Banana Glut Prompts Dole to Cut Production, Eliminate Jobs

Plagued by weak banana sales in Europe and Russia, Dole Food Co. said Thursday that it will cut its global production by 17%, eliminate 1,500 jobs and terminate contracts affecting thousands more workers in Central America.

The world’s largest fresh fruit and vegetable producer will cease operations in two of its 15 banana- producing regions--Nicaragua and Venezuela--and consolidate operations in the U.S. and Europe. In California, Dole will close its Bakersfield fresh fruit headquarters and transfer those operations to its vegetable division in Salinas.

The Westlake Village-based company also said it planned to sell $100 million to $200 million in non-core or under-performing assets.

The restructuring follows a third- quarter loss of $8 million, or 14 cents a share, which Dole officials attributed to a glutted banana market in Europe, declining sales from last year’s citrus freeze in the San Joaquin Valley and crop devastation from Hurricane Mitch last year in Honduras.

Although Hurricane Mitch caused Dole $20 million in damage, it didn’t wipe out enough of the banana crop to correct the European glut, analysts say. “There are just too many bananas,” said Nomi Ghez, an analyst with Goldman, Sachs & Co. The European banana woes have pushed Dole’s stock down from $35.50 this spring to a recent low of $17, when the firm disclosed it might take a third-quarter loss. News of the reorganization pushed Dole’s shares up 50 cents to close at $17.69 on the New York Stock Exchange.