U.S.: Calavo expects gains from new "blue chip" customers - FreshFruitPortal.com

U.S.: Calavo expects gains from new "blue chip" customers

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U.S.: Calavo expects gains from new "blue chip" customers

Shares in U.S. fruit distributor Calavo Growers Inc (NASDAQ: CVGW) fell by 3.6% yesterday on the news that net income was down in the second quarter, despite the executive's optimistic views about the impacts of new investment initiatives. avocado_81589066 small

While revenue rose 19.4% year-on-year to US$166.3 million for the period, net income fell by 12% to US$2.2 million.

In a release, chief executive officer Lee E. Cole said a sharp revenue increase for the company's Calavo Foods and Renaissance Food Group (RFG) segments was a positive indicator.

"Fresh avocado sales paced this top-line growth—we packed 1.1 million more units quarter over quarter. Calavo packed and sold 40 percent more fresh avocado units in the fiscal 2013 second quarter over the same period last year, as our company focused on my stated goal to expand fresh avocado category leadership," he said.

"To put Calavo’s dramatic growth into proper context, the fresh-avocado market on the whole expanded by about 26 percent year to year. That industry figure, of course, includes Calavo’s own expansion; remove our company from that equation and the industry growth rate decreases to about 22 percent.

"In the near term, these market-share-building programs negatively impacted net income. However, we are confident that these strategic initiatives will expand our fresh-avocado industry leadership position and contribute positively to Calavo’s net income and per-share results moving forward."

While the company's Calavo Foods Segment - mainly including its legacy products of prepared avocados and Salsa Lisa - recorded a lower growth rate at 9%, "favorable fruit and production costs" edged segment gross margins slightly higher by 10%.

The company's Renaissance Food Group business notched a 15% rise in sales, while its gross margin was up 14%.

The company's selling, general and administrative (SG&A) expense rose by around US$600,000 year-on-year, explained by the US$593,000 worth of expenses in newly formed subsidiary FreshRealm.

Outlook

Cole expected a measurable strengthening of operating performance as the company advanced into the second fiscal half of 2013.

"With the large anticipated 2013 fruit crop in California and Mexico, we will realize volume gains that benefit our packinghouse production efficiencies—spreading this considerable supply to better leverage our fixed-cost infrastructure," he said.

"We also anticipate a recovery in our Fresh products segment margins during the second half of this year as the avocado market-share-building programs we have put in motion continue to drive volume gains in our unit-driven business model.

"I am enthusiastic about the road ahead for Calavo Foods. We are adding new blue-chip customers at a steady rate in both the grocery and foodservice categories and those new accounts will prove beneficial to segment sales moving forward."

He said the company expected a pilot for FreshRealm in the fall with a national launch to follow in early 2014."

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