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Subject:  Fresh Del Monte Produce Inc. (FDP) - PART 4 Date:  9/30/2004  8:14 PM
Author:  DCFNewbie Number:  981 of 1264

Fresh Del Monte Produce, Inc. (NYSE:FDP)

4) Operational Growth/Risk


The market is clearly knowledgeable of the risks that FDP presents. It doesn't necessarily mean that they are correctly priced in, but it does mean that the low P/E is there for logical reasons.

Those reasons include:

- Fluctuations in yearly earnings

There is not much FDP can do to solve this, except increasing diversification. It's somewhat similar to portfolio management. If a certain company is overweighted in your portfolio it will obviously potentiate increasing volatility. In this case bananas are the overweighted asset in FDP's portfolio. FDP has managed to increasingly reduce the impact of bananas on the overall revenues (now stands at 34%). Still, anything above 20% will be objectively harmful to the company in the long term. Investors will not appreciate higher reliance on bananas. Other production risks like weather, are obviously, unavoidable. Higher operating margins associated with the sale of pre-packaged produce will somewhat reduce these swings.

- Current and future lawsuits

Lawsuits are abundant in FDP's pass. By employing over 25,000 workers directly and indirectl