Del Monte says Hawaii close helped net
The company said closing its operations here added $2.9M to its 1Q bottom line
NEW YORK » Shares of Fresh Del Monte Produce Inc. soared yesterday and hit a new high after reporting its first-quarter profit surged on of cost cuts and the closing of pineapple operations in Hawaii.
Before the market opened yesterday, the fresh fruit and vegetable company reported its profited more than tripled for the quarter, soundly beating the expectations of Wall Street analysts.
The stock price jumped $3.81, or 18.7 percent, to $24.18 after hitting a 52-week high of $24.45 earlier in the day. The shares have traded between $14.40 and $20.37 during the past year.
Net income for the first quarter of 2007 was $51.6 million, the company said, compared with adjusted net income of $16.5 million for the same period last year.
The company attributed the better-than-expected report to "stringent costs-savings initiatives" and a $2.9 million gain from "exit activities associated with the company's Hawaii pineapple operations."
The company did not detail what made up the Hawaii-related gain, and company representatives did not return calls from the Star-Bulletin yesterday.
In February 2006, the company's Del Monte Fresh Produce Hawaii Inc. subsidiary said it would shut down its century-old pineapple operations in Hawaii in December 2008. But in November 2006, a month after its parent company reported a third straight quarterly loss, it announced that it would pull out of Hawaii two years ahead of schedule.
At the time, the company reported $1.5 million in charges and $2.7 million in noncash charges for one-time termination benefits and contract termination costs in Hawaii in its third quarter.
Last quarter, even without the gain attributed to the Hawaii shutdown, Fresh Del Monte's profit was well ahead of expectations.
Revenue fell 0.5 percent to $836 million, mainly because of the company's efforts to improve performance in its "other fresh produce" division, which includes tomatoes, potatoes and other vegetables.
Wachovia Securities analyst Jonathan P. Feeney said in a note to investors that although sales dipped slightly because of the cuts, the company's discontinuation of those non-core items helped profits rise $15 million in the quarter.
Feeney also mentioned the strength of the company's banana segment. Sales grew 3 percent while gross profits doubled, he said.
But Feeney offered some words of caution to investors.
"We like the company, however we view the stock as relatively expensive," he said.