Sunday, May 23, 2004

Aguirre to face shareholders


Chiquita'S CEO: Preparing to build a better banana

By Cliff Peale
The Cincinnati Enquirer

[photo]
Fernando Aguirre (left), president and CEO of Chiquita, succeeded Cyrus Freidheim in January. Aguirre wants to test new technologies and new advertising.
The Enquirer/STEVEN M. HERPPICH
Imagine paying more for a banana that tastes like a pineapple. Or one that's twice as big as today's version.

Fernando Aguirre can.

The new president and chief executive officer at Chiquita Brands International Inc. has big dreams for the banana giant, hoping for a market where Chiquita can convince shoppers to pay more for bananas.

The trick, he said, is creating an aura around a new family of Chiquita products that leverage one of the world's best-known brand names.

His role models range from Nike to Harley-Davidson to Starbucks - could you imagine two decades ago paying $5 for a cup of coffee? - and he knows the transformation will be risky for a company only two years out of Chapter 11 bankruptcy.

"I think there's a real opportunity for us to change the produce section of the grocery store," Aguirre said in an interview. "It's a great challenge, but I think it's doable."

Tuesday, Aguirre will face Chiquita shareholders for the first time since he left Procter & Gamble Co. in January and took the Chiquita job.

The company still is dealing with plenty of short-term issues. It doesn't pay a dividend, an issue Aguirre says he'll take to the board of directors soon. It's going to refinance $250 million in debt this year to save money on interest. And the company's stock was trading last week at around $16 a share, down from a post-bankruptcy high of around $24 in January.

Falling banana prices continue to crimp profits, which fell 20 percent to $19.9 million for the quarter ended March 31, despite help from foreign exchange rates. On a local currency basis, banana prices fell 6 percent in North America, 8 percent in Western Europe and 11 percent in Central and Eastern Europe.

Banana prices have fallen about 1.5 percent a year for about the last decade, and Aguirre said that trend probably would continue this year. That makes diversifying Chiquita's product line even more important.

And there's the Justice Department investigation over Chiquita's "protection payments" to groups in Colombia that were on the U.S. terrorist watch list. Chiquita revealed the probe last week but has not detailed how much is paid, who received the money or when the payments started.

It all adds up to a company that still is searching for stability after the disastrous 1990s, which ended with the spiral into bankruptcy.

Chiquita's biggest shareholders seem willing to let Aguirre run the company for a few quarters before passing judgment. They aren't bothered by the Colombia allegations. But they are clear on one point: They want Chiquita to offer a dividend.

Aguirre said he hasn't decided whether to recommend a dividend to the board.

"Our main point is we think management should institute a dividend," said Sam Shapiro, president of Shapiro Capital Management in Atlanta, which owns about 2.6 million Chiquita shares, a little more than 5 percent. "And then we won't bother them anymore."

'We won't kill any ideas'

Aguirre thinks the financial footing is solid, with a better balance sheet and more than $50 million in gross cost savings already in the books.

He wants to use his P&G training in consumer research to refocus Chiquita as a consumer company. That means testing new technologies and new advertising. This year, Chiquita will invest up to $15 million more in the banana business.

"We won't kill any ideas for lack of money," he said.

Aguirre's strategy, outlined on a Wall Street conference call and an interview in his downtown office last week, includes:

• Product research: Chiquita has signed an exclusive deal with the Honduran Agricultural Research Foundation to fuel its new-banana programs. While the group, called FHIA, has delved mostly into disease-resistant fruit plants, it also is researching things like size and flavor.

Aguirre said he has tasted half a dozen different flavors of bananas, and Chiquita could see some new products in testing this year. In Asia, it already sells a sweeter banana called Highland, which is especially popular in Japan.

• New advertising: Chiquita is testing new commercials for its line of fresh-cut fruit selling in the Midwest. That unit, still in the start-up phase, will lose about $8 million this year. Despite the skepticism of some Chiquita investors, Aguirre said it's a good investment.

"These people are not really used to hearing those kind of numbers," he said. "To them, $8 million could mean a dividend payment. They're probably worried that I'm going to come in with my big, fat checkbook and start writing bills. But what they don't know is that I'm very financially oriented."

• New capital structure: This year, Chiquita will refinance $250 million worth of notes issued when it emerged from bankruptcy in March 2002, shaving up to $25 million from its annual interest costs, Aguirre said.

• New technology: The company has invested $8 million so far and will spend another $8 million on a technology platform that will standardize financial reporting across its far-flung operations. Aguirre said the system had been "very inconsistent."

"Instead of arguing over whether the data is accurate or not, you argue over what to do with the data," he said.

E-mail cpeale@enquirer.com




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