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CORAL GABLES, Fla. - Fresh Del Monte Produce, one of the world's biggest producers and marketers of fresh fruit and vegetables, said Friday it had completed its $340 million cash purchase of Del Monte Foods Europe.
Fresh Del Monte Produce said the purchase was financed mainly through its credit facility. The company revealed its intention to buy Del Monte Foods Europe, which produces processed foods, in July. The latter holds a perpetual, royalty-free license to use the Del Monte brand for processed and/or canned foods in more than 100 countries in Europe, Africa, and the Middle East. Although the two businesses were once sister companies, after R.J. Reynolds bought their' former parent, Del Monte Corp., in 1979, they were separated and sold.
"We are extremely pleased to complete the acquisition of Del Monte Foods Europe," said Mohammad Abu-Ghazaleh, chairman and c.e.o. of Fresh Del Monte, in a statement. "The acquisition establishes a significant new growth platform for Fresh Del Monte in Europe, Africa, and the Middle East, and it provides a unique opportunity for our enterprise to leverage the tremendous potential of the Del Monte brand across a wide range of high-growth markets. Moreover, the acquisition allows us to continue to diversify our business across products and geographies in order to drive long-term shareholder value."
In other Fresh Del Monte news, the company said last week that it was lowering its 2004 earnings estimates. Fresh Del Monte attributed the revision to lower-than-expected performance because of weak banana pricing, lower melon profitability in the United States, high fruit cost in Costa Rica because of difficult growing conditions, the recent hurricanes' effect on tomato crops in Florida, and high bunker fuel, transportation, and other commodity costs. For the full year 2004, Fresh Del Monte now expects to achieve earnings per share in the range of $2.05 to $2.15, vs. earlier estimates for the year of $2.55 to $2.65 per share.
Commenting on Fresh Del Monte's recent financial performance, Richard D. Hastings, v.p. - Retail Sector Analyst at New York-based Bernard Sands, LLC told Progressive Grocer: "When [there's] inflation or deflation, cost volatility creates margin problems. You can't pay $1 in the first quarter, $1.75 in second quarter, $1.10 in the third quarter, and then $2.20 in the fourth quarter without getting slammed on the margin side. The entire food industry is getting squeezed from rising commodity prices, and the pressures are getting passed along to retail, where unit volume growth is slowing, because shoppers are resistant to the higher prices."