Fresh Del Monte Produce Inc.'s (FDP) third-quarter net income fell 16 percent from the same period a year earlier, as the company dealt with rising costs of fuel, lower banana prices and a steep fall in melon sales.
The company released its third-quarter earnings report on Tuesday, and its net income per diluted share declined to $0.21 from $0.24 a year ago. Its net income stood at $12.1 million for the quarter, compared with $14.5 million in the third quarter of 2010. The third quarter is usually the most difficult for the produce industry.
The dip also comes after a strong second quarter in which the company had posted a net income of $92.8 million, which upped the company's $58.1 million mark in the second quarter of the prior year, based on a comparison against the company's second quarter earnings statement for that period.
Fresh Del Monte's chairman and CEO Mohammad Abu-Ghazaleh said considering all the factors, the company's third-quarter 2011 performance was solid.
Given the global economic uncertainty and its impact on consumer markets, I am pleased with Fresh Del Monte's solid operating results for the third quarter, Abu-Ghazaleh said in the statement.
That uncertainty and its impact on consumer markets took its toll on Fresh Del Monte's production of bananas, melon and tomatoes.
In a conference call Tuesday morning, Abu-Ghazaleh said the toughest challenge in the third quarter was the oversupply of bananas in Europe. This drove prices down 4 percent per unit. Higher sales of bananas in North America helped alleviate problems in Europe, and Fresh Del Monte took a gross profit loss of $1 million on bananas.
Another troubled area came with melon sales, which plunged 28 percent to $13.3 million.
Fresh Del Monte recalled nearly 60,000 cantaloupes in March amid concerns over a salmonella outbreak. The Food and Drug Administration implemented an import alert on Fresh Del Monte cantaloupe in early September, but Fresh Del Monte responded by filing a lawsuit against the FDA. The FDA lifted the alert in late September.
Also in September, a listeria outbreak from contaminated cantaloupes infected more than 100 people and has caused a reported 28 deaths across the country.
And sales of tomatoes, another item of produce to drastically decline, fell 32 percent to $16.5 million from the prior year period.
Overall for fresh produce, Fresh Del Monte posted an increase in gross profit. But that was offset by significantly higher fuel costs, according to the statement.
In the conference call, Abu-Ghazaleh was hopeful even as he acknowledged the realistic probability that economic conditions will continue to deteriorate in Europe. He remained encouraged the company would adjust.
We do not believe Europe's economic troubles will end any time soon, he said. Therefore, we remain proactive in adjusting our volumes ... to meet current market demands.
Shares of Fresh Del Monte dropped 4.7 percent Tuesday after the news.
Write to Brett LoGiurato at blogiurato@IBTimes.com.