Fresh Del Monte Produce Inc (FDP) 2007 Q3 法說會逐字稿

Good morning, everyone. (Operator Instructions) I would like to turn this call over to Christine Cannella for opening remarks.

Thank you, Matt. Good morning everyone, and welcome to Fresh Del Monte third quarter 2007 conference call. I'm Christine Cannella, Assistant Vice President of Investor Relations. Joining me today are Chairman and Chief Executive Officer, Mohammad Abu-Ghazaleh, and Executive Vice President and Chief Financial Officer, John Inserra, who will discuss our results for the third quarter of 2007.

Fresh Del Monte issued a press release this morning via Business Wire, e-mail, and First Call. You may visit our website at www.Fresh Del Monte.com to register for future distribution. This conference call is being webcast live on our website and it will be available for replay approximately two hours after conclusion of this call. This morning, Mohammad will review our operating performance during the quarter along with recent developments and our future outlook. John will then review our financial performance for the third quarter of 2007.

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 20-F for the year ended December 29, 2006.

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 will turn the call over to Mohammad Abu-Ghazaleh. Mohammad?

Thank you, Christine, and good morning, everyone. Fresh Del Monte performed well in a quarter that is traditionally the most difficult of the year for our company. In fact, the third quarter of 2007 was one of the best third quarters in Fresh Del Monte's history, with the most productive August we ever had in terms of our core product performance.

Net sales for the third quarter were 4% higher year over year, at $757 million, and we generated EPS of $0.51. These results reflect exceptionally high operating performance in North America during the quarter.

Banana pricing was strong as we made a conscious effort to keep our volumes in line with last year's levels in order to maintain strong performance. As we move forward, we would still like to see prices that more accurately reflect the challenges we face in terms of high fuel, transportation, and raw material costs.

Pineapples performed slightly better than the third quarter of 2006 and we still command the market's leadership position in gold pineapple with our flagship product, Del Monte Gold. We continue to benefit from the major cost improvements we implemented in this product line in late 2006 by closing our Hawaiian pineapple operations; and this has helped to further improve profitability.

Melons also performed consistently with last year at this time.

During the quarter, we continued to streamline our North America fresh-cut product line, further improving efficiencies, taking out additional costs, focusing on our top customers, and further penetrating regions such as the Northeast. These efforts had a marked impact on fresh cut's performance. Not only are we gaining new customers but we are also selling more fresh-cut products to existing customers, which is driving organic growth and creating a multitude of new opportunities.

We are also beginning to bring to our side some of our strongest competitors, which are in-store cutters. During the quarter, we won a major grocery store customer, replacing in-store fresh-cut items with Del Monte branded products. As more large customers seek outside resources to save money and increase efficiencies, we will be there to meet their needs with premium Del Monte fresh-cut products.

During the quarter, we also completed the restructuring that began in 2006 of our North American inland transportation system, with a goal to improve transportation efficiencies and further reduce costs.

In addition, during the quarter we established new relationships with a number of customers, including big box, club stores, and convenience stores.

As you may know, another recent and very positive development was that Costa Rica passed the Central America Free Trade Agreement. This allows for free trade to continue with the U.S. without duty on our melons and pineapples.

Throughout the third quarter, our business experienced significant progress in Europe. This summer was the wettest in more than 200 years in the UK and with cool, wet conditions throughout Europe and the limited supply of summer fruit, both bananas and pineapples sold more briskly than usual in the summer months.

Meanwhile, we won a major new airline account; a large UK-based airline has taken on our Fresh Cut products for its in-flight service.

At the same time, McDonald's expanded our existing relationship by adding additional volumes for its Quick Serve chain in the UK.

During the quarter, our European management team also made a concerted effort to further divestify our customer base in the UK and Europe. We believe that this strategy will help us to stabilize our revenue stream and provide us with improved performance in this region.

Our prepared food business also performed better year over year due to our sharp focus on reducing costs. Along these lines, we continued to reap the benefits of the closure of our juice plant in Italy. We also continued to trim our in-house sales force as we began to have more of our products marketed by third party distributors. This is a cost-effective approach that eliminates inland transportation and storage costs, reduces overhead expense, and provides us with greater market penetration.

We secured shelf space in supermarkets where we once had none and we began to gain sales momentum in terms of stronger sales and higher pricing. We also began to see a recovery in our canned food business in the UK as we regained shelf space once lost to a major competitor.

We experienced a very strong quarter in Asia as well, especially in terms of pricing in our pineapple and banana business. Japan remains a vital market for both products and we increased sales to major Japanese supermarkets. Highland honey bananas continued to be a highly sought-after product in both Japan and South Korea, and we benefited from premiere pricing in these markets. We will increase our production of highland honey bananas to meet growing consumer demand.

We also experienced increased banana production levels in the Philippines during the quarter due to improved weather conditions, allowing us to further implement our strategy of diverting bananas to the Middle East, where demand is increasing for quality Del Monte brand value products.

During the quarter, our success in the Middle East gained traction as a leading banana-ripening company in the United Arab Emirates. We grew in terms of sales of fresh-cut fruit and vegetables.

We landed a major airline contract with the preeminent carrier in the region for fresh-cut fruit and soon for bulk fresh-cut salads. We view airlines and airline terminals as major outlets for our products with good reason. Experts predict that 150 million passengers will travel through the Dubai International Airport over the next 10 years.

In Jordan, our poultry business continued to perform well during the quarter, with improving sales levels. We also recently introduced our canned and chilled meat products in Jordan, where they have experienced strong consumer acceptance.

Fresh Del Monte is performing well around the world and we are gratified by this performance. Some of our success is due to improved operating efficiencies, a process upon which we focus continuously throughout the year. We have worked hard to maximize the efficiencies in the business and eliminate unnecessary costs. This strategy has had a dramatic impact on our business, particularly in our core products.

Another aspect of our good performance can be attributed to the fact that we are very disciplined in the way we view our business. We are in this business to increase shareholder value and, as a result, we are sharply focused on serving the needs of those customers with whom we have longstanding relationships, and on those products that enable us to generate acceptable returns.

Of course, there are many other reasons for our success -- our well-recognized brand, our skilled management team, our dedicated employees, our commitment to the environment, and, of course, the industry in which we operate continues to be largely favorable, in part due to the health and wellness consumer food trend.

Our challenge going forward will be to increase prices on our products to offset costs related to fuel, transportation, and packaging, which continue to rise.

In summary, I'm very upbeat about how well our business has performed over the last nine months of 2007 and I remain optimistic about the remainder of this year and the beginning of 2008. We are delivering strong results and I look for the momentum to continue as we move forward. Meanwhile, we will continue to meet the challenges or find (inaudible) while working diligently to improve our operations, expand in new geographic areas, and develop new products to meet consumer demand.

I will hand it over now to John to give you some financial results.

Thank you, Mohammad. Good morning, everyone. The third quarter was an exceptional period, both financially and operationally, for Fresh Del Monte. In fact, it was one of the best third quarters in our company's history. We are happy with our performance, not just because the third quarter covers what is typically the most challenging months of the year for our business but because we've seen marked improvements in our prepared food and fresh-cut businesses.

The results that I will share with you for the quarter exclude all current and prior-year asset impairment and other charges.

EPS was $0.51 per diluted share compared with a loss of $0.41 per diluted share during the third quarter of 2006.. Net sales were $757 million, compared with $730 million in the prior-year third quarter. Gross profit was $68 million, compared with $33 million during the 2006 third quarter. Operating income increased $50 million to $26 million, compared with a loss of $24 million in the prior-year third quarter.

I will now review the third quarter performance of our different business segments on a regional basis. Our global banana business segment performed well during the third quarter of 2007. Net sales for the third quarter rose 7% to $277 million on planned lower volumes. Gross profit increased $15 million to $7 million due to increased pricing in North America and Asia, along with gains from foreign exchange. Worldwide pricing for the third quarter increased 15% to $11.53 per box compared with $10.01 one year ago.

Banana net sales in North America rose 3% on planned lower volumes. Pricing was higher due to our negotiated contracts. However, although pricing was higher year over year, the cost of fruit production and transportation have also increased significantly.

In Europe, net sales increased 8%. We benefited from higher local currency exchange rates in the UK, which was partially offset by lower pricing and slightly lower volumes in continental Europe.

In Asia, net sales decreased 7%, with lower volumes on higher pricing, as we shifted banana volumes to the Middle East.

In our Middle East operations, net sales were significantly higher, with stronger prices. As Mohammad has often said, we are enthusiastic about the banana market in the Middle East and we are well positioned to meet rising demand for bananas in this region as we go forward.

In our other fresh produce business segment, net sales decreased $12 million to $342 million, with lower volumes due to SKU rationalizations in our fresh-cut, vegetable, and tomato product lines. Gross profit increased $14 million, or 45%, to $46 million, which provides us with a gross profit margin of 14%, in line with the first half of the year. Our lower cost cost-reduction program and restructuring of our Hawaiian pineapple operations drove this performance.

Our gold pineapple category performed extremely well during the quarter. Net sales increased 12% to $108 million, volume rose 15%, and pricing was slightly lower, with costs decreasing due to better utilization of our Costa Rican operations.

In North America, gold pineapple net sales were slightly higher due to volume increases. Net sales in volume of gold pineapple in Europe were up significantly due to increased demand and excellent product quality. In Asia, sales were higher, with strong pricing and high volumes as we worked to further expand our retail consumer base.

In our melon category, we basically saw a repeat performance of last year's third quarter. In North America, sales and volumes were slightly higher. Cooler weather conditions in Europe kept sales and volumes lower than last year's level.

In our fresh-cut category, net sales decreased by 16%, or $14 million, on lower volumes as we continued to cut SKUs and concentrate on higher-margin products, which has resulted in improved performance. Sales and volumes in North American were significantly lower due to continued SKU rationalization with substantially higher pricing. Sales in Europe were lower due to decreased consumption, a direct result of cooler weather. Volumes were lower, with much stronger pricing due to the benefits of foreign exchange.

In our nontropical category, net sales increased 16% to $49 million, with slightly higher volumes and pricing due to industry shortages in our avocado product line, a result of inclement weather during the first nine months of 2007 in key production sourcing areas in North America and Chile. During the quarter, nontropical sales in Europe were stronger on higher volumes and pricing due to industry shortages.

In our tomato category, net sales decreased 16% to $34 million, with planned lower volumes. However, our SKU rationalization and lower costs due to increased industry volumes have resulted in improved performance. We expect to see shorter supplies of tomatoes in the future as more growers either exit the business or cut back on production.

In our prepared food business segment, net sales increased 15% to $89 million and gross profit increased $6 million to $11 million, with a gross profit margin of 12%. We're optimistic about the recovery of our prepared food business and, as Mohammad said, we're pleased that we continue to meet industry demand in the canned pineapple category and in our ability to gain a more competitive posture in the UK.

In our other products and services business segment, net sales for the quarter were up $49 million. The $10 million increase is due to continued strong performance in our Argentina grain and Jordan-based poultry businesses. Gross profit was in line with the prior-year period.

The foreign currency exchange benefit at the gross profit level was $6 million during the third quarter of 2007 compared with a $15 million benefit during the same period last year.

SG&A expenses during the third quarter of 2007 decreased $15 million to $42 million on a year-over-year basis, primarily due to lower advertising and professional fees.

Interest expense in the third quarter was $6 million, in line with the third quarter of last year. Tax benefit for the third quarter was in line with the same period last year.

At the end of the quarter, debt was $359 million, down $111 million from the end of 2006, primarily due to our strong performance. We anticipate capital expenditures for 2007 to be approximately $100 million.

That concludes our financial review. Operator Matt, could you now open the lines for the question-and-answer period?

Certainly. (Operator Instructions) Our first question comes from Jonathan Feeney with Wachovia.

Good morning and thank you.

Good morning, Jonathan.

Hi, Jonathan.

I guess my first question would be, when we look at this growth in the Middle East, Mohammad, I guess-- how much interplay is there between this canned and chilled beef business out of Jordan and the rest of, I guess, the Del Monte-branded fruit, vegetable-- I'll say fruit product you're doing over there? And is-- does that really give you a scale advantage? And I guess, can we look for you to be more-- If so, are you going to be acquisitive and maybe buy other businesses over in that region?

Well, let me start by saying that the meat business just started very recently, so we haven't yet really made an impact on our numbers. But I believe that by 2008 onwards, it will have a significant impact on our numbers in this segment because we see a huge potential for us in this market, especially with the kind of products that we are going to be introducing in the local market as well as in the region. When I say the region, the MENA region in general.

The Del Monte label will be only used on certain products to certain markets. So we will have the Del Monte label on some of our products, but only on selected items. And we have other brands that belongs to-- of course, under our Del Monte franchise.

However, through all these projects that we undertake, even though they are not within our core products, which is like bananas and pineapples, but we have proved over the years that we can really operate and perform and achieve the results that we promised at the very beginning. And this has been, actually, accomplished and still we see further potential down the road.

All these products, or whatever we are going-- as you mentioned, we might find an opportunity to acquire a business that will be very-- can go along with our product line. However, what we would like to do, and what we are doing right now, is leveraging our distribution and logistic capabilities in the area that is very much probably a unique opportunity that belongs to Del Monte in that respect. And that's where we have our strength, by leveraging our logistics throughout the region, and sales and distribution capacity, to integrate these products and any new products in the future, which we are working on diligently now. And once we have them in the pipeline, of course we will keep you informed at the time.

When you say, Mohammad, "other new products," you're talking about within the categories where you already compete or would you be thinking about products that utilize your distribution system completely different from the meats and the fruits?

No, it will be in the food line. But right now, we are focusing on our-- like I mentioned a few minutes ago, that we landed a very huge contract with the preeminent airline in Dubai, which is actually, in the region, and will become probably the biggest in the world in a couple of years.

So this is a huge-- and this demonstrates what Del Monte means to the area. I mean, we-- without much effort, really-- We cannot accept orders right now because our capacity cannot meet all this new demand that was not expected. I just mentioned an airline, but the catering industry in general is a very big potential in this region. We have been supplying McDonald's, now, in the area. We have been supplying the Pizza Hut, KFC-- you name it; all the big quick-serve restaurants are now customers of ours. And really, the challenge now is to meet and to be able to deliver very (inaudible) volumes that are coming our way.

Would you say, Mohammad, that's where you've been spending most of your time from a business development standpoint is the Middle East? It certainly seems exciting and we're hearing more and more about it every quarter.

No, this has been, actually, going on for now several years in the planning stages; now we are in the execution and implementation, I would say. And we are really at the beginning of the road in terms of expansion in this region. I think that-- I don't want to put numbers, but I think that they will be very, very substantial a couple-- two or three years from now.

Great. And just a couple of other questions. On bananas, obviously, a nice performance year over year. But relative to history, it's actually sort of in the middle from a margin standpoint and a profit standpoint; you look over the past 10 years. I mean, do you-- is Europe still-- are there-- basically, is there still up side to that banana business now that you're seeing better pricing in the US and perhaps still maybe depressed conditions in some other areas?

Well, let me tell you something. I mean, bananas is a commodity that we have known for many years. I believe that the whole-- the bottom line for this business is the discipline. We are a disciplined company, as I said. We are not planning to sell bananas at a loss. We are not looking just for revenue and market share. We will sell bananas to whoever pays the price to be a decent price, to have a decent return on our investments. That's our policy and that's our-- And that's why we haven't been going, trying to take market share or increasing volumes in different markets. We believe that our business is there to make money, and that's what we're doing.

Now, the banana could become short or could become a little (inaudible) over here. But in general, I believe that nobody can survive today, neither a producer nor a marketer, nor anybody, an operator, without making money. And that's what we see right now in the market. We see people going out of the way and we see people abandoning the business. And at the end of the day, facts and reality will prevail. So I believe that bananas is just like any other commodity. It has been abused, in my opinion, in the last five, six, seven, eight years and it's about time that people realize, either they make money or they can go out of the business.

Great. And just one last one -- I'm sorry if I missed this, John, but did you quantify anywhere what, company-wide, the foreign exchange benefit would have been?

Yes, we did. We said it was a $6 million benefit for the quarter.

For the whole company?

Yes.

Okay, great. And would that be a sales (inaudible)?

No, that's a gross profit, John.

It's a gross profit. And would that be-- sales mostly in processed food or--?

It would be mostly in our fresh products -- bananas, the high-volume items.

Okay. Okay, thank you very much.

Thank you, John.

And moving on, we will hear from Diane Geissler with Merrill Lynch.

Good morning.

Good morning, Diane.

Congratulations on your quarter.

Thank you.

Thank you, Diane.

Just a follow-on question from John's question on the Mideast and the branding. What are the limitations on the use of the Del Monte brand with regard to categories? Are you limited to fruit and veg, or what are the terms?

No, we have no limitation whatsoever. Don't forget that we have the Del Monte Food Europe, which we acquired in 2004, which gave us the rights and the franchise to use the brand across Europe, the MENA region, and Africa. So we have the brand to use it on all the fresh products and all non-fresh products as well.

All non-fresh. So you could conceivably do something in protein under the Del Monte brand.

On anything.

On anything; okay. Thank you for that clarification.

Then just kind of a question on the announcement yesterday by Chiquita, some of the things that they're doing on the restructuring of their business. Obviously, it's been 24 hours since they made the announcement so you may not be in a position to talk about some of the opportunities that you see there. But my understanding is that-- planning to pull out of the fresh-cut fruit bowl business. I mean, could you maybe talk about some of the opportunities you might see for change in the North American market?

Well, from our perspective, I think that will give us additional leverage. I mean, we have proved that we are the only fresh-cut fruit company in the United States that can deliver on a nationwide basis, a national level. And I think that has been proven yesterday by what we saw, that some of our competitors are moving out of that category. And we are more than happy if these customers -- whoever is going to be left behind -- to be served by us.

But we are-- as I said, we are an expensive company. We are not a company that is ready just to serve somebody for the sake of revenue, of being on the shelf; for the sake of being on the shelf. We are a company that is-- and I repeat that again and again. We are a company that will just focus on the bottom line -- as well as revenue, of course. But bottom line is very, very important for us.

Okay; do you see anything on maybe banana and pineapple in terms of opportunities there?

As I said in my statement a few minutes ago, we are expanding in new customers, we are gaining more shelf space, we lead on the fresh whole fruit level or on the fresh-cut fruit level in North America. And that's very encouraging. Even in Europe, of course, in major markets. That's-- as I said, that's a huge potential.

Okay; thank you for that. And then, John, just some detail questions for you -- the tax rate. I struggled with this, as I'm sure a lot of people do, in terms of the-- trying to understand quarters when you're going to actually have something to report on that line versus a gain. So can you help us out there with what happened in the quarter -- what were the dynamics behind--?

Well, we did have a certain recovery this quarter from previously put-up tax provisions under FIN 48. We did recognize a gain because we didn't need a tax provision we put up a number of years ago. So that was a one-time. Those things happen from time to time in any of the new tax environments that we have. But as we've said, our tax rate's usually around 6% on a normal basis. But different quarters, under the new rules, it can move in different directions.

Right. Can you quantify what the reversal was?

It was in the neighborhood of $5 million.

Right. Just to help me understand sort of what the magnitude was. And then I guess my final question -- on the FX you mentioned the benefit to gross profit. Was there anything in SG&A -- any benefit or negative through the SG&A line from FX?

Not really. In FX, we did-- our advertising program that we had last year, we didn't repeat that program and that was basically one of the major variants.

Okay. All right, great; thank you very much.

Thank you.

(Operator Instructions) Moving on, we will hear from Heather Jones with BB&T Capital Markets.

Good morning.

Good morning, Heather.

Good morning, Heather.

Congratulations on the quarter.

Thank you.

Thank you very much.

I have several questions. Going back to the SG&A, what is the run rate that we should be using? Because I look at Q4 of last year and you spent about $49 million. Should we expect that to come down this year? I mean, was there advertising dollars spent in Q4 last year that'll go away? What is the run rate that we should be looking for?

The run rate is probably more in the $50 million range, which has been historic--traditionally our run rate.

Okay. Because, like, in Q1 this year, you did $42; Q2, you did $47; this quarter, you're doing $42. So we should expect that to increase to $50?

I don't believe so. No, I don't believe so, either.

Okay, so should I split the difference; use $45 or so a quarter?

Well, I don't believe that we are going to see a-- maybe we will have an additional input in the Middle East because of expansion and things like that, but that will not change our numbers; that will not change our numbers.

Basically, you're not expecting the significant increases up to, like, a $50 million a quarter run rate?

No.

Okay. As far as the FX, I had expected a bigger impact. Would you anticipate a larger impact from-- a positive impact from FX for Q4 given the Euro and Yen, what has happened in those the last few weeks?

Well, you don't-- we have been hedged-- I mean, in some of these, in the three main currencies, be it Euro or Sterling Pound and the Yen. So we don't see that the strengthening of these currencies will have a major effect on our foreign exchange gains in the fourth quarter, Heather. There might be, but very slight.

What about '08? Could-- I mean, are you hedged out into '08, or-- say this strength continues, would it benefit you in '08?

I think that it will be a positive side in '08.

Okay. And as far as the prepared foods business, that was much stronger than I expected. And I was just wondering -- you mentioned lower supplies of canned pineapple products. Is this something you expect-- is this a sustainable improvement into Q4 or was it more just a near-term dislocation in the market ir--?

No. Actually, the shortage in pineapple is mainly from Thailand and Indonesia; it's still continuing into next year as well. But in my opinion, it's partly because of that and partly because of better marketing and sales efforts that have been put in place in the last 12 months.

So I would not-- I don't believe that once the situation comes back into normal in these producing countries that we will be affected or impacted negatively in a very big way. I believe that our sales and our marketing efforts will continue and we will maintain our level of sales and penetration in the market.

Don't forget, as I mentioned earlier, Heather, that we have restructured our business in the sense that we don't anymore have marketing and sales setups ourselves in all these markets. What we did, we transformed our sales in Italy by going to a third party distributor. Now in the UK, we just started that last week. We haven't seen the effects yet -- I mean all this is going to be coming down the road; the positive impact of that. So-- we are doing the same thing in the Netherlands. So we are doing all these kinds of things to improve our operations.

Okay. Now, so I have an accurate base for Q4 projection, last year-- for the Del Monte Europe, you had a loss of $10 million at the gross profit line. And I know there was some kind of recall issue due to Kenyan pineapple. I was wondering if you could give me an idea of how much of that was-- so I know what was nonrecurring that hurt gross profit last year?

It was $16 million, Heather.

Sixteen?

Yeah.

And that was in Q4 last year?

Yes.

Okay. And then, just some questions on the US business. First, looking out into '08, would you anticipate-- I understand that you recently raised the fuel surcharge, as has Chiquita and Dole. But on the contract pricing side, do you anticipate another round of pricing increases for '08?

For sure; for sure.

Okay. And then, on the pineapple, the data check that we had done showed pretty meaningful pricing increases in the US during Q3 but, if I remember you-all's comments correctly, there wasn't that much price increase. I'm just wondering -- do you have a sizeable piece of your business on contract so it doesn't benefit from spot market moves -- or if you could explain that for me?

We do have a lot of fruit on contract business in pineapples and we do have spot. So we kind of have-- the pineapple business now is a stable business. What we get is a period of six weeks, four weeks, five weeks, of shortages. The only company in the market that really has the volume and the quality consistently, Heather, is Del Monte. And once we do have these windows, we do gain very significantly.

So these-- if you look at them throughout the quarter, then you average the price and then you see improvements. We cannot pin it only on North America or in Europe or other areas, but we do have significant increases at certain times of the year during the quarter, be it in Europe or be it in North America.

We have had, a few weeks ago, some instances, weeks -- two, three, four weeks -- where we had the spot market here in the States going up even to $17, $18 a box. We had prices in Europe which can-- which reached 13, 14 Euros a box. If you translate them into dollars, you know how much that means.

So we keep a very close eye on the market and we make sure we diversify-- I mean, we do go where the money-- Our North American market, there is a consistent volume that goes into that market. But we do have the leverage to divert products into other areas where we can see, let's say, more value.

Okay. I have just two more questions. We've heard that some of the-- I guess you would call them the marginal growers in Costa Rica, pineapple growers -- one, that lenders have become more hesitant to lend based on compressed margins over the last few years. And secondly, that some of the growers, as the plants reach the end of their useful life, are not replanting pineapple but are replanting palm, etc. And just wondering, is there any truth to that?

That is a fact; that is a fact, yes. And we have seen that in many-- several cases now. And as I said earlier, if you remember, on several conferences, maybe last year and this year, that we believe that this business is going to re-rationalize later because the cost of investment in this business is very high. It's not like bananas and other crops but it's very intensive in capital expenditure. And I don't believe, with the present market conditions, many people can maintain and continue in that business.

Okay. And then, my final question's on melons. You mentioned during Q3 it was flattish, but the pricing that we've seen in North America recently, I understand Q4 supplies may be tight and we've seen pricing shoot up over the last couple of weeks. I'm wondering, is that consistent with what you-all are seeing?

We are enjoying a very good market for melons in the United States. But don't forget, we do have pre-- I mean, we have our Arizona now crop which is ongoing. But we do have, as well, commitments to major supermarkets and we do have promotions and we do have other commitments. But on the spot side of the market, we are enjoying very, very high demand and good markets.

The spot side is very good but you have some fixed-price contracts out there, too?

We have fixed contracts, but of course, with decent pricing and decent returns. But not, of course, enjoying-- you can never tell that you will have-- we couldn't predict that the market would be so strong at this time; otherwise, we probably would have made different decisions. But anyway, all in all, I think that it's a very good market at this time of the year.

Oh, okay; understood. Appreciate it; have a good day.

Thank you.

Thank you.

(Operator Instructions) At this time, we have a follow-up from Diane Geissler with Merrill Lynch.

Hi. Yes, just to follow up on the bumper fuel? Could you quantify any impact in the quarter from rising fuel?

Sure, Diane. The fuel in itself for the quarter was a negative $4 million so that was-- the impact of fuel was not a major impact on the results.

Okay, great. Thank you.

All right.

And at this time, we have no further questions in the queue. I will turn it back over to Mr. Abu-Ghazaleh for any additional or closing remarks.

I'd like to thank everybody for joining us on this conference call and I hope to continue giving our analysts and shareholders better news as we go forward. Thank you very much for being with us today and have a good day.

And, once again, this does conclude today's call. Thank you for joining us and have a great day.