Cincinnati-based Chiquita Brands International has posted a net loss for the fourth quarter of US$42m, or $0.99 per diluted share, including a $25m accrual related to a potential settlement of a previously disclosed US Department of Justice investigation. This compares with a net loss of $19m, or $0.45 per diluted share, in the same period last year. Net sales rose by 9% for the quarter to US$1.1bn.
For the full year, net sales rose by 15% to $4.5bn, with Chiquita reporting a net loss of $96m, or $2.28 per diluted share, compared to net income of $131m, or $2.92 per diluted share, in 2005.
“We continued to drive top-line growth in the fourth quarter and, as expected, we began to overcome several significant headwinds that had impacted our results in the third quarter,” said Fernando Aguirre, chairman and chief executive officer. “Net sales increased due primarily to improved banana volume in Europe and higher banana volume and pricing in North America.”
Aguirre added that the company continued to face a challenging and evolving environment due to competitive pressures and regulatory changes in the European banana market as well as lingering consumer concerns about the safety of fresh spinach and packaged salads in the US.
However, he added, the company believes the strategic initiatives it has put in place will effectively address these issues and allow it to gain momentum in 2007.
The company also gave an update on the US Department of Justice investigation into payments made by its former banana-producing subsidiary in Colombia, which was sold in June 2004, to certain groups in that country which had been designated under US law as foreign terrorist organisations.
The company had voluntarily disclosed this to the authorities in April 2003, and following the voluntary disclosure, the Justice Department undertook an investigation, including consideration by a grand jury. In March 2004, the Justice Department advised that, as part of its criminal investigation, it would be evaluating the role and conduct of the company and some of its officers in the matter.
During the fourth quarter of 2006, Chiquita commenced discussions with the Justice Department about the possibility of reaching a plea agreement. As a result of these discussions, Chiquita recorded a reserve of $25m in its financial statements for the quarter and full year, reflecting liability for payment of a proposed financial sanction contained in an offer of settlement made by the company to the Justice Department.
However, the company said that negotiations are ongoing, and there can be no assurance that a plea agreement will be reached or that the financial impacts of any agreement will not exceed the amounts currently accrued in the financial statements.
It added that in the event of an acceptable plea agreement between the company and the Justice Department not being reached, the company believes the Justice Department is likely to file charges, against which it would “aggressively defend itself”.
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