Core business focus props up Chiquita results in 2013

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Core business focus props up Chiquita results in 2013

Charlotte-based Chiquita Brands International (NYSE: CQB) may have reported a net loss for the 2013 financial year, but the result was US$389 million closer to breaking even than in 2012. banana bowl

The net loss of US$16 million for the full year, combined with a 68.6% rise in adjusted EBITDA to US$118 million, represents a significant improvement in the company's performance.

In the fourth quarter alone, Chiquita's net loss improved from US$333 million during the period in 202 to a loss of US$31 million in 2013.

CEO Ed Lonergan, who was appointed in October 2012, attributed the better results to a focus on the company's core business. Within weeks of his appointment, broke the story that Lonergan and the board had opted to exit the company's deciduous (grape) business, so that Chiquita could focus mainly on its products of pineapples, bananas and salads.

However, Chiquita later established a licensing agreement to sell branded deciduous fruits through new entity International Fruit Company. Other landmarks for 2013 include a supply agreement with Organics Unlimited, and the release of a comprehensive social responsibility report.

"Chiquita's improved results in 2013 reflect our decision to return our focus to the core businesses, and the first full year of execution," Lonergan said.

"Throughout the year and into the fourth quarter, we grew sales volume in both our North American banana business and our retail packaged salad business, and we continued to leverage our premium brand in the European banana market.

"We exited non-core, unprofitable businesses and delivered our promised SG&A and value chain efficiency initiatives in the year."

He said that progress had been made in strategic initiatives during the fourth quarter, despite continued headwinds from the startup of a new consolidated Midwest salads production facility, which Lonergan said was "largely behind us".

"As well, we faced certain challenges in the supply and pricing of our raw products. We faced a large oversupply of bananas in the quarter which negatively impacted the weekly trading markets globally.

"The market is only now moving back toward balance.  In addition, in our salad business, we experienced early quarter iceberg supply shortages and late quarter oversupply of raw salad products as a result of weather across our growing regions.

"Despite the challenges, we made substantial progress in the year and remain on glidepath in 2014 to deliver our long term financial targets."

The company's net sales of bananas remained consistent at US$2 billion in 2013, attributed to a decision to  prioritize profitability over volume, which resulted in Europe and the Middle East. Lower weekly market prices in North America due to higher volumes also had a part to play.

Operating income on a GAAP (generally accepted accounting principles) basis was up 45% for bananas in 2013 at US$112 million, while a GAAP operating loss of US$8 million was registered for the salads and healthy snacks category, compared to a US$218 million loss in 2012.

For 2014, the business remains focused on its "return to the core" strategy, and operating a branded commodity produce business.

"The company believes the actions it is taking position the company to remain on glidepath to the long term EBIT margin targets - to achieve run-rate target EBIT margins of 4% for Bananas and 7-8% for Salads by the end of 2015," the company said in a release.

At the time of writing CQB shares were up 1.92% at US$11.70 per share.



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