Cost pressures continue despite price rise, says Chiquita

Chiquita Brands International has reported year-over-year increases in banana prices in all markets for October-November 2007 - but warns that industry cost pressures continue.

In its US Fresh Express value-added salads business, the company reported significant year-over-year volume growth in the two-month period, while net revenue per case rose slightly.

“We are pleased that banana pricing remains favourable and that the US value-added salads category is rebounding from slow growth a year ago,” said Fernando Aguirre, chairman and chief executive officer. “At the same time, rising industry costs, particularly from fuel and purchased raw products, continue to pressure our margins.

"This is one of the reasons why we recently restructured our business, to improve profitability by consolidating our operations and simplifying our overhead structure, which is expected to generate sustainable cost reductions of approximately $60-$80 million (£29-39m) annually beginning 2008.” The company has previously noted that it is experiencing significantly higher industry costs from items such as fuel, purchased raw product, paper and ship charters, and that this trend is expected to continue through the balance of the year and into 2008.

Banana prices in the company’s core European markets were up eight per cent year on year on a local currency basis (up 22 per cent on a US dollar basis), reflecting favourable comparisons to the year-ago quarter when the market had excess supply. Volume sold in the core European markets was down seven per cent year over year, due to the company’s strategy to maintain its price premium and not pursue volume at unfavourable margins.

While Hurricane Dean temporarily disrupted supply into the market from late August, these volumes have been largely replaced by strong growth from Ecuador and shifts in industry volumes from Russian and Mediterranean markets into core European markets. As a result, local pricing in this market was roughly flat in November, after significant increases in October.