Calavo Growers Inc (CVGW) Faces Net Loss Amidst Operational Challenges
Net Sales: Fourth quarter net sales slightly decreased by 1.0% year-over-year to $241.2 million.
Gross Profit: Gross profit for the fourth quarter declined to $15.5 million, or 6.4% of net sales.
Net Loss: Reported a net loss of $7.9 million, or $0.45 per diluted share, in the fourth quarter.
Adjusted EBITDA: Fourth quarter adjusted EBITDA was $7.0 million, down from $9.6 million in the same period last year.
Balance Sheet: Ended the year with $46.3 million in total debt and $2.9 million in cash and cash equivalents.
Segment Performance: Grown segment sales increased by 5.6%, while Prepared segment sales decreased by 7.9%.
On January 31, 2024, Calavo Growers Inc (NASDAQ:CVGW), a global avocado-industry leader and provider of value-added fresh food, released its 8-K filing, detailing financial results for the fiscal fourth quarter and the full year ended October 31, 2023. The company, known for its fresh avocados, tomatoes, and papayas, as well as prepared foods such as fresh-cut fruits and vegetables, reported a slight decrease in net sales and a net loss for the quarter.
Financial Performance and Challenges
Calavo Growers Inc (NASDAQ:CVGW) experienced a marginal decline in net sales for the fourth quarter of 2023, with a reported $241.2 million compared to $243.6 million in the same quarter of the previous year. The company's Grown segment saw an increase in sales, attributed to a 25% rise in the average selling price of avocados. However, the Prepared segment faced a 7.9% decrease in sales. The net loss widened to $7.9 million, or $0.45 per diluted share, from a net loss of $3.3 million, or $0.19 per diluted share, in the fourth quarter of the previous year.
Adjusted EBITDA for the quarter was $7.0 million, a decrease from the $9.6 million reported in the same period last year. The company's President and CEO, Lee E. Cole, acknowledged the softened avocado margins due to seasonality and an unfavorable foreign exchange impact but noted improvements in margin management discipline over the prior year.
"I am pleased with our fourth quarter results as we continued to focus on the fundamentals of our operations," said Lee E. Cole, President and Chief Executive Officer of Calavo Growers, Inc.
Balance Sheet and Liquidity
As of October 31, 2023, Calavo's balance sheet showed $46.3 million in total debt, including borrowings under its credit facility and other long-term obligations. Cash and cash equivalents stood at $2.9 million. The company's liquidity position, including available credit, totaled $40.0 million.
Operational Highlights and Future Outlook
The company's Grown segment reported a modest increase in gross profit, despite an unfavorable foreign exchange impact. The Prepared segment's gross profit declined due to lower volume and higher input costs, although there was an increase in gross profit sequentially due to the onboarding of a large national account customer.
Calavo Growers Inc (NASDAQ:CVGW) also disclosed an ongoing internal investigation into its operations in Mexico, which has raised potential issues under the Foreign Corrupt Practices Act (FCPA). The company has voluntarily disclosed the investigation to the SEC and the Department of Justice and is cooperating fully.
Looking ahead, Calavo aims to enhance shareholder value in fiscal 2024 and will be celebrating the company's 100th anniversary. The focus will be on growing volume in the prepared business and fulfilling customer demand, particularly for events like the Super Bowl.
Value investors may find interest in Calavo's disciplined approach to margin management and the potential for operational improvements to drive future profitability. However, the ongoing investigation and the challenges faced in the Prepared segment may warrant a cautious outlook.
For a detailed breakdown of Calavo Growers Inc (NASDAQ:CVGW)'s financial results, including income statements, balance sheets, and cash flow statements, investors are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from Calavo Growers Inc for further details.
This article first appeared on GuruFocus.
