Westlake Village, California-based Dole Food Company, the world’s largest producer and marketer of fruit, vegetables and flowers, has posted a 100% increase in its Q2 2002 net income from continuing operations to US$66.8m (US$1.18/share), up from US$33.3m (59 cents/share) year on year.
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Year-to-date net income from continuing operations was up 94% to US$123.1m (US$2.17/share) up from US$62.7m (US$1.12/share) for the same period of 2001. Including a post-tax charge of US$119.9m from the write-off of goodwill associated with Dole’s flower business, however, year-to-date 2002 net income fell to US$3.2m from US$71.7m year on year.
DOle explained that improvements in gross margin, quarter over quarter and year over year, as well as a reduction in FY effective tax rate to 28% from 32%, drove the increased net income from continuing operations. Offsetting these increases were costs from a one-time debt extinguishment premium of about US$2.5m pre-tax and higher interest expense of about US$3.7m pre-tax as a result of Dole’s recently completed US$400m senior note issuance. Both of these actions place the company in a better position in managing its debt maturity structure.
EBIT improves overall
For the Q2 2002, EBIT from continuing operations improved significantly to US$107.7m from US$87.4m for the Q2 2001. EBIT from operations in the company’s fresh fruit segment
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By GlobalDataincreased due to higher earnings in banana operations. These benefits were partially offset by lower volumes sold in Europe and Asia and a weaker yen to US dollar exchange rate. In Dole’s vegetables segment, EBIT decreased significantly, as commodity vegetables pricing fell to more normal levels from the exceptionally high levels that prevailed in the Q2 2001.
In Dole’s packaged foods segment, the continued success of Dole’s Fruit Bowls and Fruit-n-Gel Bowls products led to an increase in operating results. EBIT in the company’s flowers segment fell significantly as a result of lower pricing and decreased sales volumes.
Revenues for the Q2 2002 totalled US$1.1bn, which was flat with the Q2 2001. Interest expense increased from US$17.9m for the Q2 2001 to US$19.5m for the Q2 2002, mainly due to the US$400m senior note issuance consummated in the Q2 2002.
Disappointment with flowers
Lawrence A. Kern, president and COO, said: “We are pleased with our Q2 and year-to-date net income from continuing operations. Our core businesses, with the exception of fresh-cut flowers, continue to perform at or above target levels, benefiting from improved margins and our cost cutting and profit improvement programmes.
“But we are very disappointed with the results of our fresh-cut flower business, which represents 4% of total revenue and had a negative EBIT of about US$2m for the Q2.” The flower industry is less attractive than Dole had expected in 1998 when it made its four acquisitions in the industry. Additionally, the company’s progress on integrating
the acquired businesses has been slower than expected. As a result, the company has done an extensive review of fresh-cut flowers in order to reconfigure it for improved performance.
