Lower consumption of fresh produce and competitors’ lower prices have led Vancouver hothouse produce firm Village Farms to kick off fiscal 2009 with lower profits.
The income trust on Friday reported net earnings of $640,000 on net sales of $21.44 million for the quarter ending March 31, down from $3.28 million in earnings on net sales of $28.52 million in the year-earlier period (all figures US$).
“We faced both market challenges and some internal production issues in the first quarter of 2009 especially when compared to the first quarter of 2008 which was the company’s best quarterly results since inception,” CEO Michael DeGiglio said in a release.
“The market challenges came in form of decreased consumer consumption for fresh produce compared to 2008 resulting in an increased supply of hydroponic tomatoes as well as some competitors facing serious financial distress actively trying to raise cash to sustain their businesses through lower pricing.”
Thus, he said, Village Farms had to eat a year-on-year decrease of 19 per cent in its average selling price for its produce.
As well, he said, the company’s greenhouse facilities in Texas were “underperforming” in Q1, due to a new variety that didn’t yield the same pounds as its 2008 variety.
But DeGiglio said the company will be back on track with its 2009 fall production as it replants with its 2008 varieties.
“We did offset some of our internal production shortfall with additional third party-produce, which resulted in an increase of 32 per cent in our third-party business on a year-on-year basis. This income stream generates a much lower margin to the fund, but is an integral part of our business strategy.”
Village Farms bills itself as the largest producer, marketer and distributor of premium-quality, greenhouse grown tomatoes, bell peppers and cucumbers in North America, grown in farm-scale greenhouses in B.C. and Texas. The company moves its produce through distribution centres in Canada and the U.S., for those markets as well as buyers in Mexico and Japan.