Chiquita Brands International Inc. (CQB)
Q1 2013 Results Earnings Call
May 7, 2013 9:00 AM ET
Steve Himes - Director, IR
Ed Lonergan - President and CEO
Brian Kocher - Chief Financial Officer
Rick Frier - Upcoming Chief Financial Officer
Brett Hundley - BB&T Capital Markets
Carla Casella - J.P. Morgan
Bryan Hunt - Wells Fargo Securities
Jonathan Feeney - Janney Capital Markets
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Thank you, Aaron. Welcome to Chiquita Brands International’s first quarter 2013 conference call. On the call today are Ed Lonergan, President and Chief Executive Officer; and Brian Kocher, Chief Financial Officer.
Also with us today is Rick Frier, who will succeed Brian Kocher as Chief Financial Officer immediately upon the filing of our first quarter Form 10-Q. As previously announced, Brian will become Chief Operating Officer at that time.
After today’s prepared remarks, we will take questions as time allows. A copy of today’s press release is available on the company’s website at www.chiquita.com, and you may also contact Chiquita’s Investor Relations Department at 980-636-5637 to receive a copy. Our press release contains reconciliations to U.S. GAAP of any non-GAAP financial measures that we mention today.
The call contains forward-looking statements, regarding operating performance or industry developments, and any such statements are intended to fall within the Safe Harbor provided under the securities laws.
Factors that could cause results to differ materially are described in the Forward-Looking Statements section of today’s press release and in Chiquita’s SEC filings, including its annual report on Form 10-K, and quarterly reports on Form 10-Q.
And now, I’d like to turn the call over to Ed.
Mr. Lonergan, please check your mute function.
Okay. Let me start up, we had a miss function on our headset. Thanks, Steve. Good morning and thank you all for joining us. We are pleased with the first quarter results we are reporting this morning. The results reflect the benefits of renewed focus on our core product lines, bananas and salads, and the positive impacts associated with the restructuring efforts we’ve discussed on our last few calls.
We are reporting $39 million of adjusted EBITDA and $23 million of comparable operating income for the quarter and this despite a $12 million currency hedging headwind in the comparison to year ago.
For perspective year ago, we delivered $28 million of adjusted EBITDA and $13 million of comparable operating income. Brian will run through many of these specific variances but we're seeing positive momentum and remain optimistic across our core product offerings.
These results reflect the commitment our employees have made to deliver against the return to the core strategic choices. We remain convinced. These choices will enable the company to profitably grow volumes and core portfolios.
In support, we gain customers in both bananas and salads in Q1, and productivity was strong across our business lines as we maintain discipline in both our value chain and overhead expenditures.
We continue to make progress against the objectives of our restructuring. First, with regard to increasing revenue and profitability in our core bananas and salads businesses, our results reflect our increased attention.
In North America, banana volume increase due to contract wins and category growth within our existing strategic customers. We continue to grow share in responsible ways and we are aligned with the right business partners.
In Europe, pricing taken at the end of 2012 enabled us to enter 2013 with positive momentum and in most cases we are able to maintain prices throughout the quarter. We continue to prioritize price over volume in our key European markets.
And in salads and healthy snacks, we saw strong velocity trends in existing retail and food service customers that enabled us to meet our expectations despite an extremely challenging supply situation in the quarter.
Toward our objective to drive cost out of the value chain to be more competitive in our core markets, the results of the restructuring have been clear. The shipping in agricultural practice efficiency actions implemented late in 2012 met our expectations in the first quarter and the results to date are aligned to the benefits we promised in our restructuring plan.
Owned farm production benefited as planned from implementation of revised ag practices and our improve shipping rotation significantly improve logistics efficiency year-on-year.
We are also encouraged by the implementation of plans to align our overhead structured industry benchmarks. SG&A expense improved 160 basis points year-on-year in quarter one to 6.9% of sales, and we remain confident for year 2013 SG&A expense will remain below the 8% of sales target we communicated last fall.
Toward our objective of evaluating and addressing non-core unprofitable businesses and minimizing investment and diversification and innovation outside the core, we continue to wind down our joint venture with Danone.
In addition, we have temporarily suspended operations at our Chiquita Fruit Solutions facility in Ecuador to improve capacity utilization for CFS products. We've identified and are in process of exiting the remainder of our targeted non-core businesses. These businesses do not contribute meaningfully at either top or bottom line but they represent a distraction for our team.
The progress that we continue to make toward our objectives will manifest in our financial results as we worked toward our previously disclosed target operating margins which are 4% for bananas at a Euro Exchange rate of $1.23 euro and 78% for salads.