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Chiquita Profit to Be Hit by Tainted-Spinach Scare

September 26, 2006|From Bloomberg News

Chiquita Brands International Inc., owner of the Fresh Express bagged-salad brand, suspended its dividend Monday and said its third-quarter earnings would be hurt by the outbreak of E. coli linked to spinach.

The news sent Chiquita's shares tumbling $2.20, or 14%, to $13.53.

The company also said that it would explore selling its fleet of 12 refrigerated cargo vessels.

Chiquita is the latest company to face difficulties because of the contamination this month of fresh spinach. The company said it faced "lower sales and unforeseen costs" at Salinas, Calif.-based Fresh Express because of the E. coli outbreak.

E. coli-tainted spinach has sickened 175 people in 25 U.S. states and killed at least one person, according to the Food and Drug Administration. Two new cases were confirmed Monday, one in Wisconsin and one in Indiana.

The FDA said Sunday that consumers shouldn't eat spinach from Monterey, San Benito and Santa Clara counties in California.

Most Fresh Express spinach comes from a single grower near Salinas, in Monterey County. None of the company's spinach has been implicated in the outbreak, Chiquita said.

The company said it intended to increase marketing to boost consumer confidence in its salad products.

"I don't think people make the distinction when they're in the supermarket between this brand and that brand. They just see bagged spinach," said Sean Egan, managing director of Egan-Jones Ratings Co., a credit rating firm. "When are people going to start purchasing Fresh Express products like they did before? It takes time to recover from a widespread problem such as this."

Chiquita also was hurt in the third quarter by lower banana prices because the European Union in January eliminated a quota and raised tariffs on banana imports from Latin America.

Chiquita last year purchased Fresh Express from Performance Food Group Co. for $855 million in cash to expand beyond bananas. The acquisition made it the biggest seller of packaged salad in the U.S.

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