Yes, we have no dividends. That's the song Chiquita Brands
Best known for its bananas, Chiquita is also a purveyor of salads and freshly cut produce, as well as an operator of refrigerated cargo ships used mainly to ferry its produce from Latin America to North America and Europe. But add in debt from last year's Fresh Express acquisition, a sharp decline in demand for its salads due to the recent outbreak of E. coli bacteria in spinach, and new rules regarding bananas in Europe, and Chiquita suddenly faces some rotting prospects.
The banana king paid Performance Foods Group
To streamline its business, Chiquita plans to sell off its Great White Fleet of 12 refrigerated cargo ships that transports approximately 70% of the company's bananas to markets in Europe and North America (the fleet gets its name from the ships' white-painted hulls that keep the fruit cooler in the hot tropical sun). It's possible it will then lease back the ships or even use third-party shippers. That's what the company has done since it added trucking routes to deliver some goods, using Ryder
But the banana business has become more slippery of late, as the European Union dropped import quotas while also raising tariffs on the fruit coming in from Latin America. That led to a 10% decline in sales in the last quarter, and Chiquita expects sales in the third and fourth quarters -- already its weakest -- to be similarly elusive.
With rising costs, lower sales, and more debt, it probably shouldn't have come as a surprise that the company's dividend would also be put on the chopping block. Chiquita says the $17 million it will save will go toward reducing the $992 million of debt it had on the books at the end of June.
While a number of the problems Chiquita faces are unique to its business, there are a few which could spell trouble for other banana growers, like former Motley Fool Hidden Gems selection Fresh Del Monte Produce
When you peel back the layers of this company, it looks like it faces some rotten prospects. With past revelations of monkey business regarding protection money payments and price information leaks to competitors, Chiquita may not be ripe for every investor.
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