Chiquita Brands have a very bad year - and have stopped paying protection to Colombian para militaries
Chiquita Brands International are the world's leading banana producer and Lord Patel's favourite addition to his breakfast muesli -well bananas are. Like many folk he ddin't realise when he munched on a Chiquita quite where his money was going...
Carl Lindner Junior ( He's 89 yrs old !) is one of the world's richest people. Forbes 2006 has him 133rd on the 400 list with a worth of US$ 2.3 Bn. (ish). He bought Chiquita from Daddy Bush to help himout and runs it from Cincinatti (where they don't grow many bananas). The Lindner family also run American Financial Group Inc.'s (CEO Carl H Lindner lll) and another insurer run b y another son Great American (NYSE: GFR).
Chiquita have been having a lean time these past two years, in 2006 they lost US$ $27 million - because as they explained that year
Regulatory changes have encouraged new entrants and more intense price competition in the European market, especially at the low-end of the price spectrum. Because most of the new entrants do not have established customer relationships they’ve been forced to sell their products through brokers at very low prices. ..... In addition, the firm suffered $19 million of net incremental cost associated with higher banana import tariffs in the European Union.But what they did do was make some shrewd moves to hedge against the Euro ...Chiqiuta hedged with put options approximately 75% of its estimated net Euro cash flows 18 months into the future. For 2007, the firm recently reset its put option positions at an average rate of US$1.28 per euro, which has effectively locked in anticipated year-on-year currency benefits of approximately US$15 million. For 2008, the firm is approximately 30% hedged at an average rate of US$1.27 per Euro.
Which seeing the Euro is trading today at 1round US$ 1.46/US$ 1.48 was a VERY smart move.
Fernando Aguirre, chairman and CEO told us today that he forecast a Q4 operating income loss of US$10 million to US $20 million, compared to a $33 million loss in fourth-quarter 2006. For the year, he expects operating income of $23million to $33 million, which , on a turnover of over US$4 Bn. is not a whole lot of potatoes.
The share price shot up by just over a dollar to close at US$18.44 (up 6% on the day).
Of course the bottom line has been hit this year after an appearance in court in Washington after a lengthy Department of Justice enquiry . Court documents filed showed that, federal prosecutors said Chiquita and several unnamed high-ranking corporate officers paid about US $1.7 million through a subsidiary , called Banadex for protection between 1997 and 2004 to the United Self-Defense Forces of Colombia (Autodefensas Unidas de Colombia--AUC) - which was designated by the U.S. government as a terrorist organization in September 2001. (List of charges here)
Chiquita began paying the right-wing AUC after a meeting in 1997 and disguised the payments in company books.
DOJ Prosecutors also said that the company made similar payments to the leftist Revolutionary Armed Forces of Colombia,(FARC).
At the time Fernando said "The information filed today is part of a plea agreement, which we view as a reasoned solution to the dilemma the company faced several years ago. The payments made by the company were always motivated by our good faith concern for the safety of our employees." He also agreed the company would pay a US$25 Mn. fine.
The document filed by federal prosecutors is known as an information. Unlike an indictment, it is normally worked out through discussions with prosecutors and is followed by a guilty plea.
Just another form of insurance probably for the Lindner family - and big supporters of President George Bush. They have since sold their Banadex operation which has about 4,400 employees and contributed about 9 percent of Chiquita's banana supply.
There is an interesting note at the National Archive "DOCUMENTS IMPLICATE COLOMBIAN GOVERNMENT IN CHIQUITA TERROR SCANDAL - Company's Paramilitary Payoffs made through Military's 'Convivir' with copies of Embassy cables etc., See also an article on April 4th in The Nation "Paras go Bananas".