Dole (NASDAQ:DOLE) indefinitely suspended a previously announced $200 million share buyback program on Tuesday in an effort to stem losses from its volatile strawberry business and revamp its fleet of container ships.
The Westlake Village, Calif.-based food giant will use the repurchase program’s existing funding to buy three new specialty-built refrigerated container ships for $165 million in an effort to take advantage of an "opportune window in the shipping industry."
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The strategic move will replace a 27-year-old fleet, bringing on instead new ships at the most cost-effective time that are more fuel efficient and built to Dole’s “exacting specifications and design.”
“Updating our West Coast shipping capabilities is very important strategically to the company’s competitive differentiation and future growth prospects,” Dole Chief Operating Officer C. Michael Carter said in a statement.
The ships, to compliment Dole's U.S. West Coast operations, will be delivered in phases from late 2015 to early 2016.
The decision to suspend the buyback is also a reflection of a weaker-than-expected strawberry business, which has seen “especially pronounced” volatility during the first half of 2013 due to unusual weather.
Dole, the second-largest U.S. strawberry supplier, said all 962 acres of its strawberry fields in Oxnard, California, were affected this season, limiting its production to mostly freezer and juice outlets during what is typically the busiest strawberry season of the year. Because of the headwinds, full-year losses in Dole's strawberry business are expected to fall $23 million below its original estimate.
While Dole is looking to monetize its excess land in Hawaii by actively marketing the 20,600 acres it is not currently farming on the island of Oahu, it does not expect the land to provide a near-term source of liquidity.
Shares of Dole fell close to 8% in recent trade to $10.20.