Fyffes/Wibdeco sells plantation for $14m

FYFFES and Wibdeco, partners in the £147 million takeover of the Geest banana business in the West Indies and Central America, have taken the first step in the rationalisation of that business with the sale of a plantation on Costa Rica for $14 million (£8.9 million).

Fyffes/Wibdeco had indicated at the time of the Geest purchase that the loss making Costa Rica, plantation would be sold but the proceeds have surprised analysts. When Fyffes/Wibdeco acquired the Geest business, no value was ascribed to the 2,800 acre plantation, so the $14 million is, in effect, profit for the joint venture.

Fyffes finance director Mr Carl McCann said $9 million has already been received from the local purchasers, with a further $5 million being paid in two equal instalments between the second and fifth anniversaries of the sale. He said that $6 million would be used to cover restructuring costs at the plantation and to pay off some debt, but some cash would be available to pay off debt associated with the purchase of the Geest business.

The most important effect of the sale will be to eliminate annual losses of £7 million sterling, a factor that should allow the Geest business to return to more acceptable levels of operating profit. Since 1992, Geest's operating profits have fallen steadily, mainly due to the Costa Rica losses, and fell to £10 million sterling on sales of £201 million sterling in 1994.

Analysts believe the elimination of the Cost a Rica losses and greater efficiencies in the retained banana business in the West Indies should allow the Geest business to return to more acceptable profits of around £20 million by 1997.

Fyffes and Wibdeco still have two large banana ships which came with the Geest acquisition, and it is expected that these ships - currently on charter to Noboa - will be sold by the end of the year. Mr McCann said that lease income from the two ships currently meets their financing costs and that the leasing market for ships of this type had improved in recent months.

Meanwhile, European Union officials began talks with four Latin American countries and the United States yesterday in a decade old dispute over EU restrictions on imports of "dollar" bananas.

But Latin American diplomats said they had little hope the two days of meetings would produce any movement.