally estimated," said Aguirre.

 

 

 

"Since 2005, market dynamics and the competitive landscape have been rapidly changing, which has limited our profitability and slowed the execution of our strategy," he said.

 

 

 

The firm said it has simplified its organizational structure and realigned it by geography rather than product line.

 

 

 

It also said its product supply has been consolidated worldwide to drive greater network efficiency, prioritize the development of higher-margin, value-added products, and improve its market competitiveness.

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