US produce giant Chiquita Brands International has said it is beginning to see the results of its restructuring but will continue to drive costs down in a bid to be more competitive.
The company yesterday (12 March) booked an annual loss of over US$400m after impairment charges and other expenses hit the company’s bottom line. Net sales dropped 1.9% as banana revenues slid 2%, while sales of salads and healthy snacks remained consistent year-on-year.
Speaking on the firm’s earnings call yesterday, president and CEO Ed Lonergan said the group’s restructuring was complete and that it was now seeing the results they expected. Lonergan, however, said Chiquita‘s efforts were “far from complete” and emphasised it was “not declaring victory” on efficiency actions.
“We’ll continue to drive cost out of the value chain to leverage the velocity of advantages of our brands with the right value proposition to the customer and the consumer. We did a lot of pairing in 2012 and while we have a few more businesses to exit in 2013, we do not expect that to be accompanied by material cash outlay.”
In August last year, the company announced a restructuring that it expects will save the company around $60m annually.
The restructuring focused on a reduction in expenses and a focus of its resources on bananas and salads. The company said it would look at increasing volumes, reducing operating and administrative costs, and “aligning investment opportunities for both business units”.
Lonergan told analysts: “The pieces are largely in place for successful turnaround of this business. The restructuring has been executed quickly and efficiently, and key efficiency choices are paying dividends as we look to 2013 and beyond. We now have the financial flexibility to allow us to focus on our businesses and execution of our new strategy.
“To that end, the most important thing we can do is to drive cost out of the value chain so as to be more competitive in our chosen markets.”
He said a new Chicago plant will add an estimated $8m of annual benefit and that it will begin accruing benefits from a strategic sourcing initiative with a third-party advisor by late 2013.
He added: “We continue to focus on building our brand in the growth markets of Russia, Eastern Europe, the Mediterranean and the Middle East. These moods delivered value accretion in Q4 and should also do so in 2013.”
CFO Brian Kocher added the refinancing of the majority of Chiquita’s debt last month now provides the company with “financial flexibility” that will allow it to focus on running the business and executing the new strategy.
“The refinancing allowed us achieve many goals, including maintaining liquidity via new asset-based credit facility, extending maturities on a large part of our debt portfolio, preserving the opportunity to deleverage within the terms and conditions of the senior secured notes in the credit facility, and substantially eliminating the financial maintenance covenants of the previous facility.”
Kocher said the company not only expects comparable income and EBITDA to increase, but the pacing of EBITDA throughout the year to differ from historical trends.
“As we look forward to 2013, the company is already seeing tangible progress following restructuring. With bananas, our North American contract wins in Q4 2012 will drive US market share growth in 2013, and we continue to maintain a leadership position in our European markets.”
He added: “Opportunities exists for further value chain and overhead simplification. Our work on driving out cost and delivering a more competitive business model will never be finished.”