Summary Business: Fruit, vegetable provider Headquarters: Westlake Village CEO: David H. Murdock Market Cap: $865 million Dividend Yield: 2.58% Total Liabilities: $2.5 billion P/E: 12.80 Long-Term Debt: $1.3 billion Yes, they have bananas they’re just not as profitable as they once were. That may describe Dole Food Company’s predicament these days as it fights European Union trade restrictions that have protected former fruit selling colonies at the expense of Dole, Chiquita Brands International and other U.S. fruit suppliers. While both Westlake Village-based Dole and Chiquita, of Cincinnati, have been hit by the trade restrictions, they chose different strategies to overcome European sanctions. Today, Dole revenue figures are down slightly, but they have remained steady over the past year. Chiquita, meanwhile, has a debt of $690 million and recently had to secure an $85 million loan from bondholders to cover losses. In 1993, the EU imposed its banana import regime, effectively favoring European firms that grew bananas in former colonies. Chiquita Brands has since lost 50 percent of its market share in Europe as it has attempted to overturn the restrictions in court. Dole, on the other hand, chose to fight by diversifying, resulting in an increased share of the European market in 1998 for the first time since the new sanctions began. Dole bought a 60 percent share in a Swedish fruit and vegetable produce grower, Saba Trading, allowing it to expand into new markets in Asia and Africa using that company’s pre-existing licensing agreements. It did the same thing in European markets with the acquisition of a Spanish produce and flower grower. Along the way it became a top marketer of fresh cut flowers. The company said its 15-percent revenue increase for fresh fruit in 1999 to $3.1 billion was due to its acquisition of Saba Trading, the largest produce distributor in Europe. Its Spanish flower operation posted $202 million in revenue the same year. “We had bananas and no paper rights, so there was a natural sentiment of ‘Let’s get together and create an enterprise that benefits both,’ and that’s what we did,” said Patrick A. Nielson, Dole vice president of international legal and regulatory affairs. But the acquisitions have been costly. Dole, affected by the ongoing banana dispute despite its strategic moves, posted a $6.5 million fourth-quarter 2000 loss (after a $28.5 million loss in the same quarter a year earlier). Chiquita, in the meantime, reported a $69 million loss in its most recent quarter, as compared to a $75 million loss in the same quarter in 1999. At the same time, its European market share has dwindled to just 20 percent, half of what it was when trade sanctions were introduced eight years ago. Dole, meanwhile has doubled its share of the European market from 13 percent in 1993 to about 26 percent in 1998, according to an International Banana Conference report. George Dahlman, an equity analyst with U.S. Bancorp Piper Jaffray, said Dole may meet earnings estimates for 2001 thanks to cost-cutting measures and its growing market share in Europe. And, although recently appointed U.S. Trade Representative Robert Zoellick has yet to sign on, the EU has proposed new licensing requirements for banana imports to take effect July 1 that Dole finds favorable. “There needs to be a change,” Nielson said. “Our market share is continually being eroded and the EU knows this is happening. They fully intended this to happen.” Chiquita has acknowledged it is pressuring the Bush Administration to reject the plan and insist on the elimination of all sanctions. Gary Hufbauer, a trade analyst with the Institute of International Economics in Washington, D.C., said Dole and Chiquita are as far apart as ever on how to handle the issue. “The intractability is as deep as I’ve ever seen,” he said. The U.S. already has imposed $191 million worth of sanctions on European exports. The Europeans have threatened $4 billion in tariffs on U.S. goods if those sanctions are not lifted In the fourth quarter of 2000, Dole lost 13 cents a share, versus a gain of 4 cents a share in the same quarter of 1999. Analysts polled by First Call/Thomson Financial had estimated a 2-cent loss per share. Net income for the company was $68 million last year, compared to $48.5 million in 1999. Revenue for the world’s top banana seller slipped in the fourth quarter to $1.06 billion from $1.08 billion for the same quarter in 1999. The drop was in keeping with a drop in revenue for all of 2000, $4.76 billion, down from $5.06 billion in 1999.
