Fresh Del Monte Produce Inc (FDP) 2005 Q4 法說會逐字稿

Good morning everyone. I'd like to remind you that today's call is being recorded and that all lines will be muted during the call. [OPERATOR INSTRUCTIONS] I'd now like to turn the call over to Christine Cannella for the opening remarks. Please go ahead.

Thank you, Kevin. Good morning everyone and welcome to Fresh Del Monte's 2005 Fourth Quarter and Full Year Conference Call. I'm Christine Cannella, Assistant Vice President of Investor Relations. I am joined today by Chairman and Chief Executive Officer, Muhammad Abu-Ghazaleh, and Executive Vice President and Chief Financial Officer, John Inserra, who will discuss our results for the fourth quarter and year-ended December 30th, 2005.

First Del Monte issued a press release this morning via Business Wire e-mail and First Call. If you have not received a copy of the earnings release, please contact Eva Torres at (305) 520-8156. You may also visit our website at freshdelmonte.com to register for future distributions.

This conference call is being web cast live on our website and it will be available for replay approximately two hours after conclusion of this call.

This morning Mohammed will review our operating performance during the quarter and the year, along with recent developments in our future outlook. John will then review our financial performance for the fourth quarter of 2005 and for the full year.

Please let me remind you that much of the information that we will discuss this morning, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the Safe Harbor provisions of the Securities Laws. Our actual results may differ materially from those in the forward-looking statements, as a result of various factors, including those described under the heading description of Business Risk Factors in our Form 20FA for the year ended December 31st, 2004.

I would also like to add that this call is the property of Fresh Del Monte Produce. Redistribution, retransmission, or rebroadcast of this call in any form, without our written consent, is strictly prohibited.

With that, I'd like to turn the call over to Mohammed Abu-Ghazaleh. Mohammed.

Thank you, Christine, and good morning everybody. The fourth quarter was a very tough period for Fresh Del Monte Produce. We faced a number of operating challenges during the quarter, including unexpectedly weak holiday sales of gold pineapples during the Christmas season in Europe and the Thanksgiving holidays in North America, significantly lower banana pricing in Asian markets, continued high import costs related to fuel, transportation, and fruit production, intense new competition in the prepared food business in the UK, and stronger product sales versus the dollar in Chile and Brazil, which increased our production costs in those regions.

These headwinds, combined with several other factors that I will discuss in a few moments, made the last quarter of 2005 the most challenging fourth quarter we have experienced since the year 2000. For the quarter, net sales were $758 million. Net income was a loss of $4 million, a loss per diluted share of $0.02, excluding asset impairment, and restructuring charges associated with streamlining our operations. For the year, net sales were $3.3 billion. Net income was $107 million, and earnings per diluted share were $1.91, excluding the charges we just mentioned.

We're extremely disappointed with our results, however, we have responded aggressively to these tough market positions and I am very encouraged by what we have accomplished today to prepare for 2006 and beyond. In the fourth quarter we moved quickly to ramp up our cost savings program. This program included closing our New Orleans distribution center and streamlining our Sanger, California operations, leaving the fresh cut facilities in place to serve that region. We also began to restructure our South Africa operations, closing down cost inefficient facilities and we moved to improve our operations in Italy and Kenya. In addition, we continue to reorganize our European food business, including closing offices and consolidating manufacturing facilities.

During the quarter we also stepped up our efforts to compete more effectively in our UK prepared food business. During the 2005 fourth quarter we came under intense and unexpected competitive pressure in the UK in our prepared food and juice lines. We have responded by continuing to role out innovative new products, including fruit smoothies and value added juices, such as Del Monte Gold Sweet Pineapple Juice. We also made investments to support our new product pipeline from which exciting new [inaudible] products would emerge over the next 12 to 18 months.

In addition, we continue to lay plans to launch a print and media marketing campaign targeting various ages and cultures that is designed to further reinvigorate and rejuvenate the Del Monte brand, help improve our competitive position, drive sales of our products, and enhance profitability.

While we worked diligently to address competitive issues in the UK prepared fruit and juice lines, our other European markets continued to perform to our expectations and gain new strength. Though it has taken us longer to recapture market share in the juice line, we are fully on track with our new product development and we have improved production, and lowered costs in many of our manufacturing facilities. Advances that have been offset by higher import costs associated with transportation and packaging.

Still we are seeing progress in non-traditional prepared food markets in the Middle East and Eastern Europe. Studies have shown that consumers are increasingly seeking fresh products, such as chilled, fresh juice and we are moving quickly to serve these desires. To accommodate these needs, we are building a state-of-the-art multi-purpose facility in Dubai that is scheduled to open in late 2006 and we have plans to build facilities in Algeria, North Africa, and Saudi Arabia, where we have formed joint ventures. These facilities are slated to open in the first quarter of 2007.

Finally, we are expanding our premium protein products in Jordan and in producing other protein foods in this country. We see attractive opportunities in these products and we are very encouraged by the solid potential for growth these markets hold for Fresh Del Monte Produce in the future.

As we move ahead, we have plenty of reasons to be optimistic about the future. In North America, for example, we are expanding our whole fresh and fresh crop opportunities and we are continuing to attract a number of new customers, including convenience stores, casual dining outfits, and major supermarkets. In the UK we are preparing to launch new chilled juices in the second quarter of 2006 and we are developing new snack foods in Europe that will allow us to make strong inroads into the [inaudible] stores and food service areas in these markets.

As we continue to grow in a smart and high targeted way, we are also tightening our company-wide operations and implementing a series of measures that will streamline our business and cut costs. For example, we consolidated our southeast potato operations to [inaudible] Georgia. We are prepared to sell our onion operations in Georgia after the 2006 harvest and we began to phase out our [gradient] sweet onion business. In addition, we started the process of terminating some joint ventures that we feel no longer fit with our strategies. These decisive actions will allow us to reduce administrative selling and marketing expenses associated with the non-core products and enable us to shift our resources back to our core product line, which drives our business growth.

We've also made the decision to stop planting pineapples in Hawaii. This does not mean that we will be exiting Hawaii immediately. Pineapples have a contract of approximately three years and our current cycle will continue to produce right up through mid-2008. These have not been easy decisions to make and this was a particularly difficult one, as we have a long history in Hawaii and we have close relationships with our employees, their families, and the local community.

In the meantime, we are pleased that [inaudible] import banana regime was adopted in Europe, as we believe that it provides both a fair and equitable market access for those of us who supply bananas to the European markets. The regime went into effect on January 1st, 2006, with a tariff of 176 Euros per ton for bananas imported from Latin American countries. Though industry demand and pricing remained strong, due to industry shortage of bananas, we have not yet been able to take advantage of the new free market systems.

In summary, the fourth quarter was a challenging period for Fresh Del Monte Produce and we expect some of these challenges to continue through the first half of 2006, including continued import cost [efficiencies]. We have already taken measures to indicate these higher costs. For example, in September we implemented a fuel surcharge as a means of trying to cover some of the increased costs in fuel; however, we do anticipate that higher fuel costs will continue to be a challenge to our business.

On the banana front, industry-wide volumes are expected, but volumes are still lower than what we have seen compared with last year. Pricing remains strong on the North America open market, but we are tied to banana contracts with many of our customers. From an industry perspective, pineapple prices are lower and demand is slightly off in North America, though we anticipate that demand will rise as we get closer to the Easter and Passover holidays. Our [inaudible] volumes remain constant, as we continue to hold our pricing direction against our competition.

As we move forward, we continue to focus sharply on streamlining our operation and strengthening our core product line. These are aspects of our business over which we have substantial control. However, we also recognize that our industry is undergoing a volatile period in which we expect to see a range of fluctuating factors over which we, unfortunately, have no control. Given this level of uncertainty and industry unpredictability, we have determined that we cannot reliably benchmark our 2006 performance. As a result, we will not provide guidance in 2006.

Before I turn the call over to John, I would like to take a moment to put rumors to rest about the potential sale of Fresh Del Monte Produce. Our board believes that it is in the best interest of all shareholders to review offers that are presented to us, even though submitted on an unsolicited basis. A potential buyer approached us some time ago with a preliminary, nonbinding offer for our consideration. Our board refused the offer, just as it would any other offer, determined that it was not in the best of shareholders and closed the discussions.

Thank you. I'm glad to turn it over to John now. John?

Thank you, Mohammed, and good morning everyone. As Mohammed said, the fourth quarter was a very tough quarter. One of the most difficult since 2000. Net sales were $758 million, compared with $818 million in the fourth quarter of 2004. Net income was a loss of $4 million, compared with a gain of $19 million in the prior year period. A loss per share of $0.02, excluding asset impairment charges and restructuring charges associated with streamlining our operations, compared with an earnings per diluted share of $0.33 in the fourth quarter of 2004.

For the year, net sales were $3.3 billion, compared with $2.9 billion in 2004. Net income was $107 million, compared with $139 million last year. Earnings per diluted share was $1.91, excluding asset impairment and restructuring charges associated with streamlining our operations, compared with $2.14 per diluted share, excluding taxes and asset impairment charges in the prior year.

Let's now move on to our review to the 2005 fourth quarter and full year performance of our different business segments. As Mohammed said, the banana business, during the fourth quarter, was extremely challenging, with 4% lower net sales due to lower pricing in Asia and lower volumes in North America and Europe. Partially offset by higher pricing in Europe, world-wide pricing in the fourth quarter was down 6% to $9.17 per box, compared with $9.74 per box in the fourth quarter of 2004. Costs related to fuel and agricultural products were much higher, causing a gross profit loss of $18 million primarily from our Asian and North American operations.

For the year, banana sales increased to $1.1 billion, compared to $1 billion in 2004. Volumes in North America and Europe were down significantly. However, gross profit was 63% higher due to higher pricing in the first quarters of 2005. World-wide pricing for the year was up 6% to $10.39 per box, compared with $9.80 per box in 2004, as we benefited from strong performance in the first nine months of 2005.

In our other fresh produce business, overall net sales for the quarter were $385 million, compared with $429 million in the fourth quarter of 2004. This 11% decrease was attributable to lower tomato, pineapple, grapes, other non-tropical fruit and melon sales. Gross profit was lower by 11% to $50 million from $56 million in the prior year period. For the year, net sales were $1.7 billion, 3% higher than the $1.6 billion in 2004. Volumes were down 8% and gross profit was 10% below last year due to lower sales.

Fresh cut sales increased 5% in the fourth quarter with 7% volume growth as we continue to expand our nationwide footprint in this value added product line. For the year, fresh cut sales were up 32% to $352 million, compared to $267 million in 2004. We are now the leading marketer of fresh cut fruit in the United States at the retail level, with an impressive 24% market share.

Net sales of gold pineapple decreased by 6% for the quarter due to lower than expected sales over the Christmas holidays in Europe and the Thanksgiving period in the United States, with lower pricing due to competitive market pressure. For the year, overall net sales of pineapple decreased, even though sales were slightly higher in North America. For the year, volumes were higher in North America and Europe with lower pricing.

We saw 6% lower sales in melons during the quarter, compared to last year's significantly strong fourth quarter, which was a result of lower industry-wide production volumes from Guatemala. Our volumes were consistent with last year's fourth quarter and pricing was lower in North America. For the year, net sales of melons were up 10%. Volumes were in line with last year and pricing was 9% higher.

Net sales of grapes and non-tropicals were lower in the fourth quarter with lower volumes. However, pricing was higher for both the quarter and the year.

For the quarter, net sales of tomatoes were down 22%, compared with a strong fourth quarter last year with tight supply and strong pricing, driven by hurricane activities in central Florida. Volumes for the quarter were in line with last year. For the year, net sales of tomatoes were consistent with 2004 with comparable volumes and pricing. During the quarter, we altered our tomato strategy and switched many of our customers from pricing on a contract basis to periodic pricing, which provides us with much greater flexibility and eliminates what has been, until now, the impact of yearly set pricing. We will continue to adhere to this strategy through 2006, mitigating the negative impact on our business.

Net sales of our prepared food business in the fourth quarter of 2005 was $76 million, down 14% from $89 million in sales in 2004. This decline was driven by unexpected increases in competition in the UK, our largest market. Gross profit for the quarter was $5 million, compared with $16 million in the fourth quarter of 2004. Gross profit margin was 7% for the quarter, compared with 18% in 2004, due to the increased raw material costs and strong competitive pressure.

SG&A expense in our prepared food business was in line with the prior year period. For the year, net sales of prepared foods were $316 million. Gross profit for the year was $46 million and gross profit margin for the year was 15%. SG&A expenses were $53 million for the year.

Sales in our other products and services business for the quarter were up 17% to $47 million from $40 million in the fourth quarter of 2004. Gross profit for the quarter was $4 million versus $2 million in the prior year period. For the year, sales were up 15% to $170 million, compared with $148 million in the prior year period. Gross profit for the year was $11 million, compared with $9 million, a 15% increase. These up ticks for the quarter and for the year are based on the success of our poultry business in Jordan and our improving grain business in Argentina.

SG&A expenses during the quarter -- fourth quarter of 2005 was $48 million, compared with $47 million in 2004. Year-to-date SG&A expenses were $191 million versus $131 million, which was attributable to the prepared food business that we acquired in the fourth quarter of 2004, and our investment in information technology, and preparation for Spain's [Oxley] compliances.

The benefit of foreign currency exchange at the gross profit level was $2 million during the fourth quarter of 2005, compared with $11 million in the prior year period. For the year, the benefit of foreign exchange at gross profit was $36 million, compared with $49 million in 2004.

For the quarter, interest expense primarily related to our revolving credit facility was $6 million, the same as the prior year period. For the year, interest expense was $17 million, compared with $9 million in 2004. Regarding income taxes, we had operating losses in a number of our overseas and U.S. operating units due to lower pricing and higher operating costs, as well as resolution of certain tax contingencies. This resulted in a tax benefit during the quarter of $10 million. For the year, that benefit totaled $8 million. Total debt was $361 million at year-end 2005, which is similar to our debt level a year ago. In addition, our debt-to-capital ratio was 24% at year-end.

As you are aware, in the first quarter of 2006 we will begin recognizing compensation expense for stock options in compliance with the new accounting rules for stock-based compensation. Until now we were only required to disclose the pro forma effect on earnings. For 2005, had the new accounting rules been effect, our net income would have been $6 million or $0.10 per diluted share lower than reported. Although it depends on many factors, for 2006 we estimate that these new accounting rules will lower our earnings by $0.03 to $0.05 per diluted share.

Kevin, we would like to begin the question and answer period.

Thanks very much. [OPERATOR INSTRUCTIONS] And we will go first to Heather Jones at BB&T Capital Markets.

Looking to '06, was wondering if you could give us some idea of what your interest expense is going to run for the full year?

We expect that to be in line, Heather, with this year.

OK. And should we expect a tax credit, or tax expense, or what should our expectations be for the tax in '06?

Currently we're anticipating about a 5% to 6% tax rate.

OK. Tax expense?

Um-hmm.

OK. And as far as currency, thank you for the disclosure on the gross profit impact. Was wondering what kind of hedging you have in place or if you don't want to give that kind of detail, should we expect currency to be -- at current rates to be a headwind or a help for you in '06?

I think it should help us going forward.

OK. And as far as '06 earnings, if you had to put a number out there, do you -- given -- do you think a range will be below this year, below '05 or above, given the cost savings programs, but the other headwinds you're facing?

As we said, at this point we're not prepared to give guidance, Heather.

OK. And our data shows that pineapple pricing is weak at Q1 in both North America and Europe, and was wondering if that's consistent with what you're seeing?

Banana pricing is weak? Pineapple pricing?

Pineapple pricing, below last year. It's -- because what we're seeing is that it is below last year.

Yeah. We're seeing some reductions.

OK. And has Asia come back at all from Q4?

Yes. We have seen a rebound in Asia.

OK. And then my final question was just on your book value. Just wondering when was the last time a review was completed of that, given the issues that you've mentioned in the UK market, you're closing down some of these facilities? Was just wondering when the last asset review was done for that?

We review assets every year as part of the audit.

OK. All right.

Next up we have a question from Johnathan Feeney at Wachovia.

My first question would be, looking at all of these restructuring moves you're making, I'm counting here seven of them that Mohammed estimated. How many of these have you come up with in the past couple of months, since you started hitting a tough environment and how many of these were projects you intended to implement since the closing of -- I mean, five and seven are in the former Del Monte Europe? How recent are the decisions to take on these restructuring moves?

Well, the decision has taken since the middle of the year really, last year. I mean, the middle of 2005 and we started implementation in the last, I would say, couple of months and taking the decisions as far as Hawaii, as far as the potato business, as I mentioned earlier, and other locations, be it in North America or outside North American, in order to maximize our efficiency and returns to our shareholders.

OK. Could you talk a little bit more about the UK business? You say unexpected competitive pressure. Can you -- do you have a theory as to why all of the sudden competitors came after this business and gross profits were down so much?

Actually, what we have seen is a company [inaudible], which belongs to Mitsubishi, I believe, that they have come with a product label that tried to capture market share through very big discounts, and up front fees, and incentives, which we thought would be, for us, responsible to match these. So we have, as I said, we have taken other measures by producing new products and different strategy. And we are seeing that really the supermarkets are experimenting over the last several months with these -- with this product label. They are coming back to us, realizing that their sales declined, rather than increased, and some of them are coming back to put Del Monte back on the shelf at our pricing attempts. So it was, in my opinion, a period that we have to go through and the buyers are back -- coming back to our arena.

Now, what gives you -- I guess, Mohammed, what gives you confidence that -- you mentioned innovating in the UK might help you out. You're launching some new products in the pineapple and smoothie side. I mean, given this kind of competitive pressure, what gives you confidence you're going to be able to get a decent return on those investments right now?

[Inaudible] we have introduced a few products into the market and received very positive feedback from the supermarkets and the food service. As a matter of fact, I just came back on the weekend on a trip to Europe. I visited and we visited all of our locations there and particularly, as well, focusing on the food business. And we came back very, very encouraged with what we are doing right now and I believe that 2006 and beyond will make -- will put us in the right direction with what we are doing right now.

And just one final question for you. You look at - I don't know where the -- we've been hearing, too, about the global shortage of bananas, preventing, I guess, what otherwise might be more aggressive market share gains on your part in EU. But what I'm wondering is give that shortage, and it's a shortage everybody's feeling, are you a little surprised that pricing's not better in the EU? You know, pricing is strong, but maybe not as strong as it was in the third and the early part of the fourth quarter? And does new competition in the EU have something to do with that?

No. As a matter of fact, the pricing in Europe is very -- is quite strong. I mean, very, very satisfactory.

Would you say it's better since the -- January 1st?

Yeah. I would say that it is a little bit higher than a year ago. Week-to-week or year-to-year I think that our price -- the prices in Europe are equal or better than last year. So we will not see deterioration in pricing for this quarter and probably for the next quarter, as well. We believe that because of the shortage in fruit, that's what's keeping the very market very strong. But we have to wait and see what will happen in the second half o the year. Because, really, this is not-- I would say that the first six months will not be a good, you know, kind of yardstick to judge the market with the new regime.

Right. Correct me if I'm wrong, but you've given -- had not -- I guess, wouldn't you expect pricing to actually be up dramatically on a -- I'm talking about on a year-over-year basis, sequentially? So you'd expect trends to be better, if there were a severe volume shortage, as there is right now. What am I missing?

I'm sure if the shortage continues, definitely will have strong pricing, at least in the first half and maybe moderate or reasonable pricing during the second half. That will depend on the volumes and how the market reacts, but we have to wait and see how the volumes will develop in -- at the tropics.

Next up Leonard Teitelbaum at Merrill Lynch.

Maybe straighten me out a little bit here. As I understand it, one of the big problems you've got is you've got a contracted price in the U.S. that's putting pressure on domestic margins. Is that correct?

That is correct, yes.

OK. Now, when these contracts -- when do these contracts come up for negotiation, number one? And, number two, if they do, are they -- are the new contracts going to have reopeners in them or is that not possible?

The contract keep-- you know, mainly at the end of the year, beginning of the year and some of them even during -- you know, during the whole year. I mean, they come up for renewal. We have tried and we have made our best efforts to improve pricing in contracts, however, we are one of several players in the market and we -- if we say we want a dollar more, our competition might come and say we will accept half a dollar less. So it is always influenced by the competition in the market and, unfortunately, what we have seen in the last several months, in spite of the shortage and the increased demand in terms of shortage, we haven't seen any aggressive or any adjustment in the pricing from the competition.

Mohammed, it would seem to me, and I don't know, I'm asking the question. Is your competition faced with the same costs you are? I mean, I'm under the impression you guys are really the low cost producer here and if you're getting squeezed in the U.S., is it not fair to presume your competition is as well?

Yeah. I believe that everybody's costs, more or less, is on the same line. Maybe a few cents here, more or less, but we believe that in at least in Costa Rica and Guatemala, all of the countries that we are existing, where we produce fruit, we probably have the same -- more or less the same problems. However, in Ecuador, you know that prices have been crazy the last couple of months. I mean, prices that is being paid right now between $8 to $11 [F.O.B.], which is -- which puts you at a very, very, very huge disadvantage. We have tried -- we have been trying to mitigate these high prices by -- as best as we can from Ecuador to compensate for the shortage from the other sources. And this has put a lot of pressure and additional costs on our fruit that we could not pass to our buyers. And this applies the same to our competition, as well.

Now, Mohammed, you said that -- well, have you signed new contracts at the end of this year for '06? And how much of your sales in '06 are currently contracted for? And of those that have been contracted, are they at the same level as they were in '05?

No, no. We have definitely increased the prices. I mean, our prices have improved over 2005. However, for us, it's not yet satisfactory in the sense to cover all of the additional costs that we are incurring right now, be it the fuel, or packaging, or all of the other costs that have been up over the last 12 months. But we definitely have improved the pricing, but we -- not our wishes.

Now, why would -- what conditions have changed, perhaps it's Asia, that would lead any of us to believe that the March quarter would be different from the December quarter in terms of pre-tax income?

Well, I think we have seen some improvement in Asia in pricing, so that should help somewhat.

But other than that, things are pretty much the same, aren't they, John?

No. Things have improved. They have improved, but not as much as would have liked them to improve. I mean, what is really our biggest challenge right now there is the costs. The costs are quite high in term so year-over-year, the normal, let's say, trend. The fuel cost has been humongous. Carton-- on every single item that we have to use in our packaging, or our transportation, or whatever we are doing, even new constructions of the DCs or other facilities have increased. Everything has been increasing. Unfortunately, our pricing hasn't been responding or going along in the same manner, so we have a very big headwind in terms of costing. Hopefully this can ease over the next few months, but so far we are seeing the same challenges that we have seen during 2005.

OK. Now, one final question. John, it's been a long time since I was in accounting and that's probably pretty good for me, but at the end of the day, when I take a look at a tax credit, if you will, and a tax rate that is substantially above what one had been paying in past taxes, I've got to wonder whether or not you've used a reversal here or exactly what you've used to compute the tax credit or benefit that you had this quarter. What am I missing here, John?

Well, no. We recognize a significant amount of NOLs on losses that we incurred and expect to take as we go forward. We had -- did reverse some tax contingencies, but NOLs really -- we will use them as we go forward.

But you didn't have any NOLs this quarter, because you reported a loss.

That's why we have NOLs.

Yeah. OK. So you're saying that one of the benefits of or one of the reasons it gave you the lower tax rate was the NOL carry forwards?

Right. That we set up on losses that we incurred primarily in the U.S. and Europe, and in other parts of the world. As we have losses, we can put those aside and use them in the future.

All right. OK.

We have a question now from Eric Larson at Piper Jaffray.

Just a quick follow-up on Lenny’s question. Obviously you've made some inroads to move your tomato-- your North American tomato contracts, which sounds like they were annual contracts to have some more flexibility. Given the difficult times in the banana business, do you think it's possible to move the North American banana business to more flexible contracts or lack thereof of contracts? Is there a movement to start doing that?

I wish I can. I would like your help, if you can give me a hand. But, unfortunately, you know we are not the only player in the market where we can decide what would need to be done. We need our competition to act on what you are saying, however, we're just bound by what the market trends are and, unfortunately, this has not happened so far.

Yeah. I hear you. For 2006 and either Mohammed or John can address this, you know, fuel, when it gets to the top end, when it gets to the prices it's at can be as much as 4% of sales. Should we use a number similar to that, John, for '06? And should we assume high fuel prices, or have you been able to hedge any of that, or give us an idea of what you're thinking there?

No. We haven't hedged any of the fuel costs, but the impact was fairly significant last year and probably we'll see a repeat of that.

Yeah. From a delta, from a change point of view, it'll still remain high. You shouldn't see this -- you'll see a high cost, but you won't see --

Right. We won't -- we shouldn't have a year-over-year increase as we had in 2005 over 2004.

OK. Great.

Yeah.

I'll follow-up offline with the rest of my questions.

[OPERATOR INSTRUCTIONS] We'll continue with Ken Goldman at Bear Stearns. Mr. Goldman, your line's open. Would you check your mute button please? Hearing no response, we'll move to a follow-up question from Heather Jones.

Going back to the oil question, I'm just trying to understand exactly what you're saying. Are you saying that oil will be up; you just don't expect as a big a year-over-year increase as you saw in '05 versus '04?

Nobody knows. If I knew that I'd be the richest man I could be, Heather. I really don't know. But at this point, I think what Eric was trying to drive at was that we don't expect -- not, we. He doesn't expect it to be up as high as it was. In other words, you know fuel is probably $100 a ton year-over-year. We don't expect to see that, at least this point, but no one knows that for sure.

You're saying you don't expect the Rotterdam to stay about where it is now?

Well, I mean, right now that's what I would assume, knowing anything else. It's just like exchange rates. Whatever today's rate is the best guess you can have.

OK. And then going to supply, two questions there. In Cameroon, is that a long-term contract or do you own part of that production? Because obviously that's a big cost advantage for you right now and just what is the situation there?

Well, in the Cameroons I think we disclosed in the 20F that that is not an owned operation.

OK. But is a long-term -- I mean, should we expect you to continue exports from there for the foreseeable future?

Yes.

OK. And we understood that you had lost a fair amount of volume out of Colombia, sourcing contracts you had there. On a longer-term basis, do you plan to supplement that through Ecuador or are you going -- I mean, how do you plan to replace that?

This is Mohammed speaking. And, no. The rumor that we have lost, it's not that lost. We have purposely terminated that contract 22 hours before renewal. We did not wish to renew that contract, so we did not lose it. We have terminated that contract.

OK.

And we have other plans to replace it from other sources.

OK. Would it be in Latin America or you're going to pursue further ACP?

That's a decision we have to make, Heather.

OK. And then my final question is you -- I've heard that there's -- you may be closing one of the UK plants that you got with the Fisher acquisition and then the California plant you mentioned, and New Orleans. Should we expect further closures of DCs around the U.S. or in the UK?

So far no other DCs or plants will be closed and when we see something that is not performing, we'll definitely take care of that.

OK.

Moving to Leonard Teitelbaum.

Guys, just one follow-up, John or Mohammed. I want to make sure I understand this right. The problem is not a shortage of product to sell, either pineapples, or bananas, or others. It's covering the spread on the increased costs. Is that a correct statement so far?

No. At this stage, there is a shortage on bananas. There is definitely a shortage and that's why, because of that shortage, the prices for bananas, especially in Ecuador, have climbed dramatically over the last couple of months. As far as pineapples, we don't see any shortage of supply. So banana situation, in my opinion, is a temporary situation until production comes back in Central America and then we will see more supplies going forward. And we believe that is going to happen in the next four to five weeks.

So by the end of -- by the beginning of Q2 you expect to see a replenishment of inventory available for sale in the industry?

Yes. Yes.

Leonard Teitelbaum. OK.

And we'll hear from Johnathan Feeney.

Just one follow-up for John. You've given ambitious restructuring plans here. You may be forced to layout a fair amount of cash to do these things in a very volatile earnings year. Can you talk about your philosophy around the sizable dividend you guys pay and if you'd consider cutting that temporarily?

I think this is a question that has to be put to the Board and whenever the time is needed. I mean, there is no decision at this time and these are matters that the Board has to decide for itself.

Oh, do you -- I mean, I guess, in your role, Mohammed, did you have an opinion on that, that you'd care to share?

I cannot disclose that, not on a conference call.

OK.

This concludes the time allotted for the question and answer session. I will now turn the call back over to Mr. Abu-Ghazaleh for closing comments.

I would like to thank everybody for participating on this call and I hope to get with you again on our next conference call. And thank you again for being with us today.

Thank you again for joining us. That concludes today's call. Have a good day.