Food marketer Calavo Growers saw earnings slide 54.4 percent to $2.7 million, or 18 cents per diluted share, despite higher revenues in the third quarter, it said Sept. 7. Its profits were constrained by high fruit costs in its fresh foods segment and a smaller supply of fresh avocadoes, it said, although sales jumped 44 percent.
The third quarter was the Santa Paula-based company’s first since acquiring Renaissance Food Group, which makes fresh prepared foods for supermarkets, this summer. The $96 million acquisition added $22.8 million in sales to Calavo’s third-quarter earnings.
“While the fiscal 2011 third quarter presented challenges due principally to the limited avocado supply and strong avocado demand, Calavo’s ability to navigate them and remain solidly profitable underscores the strength of our business model,”Calavo CEO Lee Cole said in an earnings release.
The limited avocado supply drove up fruit costs, specifically in the prepared avocado business, which includes guacamole products. Fruit prices in the prepared business have climbed more than 70 percent form last year’s third quarter , Cole said.
A smaller avocado crop also resulted in less volume moving through Calavo’s marketing and distribution channels, “which reduced production efficiencies and increased our per-unit packing costs,” Cole said. “We expect this to change with next year’s anticipated larger crop.”
Third-quarter revenues in Calavo’s Fresh business segment jumped 29 percent to $130 million, primarily on higher avocado prices. It actually shipped 27 fewer fruit units in the most recent quarter, it said, because of smaller avocado crop as well as smaller tomato volumes.
Sales in the Calavo Foods business segment rose to $35.1 million — including the revenue from the Renaissance businesss — up 153 percent from $13.9 million in the same quarter last year. Excluding the Renaissance business’ contribution to Calavo’s sales, the foods segment saw a year-over-year decline of 11.5 percent.
Calavo said it expects better results in the fourth quarter. “As anticipated, we are seeing certain promising early indicators of an easing in the avocado supply,” Cole said. “This has been a stiff headwind to our operating performance the past two quarters. The seasonal supply of avocados sourced from Chile has begun in earnest and the crop is significantly larger than last year’s. Along with Mexico-sourced fruit, we expect increased availability of fresh avocados in the marketplace, easing the hamstrung supply—and high costs at Calavo Foods—we have encountered the past few quarters.”
The anticipated fourth-quarter turnaround would signal a stronger 2012, he said.
Calavo shares closed up 2.6 percent to $19.46 on Sept. 7.[wikichart align=”center” ticker=”CVGW” showannotations=”true” livequote=”true” startdate=”07-03-2011″ enddate=”07-09-2011″ width=”390″ height=”245″]