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Dole Warns of Lower Profit in 2nd Quarter

Earnings: Statement comes after the U.S. imposed sanctions on the European Union for trade rules favoring former colonies.

May 21, 1999| From Bloomberg News

Dole Food Co., the world's largest fresh-fruit producer, on Thursday warned that second-quarter profit will be far less than analysts expected as a glut of bananas in Europe is depressing prices.

Westlake Village-based Dole said it expects profit from continuing operations to be 55 cents to 75 cents a share, less than the 99-cent average estimate of four analysts surveyed by First Call Corp. The company had net income of $82.1 million, or $1.35 a share, a year earlier.

An unexpected increase in the number of banana-import licenses from the European Union caused a glut of bananas in EU countries and depressed prices, Dole said. The warning comes after the U.S. in April imposed trade sanctions on the EU because of trade rules that favor bananas produced in its former colonies.

Dole shares rose 63 cents to close at $31.75 on the New York Stock Exchange.

"There will be tighter banana supplies in the next two quarters, but Dole won't recoup the earnings lost because there will be a lot of competing summer fruit," said analyst Nomi Ghez at Goldman, Sachs & Co., who revised her second-quarter earnings estimate down to 60 cents a share from 90 cents, and her 1999 estimate to $1.95 from $2.15.

Consumers won't be ready to pay higher prices when they can also buy other fruit, she said.

The company also said profit has been hurt by falling demand in Eastern Europe and Russia, where weakened currencies are making Dole's bananas more expensive.

In March, the U.S. voted to impose sanctions on certain EU goods because of trade practices that favor the group of nations' former colonies in the Caribbean, Africa and the Pacific. U.S. banana companies such as Dole, Chiquita Brands International Inc. and Fresh Del Monte Produce Inc. say they unfairly have lost business each year since the European Community imposed those import rules in 1993.

Chiquita warned earlier this week that the lower European prices would similarly push its second-quarter profit below analysts' estimates.

Dole also said it will report a gain of 10 cents to 15 cents a share in the quarter from insurance proceeds to recover costs tied to its Central American plantations damaged by Hurricane Mitch late last year. The hurricane killed more than 7,000 people in Honduras and wiped out about 10% of the world's banana supply.

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