Chiquita Brands International, the Cincinnati-based marketer and distributor of fresh produce, has posted a sharp drop in first-quarter net income from US$87m, or $1.94 per diluted share, to $20m, or $0.46 per diluted share.
The company said the 2006 first-quarter results included $50m in higher costs associated with fuel and transportation, the continuing impact of weather-related events that occurred in late-2005 and higher banana import tariffs in Europe.
Net sales rose by 24% to $1.2bn. Chiquita said the increase stemmed primarily from the acquisition of Fresh Express, and was partly offset by lower banana volume in Europe and North America and unfavorable European exchange rates. Operating income fell from $94m to $39m.
“We faced a variety of challenges in the first quarter, including rising industry costs for fuel and transportation expenses as well as the transition to the new banana import regime in the European Union, where tariffs more than doubled this year,” said Fernando Aguirre, chairman and chief executive officer. “In addition, we incurred significantly higher sourcing costs due to the continuing effects of tropical storms in late 2005 and our decision to secure replacement fruit to meet customer needs.”
Aguirre added that the company expected banana supply shortfalls to prevail through the second quarter, but supply should return to more normal levels by the middle of the year. The company also anticipates higher industry costs, driven by higher fuel-related expenses, which it is attempting to mitigate through indexed fuel surcharge policies.
However, Aguirre was enthusiastic about the impact of the company’s acquisition of Fresh Express. “We are very excited about our sustained progress at Fresh Express,” he said. “We continue to expect this strategic acquisition to generate significant revenue and earnings growth and to be accretive to overall company earnings for the full-year 2006.”