Fresh produce giant Fresh Del Monte has posted net sales of $1.07 billion in the third quarter of its financial year, in line with the same quarter the previous year, as the business continues to work towards increasing its value-added product range.
Its Fresh and added-value products division saw sales of $652.9 million, up from $639.9 million in the same period the previous year, and now accounts for 61% of the group's sales, and 72% of its profits.
Banana Costs
However, as Mohammad Abu-Ghazaleh, the company's chief executive told analysts, challenges remain, not least in the group's banana segment, which accounts for more than a third (36%) of the group's sales.
"The banana business has been [...] in turmoil for the last - I would say 10, 15 years," Abu-Ghazaleh told analysts. "And I think, that this cannot hold forever. I mean, costs are going up in every respect, be it on the production level, on the shipping level, ports, you name it. Transportation, everything."
Abu-Ghazaleh also suggested that the retail sector's demand for low on-shelf prices in the banana segment is likely to come to a head in the near future.
"This cannot go on forever. I mean the retailers, the buyers has to understand that unless the prices are adjusted going forward there will be a time when there will be issues in this industry," he said. "And I believe it will adjust by itself as we go forward."
Profit Drivers
Gross profit at Fresh Del Monte in the third quarter was $74.7 million, compared with $52.6 million in the third quarter of 2018.
The company said that this gross profit was driven largely by higher selling prices in the company's fresh, value-added and banana segments, however it was offset to a degree by lower sales volume, higher fruit production and procurement costs, as well as unfavourable exchange rates.
The group said that it is 'emphasizing value-added margin growth in all product lines', increasing its range of global partnerships, introducing what it describes as 'trend-forward' products, and opening new facilities in Mexico and Japan.
Commenting to analysts, Abu-Ghazaleh said that the group was introducing protein salads and other value-added items to its range for quick service restaurants, as well as a range of fresh-cut fruit options.
"This is a trend that Fresh Del Monte will be moving toward," he said. "As we go forward, quarter-to-quarter, I am sure that you will be hearing more news about many other initiatives that will add to our very well disciplined plan to change the company from a banana-based company into a more diversified value-added products company."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
