Calavo shares jump on higher avocado sales
Shares of Calavo Growers soared 6.5 percent on Tuesday, when the Santa Paula-based produce marketer reported fourth-quarter revenue climbed 35 percent to $190.7 million on higher avocado prices and volume.
Fourth-quarter net income slipped slightly to $6 million, versus $6.2 million a year earlier, a drop the company pinned on costs related to startup expenses of FreshRealm, a new cloud-hosted technology platform that connects growers, retailers and other food-system operators. The platform is slated to roll out in the first half of 2014.
Calavo’s income before FreshRealm expenses and additional earn-out payments for Renaissance Food Group jumped to $6.3 million.
“Our top-line growth was paced by an ever-quickening expansion of the avocado industry, which we continue to lead and innovate,” CEO, President and Chairman Lee Cole said in a statement. “We packed 2.3 million more fresh avocado cartons last year over fiscal 2012, almost 14.4 million units in total, indicative of overall industry growth, which reached nearly 1.7 billion pounds in 2013 as we had predicted. Demand continues to grow stronger each year as avocados more and more become a staple in American diets.”
Revenue in Calavo’s fresh produce business surged 38 percent to $125.2 million during the quarter, driven largely by avocados, which enjoyed “sharply higher prices.”
Sales in the Calavo Foods business segment rose to $12.9 million, up 12 percent, but higher fruit costs for prepared avocado products hurt profit margins during the period. The company said gross margin declined to $1.3 million, or 10.2 percent of segment sales, from $3.2 million, or 27.5 percent of segment sales, in the fourth quarter.[wikichart align=”right” ticker=”CVGW” showannotations=”true” livequote=”true” rollingdate=”6 months” width=”300″ height=”245″]
The company’s Renaissance Food Group segment, which supplies deli items such as sandwiches and salads to supermarkets, notched $52.6 million in revenue, up 35 percent year-over-year. Calavo bought the business in 2011 for $96 million, including an initial payment of $16 million plus up to $80 million in earn-out payments based on five-year performance of the acquired business. Renaissance’s fourth-quarter growth stemmed from an expansion into more retail locations as well as a broader product lineup, Calavo said.
Since the acquisition, the Renaissance segment’s revenue has nearly doubled, the firm said. “We are enormously proud of RFG’s operating performance,” Cole said. “The business unit’s contribution extends far beyond financial results. Its rate and breadth of product innovation, speed in distribution, and continued market penetration are felt throughout the company.”
On a full-year basis, the Santa Paula firm’s earnings inched up 1.2 percent to $17.3 million as revenues jumped 25 percent to a record $691.5 million
The company’s outlook for this year calls for avocado demand to remain high, driving both volume and prices, and for double-digit growth in the Renaissance and Calavo Foods segments.
Shares of Calavo gained 6.5 percent to $31.61 in midday trading on the Nasdaq on Jan. 7.