Higher revenues and a surge in gross margins helped California-based avocado company Calavo Growers Inc (NASDAQ: CVGW) more than triple its net income in the second quarter, reaching a record level of US$6.7 million.

Shares rose 6.78% on the announcement yesterday, hitting US$33.39 per share. This compares to US$30.41 per share a year ago, and US$16.08 per share five years ago.

The 65% uptick in margins, mainly coming from Calavo's fresh product and Renaissance Food Group LLC (RFG) segments, outpaced a revenue growth of 17.2% that took sales to US$194.9 million.

CEO Lee E. Cole was upbeat about performance during the quarter.

"Indicative of the company’s core strength, we did an outstanding job managing Mexican fresh-avocado sourcing and sales operations which contributed to the substantial improvement in Fresh segment gross margin versus last year’s second quarter and paced total gross margin gain of about 280 basis points in the most recent period," Cole said in a release.

"Furthermore, RFG’s improved gross-margin is reflective of certain economies of scale resulting from strong, consistent sales growth, better labor utilization, and improved raw-material quality and yield."

While net income may have tripled for the quarter, it doubled year-on-year for the six months to April 30, 2014.

Cole highlighted the company was in a favorable position for the second half of the year, with momentum behind its operating performance and all three business segments going to plan.

"As forecast and previously reported, our best-in-class, diversified fresh avocado sourcing capability has stepped up supply from Mexico to offset the small California harvest this year," Cole said.

"The limited domestic harvest is constraining industry volume growth at present. We anticipate no change in that regard in the third quarter, but do expect volume growth to accelerate starting in September and October of this year and continuing into fiscal 2015.

"We are pleased by the steady uptick of incremental revenue and profit contribution by RFG since becoming part of the Calavo family of brands."

In terms of investments, while start-up expenses for its FreshRealm networking technology brought down profitability in the last quarter of 2013, Calavo has planned a California launch for the product with multiple food merchants this summer.

"Like all Calavo offerings, FreshRealm is positioned to attract the fast-growing segment of the population that desires more fresh food in their lives," Cole said.

"In addition to being able to bring fresher food directly to the public, the offering will supply fresh food to the market using technology and leading-edge product innovation in unprecedented ways.

"Building upon our outstanding year-to-date performance and the vast resources Calavo brings to bear across its various businesses, I’m looking forward with anticipation to completing a very successful fiscal 2014 and posting record earnings per share."

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