In a move the company says will better serve long-term growth, Del Monte Fresh Produce BB #:160808 plans to sell off $100 million in unused and underutilized land and facilities.
Some of the properties up for sale include land purchased for potential agricultural projects, said Mohammad Abu-Ghazaleh – Chairman and CEO, during the company’s third quarter earnings report held Oct. 28.
“Some facilities we have vacated because we consolidated the operation…in two or three facilities under one roof,” he said, “like we are doing right now in California by putting three, four different facilities under one roof in Gonzales, CA, which means that we have so much assets that we can sell.”
The third quarter continues difficulties the company is experiencing, driven by the COVID-19 pandemic, which has decreased demand from schools restaurants, foodservice, and government shutdowns. Sales for the quarter were $990 million compared to $1.1 billion a year ago.
The banana market continues to be a challenge as well.
“It’s really..it’s a very big mess, let me put it that way,” he said.
Production and oversupply are a big problem, especially from Ecuador.
“There is so much bananas around the world that nobody knows what to do with, not only in North America but all over the world,” he said. “other countries are producing, new countries that have not been on the map like Vietnam, Laos, Cambodia.”
The newcomers are aimed at supplying the Chinese market, which is putting pressure on Central and South American producers.
The North American market can’t easily absorb any extra banana volumes, either, despite higher prices reported by the U.S. Department of Agriculture.
“North America is a contract, 90% of our volumes in North America and that applies to us, and to our competition as well, 90% of our volumes are contracted to buyers, to retailers and other,” he said. “We don’t have that kind of volatility on prices during the year except for the spot market.”
Del Monte has made efforts to make its North American business leaner, including adding two new, more efficient container ships.
“We are taking so many actions to really bring the business to a different path,” Abu-Ghazaleh said. “We are very confident about our future in the banana business because we are taking a different model in approaching the markets and sourcing of this fruit.”
