U.S.: Chiquita results fall short of expectations in Q1

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U.S.: Chiquita results fall short of expectations in Q1

While Wall Street was abuzz with news over the proposed merger of Chiquita Brands (NYSE: CQB) and Fyffes Plc (ESM: FFY) a couple of months ago, the U.S. company was battling with with the effects of weather on its business. chiquita

Chiquita has announced a GAAP net loss of US$25 million for the first quarter, down from a net income of US$2 million for the same period in 2013.

"Drought conditions in Central America and winter storms in North America and over the Atlantic disrupted our value chain and market demand for our products," CEO Ed Lonergan said in a release.

"While we grew our North American banana volume in excess of 5 percent compared to first quarter of 2013, shortfalls in contracted and owned farm supply required purchase of expensive weekly market fruit to serve our contracted business and resulted in inefficient shipping choices and short supply to our weekly market customers across countries.

"In salads and healthy snacks, winter weather resulted in mismatched demand versus supply in both our retail and foodservice businesses, impacting service and raw product requirements."

The executive added that retail salad volume grew 5% year-on-year, however volumes were substantially lower for the foodservice and fruit ingredient businesses.

This combination of factors meant the company did not perform as well as it had hoped.

"While we are confident in our 2014 progress toward our long term financial targets and benefits from our 'return to the core' strategic plan, our first quarter results did not meet expectations," Lonergan said.

While claiming it was the company's responsibility to offset the impacts of unexpected weather events, he said the proposed Fyffes deal would bring support on the risk management front.

"While weather impacts are a fact in our industry, our responsibility as leaders is to mitigate these risks," he said.

"In addition to bringing together two complementary businesses, we believe that the combination with Fyffes, which we announced on March 10, 2014, will fundamentally improve our ability to deal with weather risks and event-driven supply volatility in our bananas business due to the broader growing and shipping profiles of the combined entities.

"Last week, ChiquitaFyffes filed a registration statement with the SEC in connection with the proposed combination, and we have begun the regulatory review process in both North America and Europe."

Lonergan still expects to close the transaction by the end of the year.


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