California-based avocado group Calavo Growers Inc (NASDAQ: CVGW) notched a 30.5% rise in gross margins for the first quarter of 2015, leading to a US$7.1 million boost in profits.
In a release, CEO Lee Cole said the year began in “strong form” with a quarterly net income of US$5.3 million compared to a US$1.8 million loss for the same period last year.
“In Calavo’s Fresh business segment, we did an excellent job of sourcing and marketing Mexican-grown avocados, packing substantially more units in this year’s first quarter from one year earlier which contributed to the overall company gross margin gains,” Cole said.
“The revenue trend line in the RFG [Renaissance Food Group] business segment, as expected and previously announced, continued its steady upward advance in the most-recent period.
“And Calavo Foods produced and sold significantly more fresh prepared avocados, while doing an outstanding job of managing fruit and production costs.”
Revenue rose 12% for Calavo’s fresh segment business in the quarter, reaching US$111.6 million year-on-year, while the volume was 200,000 units higher at 4.4 million, mainly due to a greater number of avocados and tomatoes packed.
Profits could have been even greater if it weren’t for increased selling, general and administrative (SG&A) expenses in the RFG segment.
“The higher RFG costs for SG&A relate to investment in business-development and capacity-building initiatives which we expect to generate incremental revenue and profit contribution later this year.”
Lee expected to make the most of a trend toward two billion pounds of avocado consumption for the industry in 2015.
“Our Mexican avocado operations will continue to track positively and, along with California production which begins to ramp up late in the second fiscal quarter, will drive the company’s performance,” he said.
“To that end, we anticipate the company to see a second quarter year-over-year increase in avocado packing volume of at least 15 percent.”