Chiquita Brands to restructure and cut jobs
NEW YORK (Reuters) - Chiquita Brands International Inc (CQB.N) said on Monday it will cut management jobs and close facilities as part of a restructuring to generate annual cost savings of $60 million to $80 million, sending its shares up more than 7 percent.
Chiquita, known for its namesake bananas and Fresh Express bagged salads, said it will reduce the three highest levels of management by 21 percent, or 160 jobs.
"While we have already taken various actions to strengthen our balance sheet, improve our risk profile and diversify the company, we continue to endure rising industry costs, punitive European banana import regulations, and a slower-than-expected recovery in the value-added salads category," Chief Executive Fernando Aguirre said in a statement.
Chiquita's Fresh Express salads, which account for roughly a quarter of the company's sales, have experienced weakness in recent quarters because of an industry-wide E. coli scare last September, although its brands were not contaminated.
The company, which is trying to diversify its offerings, expects to take a one-time charge of $25 million in the fourth quarter of 2007, related to severance costs and asset write- downs.
It plans to use the proceeds from the cost savings to reduce debt.
BB&T Capital Markets analyst Heather Jones upgraded Chiquita's shares to "Buy" from "Hold" on the news, saying the moves should propel earnings higher next year.
"Their results haven't improved commensurate with improvements you've seen with Dole Food Co and Fresh Del Monte Produce Inc's (FDP.N) results this year," Jones told Reuters, adding she had believed Chiquita had a structural cost issue, but was not really doing anything to address it. "Even though I think they could do more, today was a very important step."
As part of the job cuts, the company said it eliminated the role of chief operating officer. Bob Kistinger, who previously served as COO, will be leaving the company "to pursue new opportunities," Chiquita said.
Chiquita said the changes will result in fewer layers of management, faster decision-making and improved accountability.
Also, the company said it will have one global supply chain and one global innovation program, which has included new products such as a pure fruit smoothie and new technology that lets packaged bananas stay fresh longer.
CLOSING UP SHOPS
Chiquita, based in Cincinnati, said it will close some facilities and exit certain nonstrategic or unprofitable businesses.
The company will close a banana distribution facility in Bradenton, Florida; a Fresh Express distribution center in Greencastle, Pennsylvania, and a production facility in Carrollton, Georgia.
The company will also discontinue its line of fresh-cut fruit bowls and will therefore convert two facilities, in Edgington, Illinois, and Salinas, California, to producing salads and other snacks, such as Chiquita Apple Bites.
The company also said it will explore strategic options for its German banana business, Atlanta AG, including a possible sale.
"With these changes, however, we will need to redefine our growth targets, since the negative impacts of rising industry costs, the EU tariff regime and the E. coli event have slowed down our strategic growth plan considerably, such that reaching our goals will take us longer than we originally estimated," Aguirre said.
The company said last month it expected a modest improvement in third-quarter sales and operating results, helped by higher banana prices.
Chiquita shares gained $1.24 to $18.25 in afternoon trading on the New York Stock Exchange. Fresh Del Monte shares were down 7.2 percent, or $2.70, at $34.85, a move BB&T's Jones attributed to profit-taking ahead of the company's earnings report on Tuesday.
