Chiquita struggles on after Q1 loss

By Lorraine Heller

- Last updated on GMT

Related tags: Profit, Chief executive officer, Banana, Chiquita

Leading banana supplier Chiquita has reported a $3m loss for its
first quarter, hit by increased industry costs, unfavorable pricing
and an exit from unprofitable business in Chile.

Announced last week, the results for the quarter ended March 31 2007 reveal the firm's continuing difficulties after more than a year in a challenging operating environment. But according to chairman and chief executive officer Fernando Aguirre, Chiquita has made progress in its "strategy to return to profitable, sustainable growth."​ The firm plans to focus on increasing its financial flexibility, simplifying its business model and developing branded, innovative products to increase market share. "Overall, while we have faced several obstacles in recent quarters, I am confident that Chiquita is on the right path, and we saw tangible signs of progress in the first quarter. We remain committed to deliver sustainable, profitable growth, and we expect 2007 to be a positive step in reaching those goals,"​ said Aguirre. Total net sales for the quarter increased by 3 percent to $1.2bn, boosted by an 8 percent increase in banana sales. But profit for the firm's banana segment was hit by higher industry costs, such as purchased fruit, ship charters and fuel, as well as higher European banana tariffs and lower European banana pricing. Operating income for the segment was down 11 percent from last year, to $33m. The company claimed it made progress in its European banana business by growing volume and maintaining its premium market position and profitability, despite last year's regulatory changes, which imposed higher tariffs on imported bananas. In its North American banana business, the firm said it also grew volume, recovered cost increases, and is successfully introducing higher-margin, innovative products to differentiate the Chiquita brand. The company has also taken certain actions designed to improve profits in its other produce operations, including exiting unprofitable farm operations in Chile, which resulted in $5m charge to its first quarter results. Chiquita also announced it has signed agreements to sell its 12 refrigerated cargo vessels for $227m, an "important step"​ in its growth strategy. The firm has also been embroiled in a terrorist funding scandal, which resulted in a $25m fine. Chiquita, which was accused of funding certain groups in Colombia designated under US law as foreign terrorist organizations, voluntarily disclosed these to the Justice Department in April 2003. Chiquita claimed the payments, which were made by its former banana-producing subsidiary in Colombia, were "protection payments".

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