US fresh produce group Calavo Growers has reported a slump in annual earnings after high avocado costs continued to hit its bottom line in the fourth quarter.

A lower supply in avocados across the industry drove up costs for Calavo and hit the volumes of fresh avocados it could sell.

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However, chairman, president and CEO Lee Cole said supplies would increase in the year ahead due to expanding crops in California, Mexico and Chile. The prospect of an increased supply gave Cole optimism that Calavo’s margins would improve over the next 12 months. 

For the year to 31 October, Calavo booked a 37.7% fall in net income to US$11.1m. The company reported a 23.6% drop in fourth-quarter net income to $3.6m.

Calavo’s net sales climbed 31.2% to $522.5m thanks in part to the acquisition of local fresh food company Renaissance Food Group, which the company purchased in June.

The acquisition also boosted Calavo’s fourth-quarter net sales, which were up 37.4% at $147.3m.

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Cole said Calavo had had a “transformative” year despite the challenges it encountered due to the acquisition of Renaissance Food Group. The deal, he said, “substantially” expanded Calavo’s business in fresh packaged foods, including produce, deli and meat.

“Calavo begins the year with considerable momentum behind it and the company’s respective business segments. We expect to benefit across the board from an expanding supply of fresh avocados, sharply improving gross margin in our fresh refrigerated guacamole products, a fast-growing RFG subsidiary and increasing unit volumes in diversified produce,” Cole said. “As point of note, Calavo is now a leader in three of the fastest-growing categories in the grocery store: avocados, fresh dips and fresh packaged foods.”

Shares in Calavo were down 0.47% at $25.32 at 13:23 ET today.