A significant reduction in the cost of sales helped Chiquita Brands International post a very strong financial result in the second quarter, with net income rising 230% year-on-year to reach US$59.6 million.
In a Form 10-Q filed with the Securities and Exchange Commission (SEC), the now privately owned produce multinational posted the positive result despite a 6% drop in sales to US$777 million.
The group also incurred costs of US$12 million due to the termination of a strategic combination with Fyffes Plc (ESM:FFY) during the period.
For the six months ended June 30, Chiquita posted a loss of US$5 million but this is an improvement on the loss of US$6.8 million recorded in the first half of 2014.
The company noted it had disposed of a dormant distribution business in Singapore in the second quarter, for an “immaterial amount” while in the first quarter it had exited an African banana sourcing business which resulted in a net loss of less than US$1 million.
Chiquita also noted that while the Iranian market was important for its bananas sourced from the Philippines, in recent years the business had become challenging.
“Even though the sales in Iran are permitted, the international sanctions against Iran affected the ability of Iranian customers to pay invoices within terms because it became difficult for them to obtain U.S. dollars, euros or other suitable currencies in sufficient quantity on a regular basis,” Chiquita said.
“Certain customers have so far been able to find acceptable methods of payment to comply with their payment plans. However, some customers have not, and as a result, we recorded a reserve of $9 million in 2012, an additional $2 million in 2013, and another $2 million in 2015 as a result of further delinquency and other repayment risk.”
The company will be sourcing Philippine bananas for sale in the Middle East under a committed-volume, long-term purchase contract with a former joint venture partner through 2016, but to mitigate risk it has reduced the amount of bananas sent to the region and has developed customers in other Middle Eastern markets.