Banana Business Can Be Squishy

Posted by Rick Stine on May 04, 2010
Earnings, Economy, Food

bananasAs Fresh Del Monte Produce knows all too well, there are many factors out of your control when in you are in an agriculture business. In reporting earnings today, the company broke out sales and profit numbers for specific parts of its business. Banana sales in the most recent quartrer represented 43% of its business. So, how bananas go is often how the company’s quarter goes. Top line looked good – banana sales up 11% to $402.7 million. But that’s where the good news stopped. Pricing dropped 4% worldwide at the same time unit costs went up 4%. It seems much less demand for bananas in Europe, Japan and Korea. And a supply issue in the Phillipines (drought has hurt production) hasn’t contributed to pricing power. Also, unfavorable exchange rates, higher costs associated with buying bananas for resale from other growers and much higher ocean freight costs really dug into gross profits – the gross profit this quarter was $18 million versus $44 million a year ago. And tough conditions may persist.

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May 4, 2010

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