Dole Food Company, Inc. (NYSE:DOLE) presents an interesting opportunity for investors following its most recent announcements. The company delivered a news on May 28, the impact of which could be compared to that of a double-edged sword. It was both good and bad for investors. However, I tend to lean on the good side more, considering the company’s current position. Dole Food Company, Inc. (NYSE:DOLE) made two consecutive announcements sending its shares down, but this could yet again prove temporary.
In the press release, Dole Food Company, Inc. (NYSE:DOLE) revealed that it will acquire three new specially built refrigerated container ships for its U.S. West Coast operations, costing approximately $165 million, for phased delivery in the late 2015 to early 2016 time frame. The company expects to use the newly acquired container ships in a bid to update the company-owned vessel fleet.
Updating our West Coast shipping capabilities is very important strategically to the Company’s competitive differentiation and future growth prospects,” said C. Michael Carter, Dole Food Company, Inc. (NYSE:DOLE)’s President and Chief Operating Officer. “These ships will be 27 years old at the time of replacement. The new ships will be more fuel efficient and will be built to Dole Food Company, Inc. (NYSE:DOLE)’s exacting specifications and design, with a 770 FEU capacity (compared to the replaced ships with 491 FEU) and equipped with gantry cranes.
Consequently, Dole Food Company, Inc. (NYSE:DOLE) also announced the indefinite suspension of the share repurchase program of up to $200 million. The company announced the authorization of the share repurchase program barely three weeks ago (May 9). The premature announcement of the suspension is perhaps what triggered the stock’s sudden dive early morning on May 28.
At this time we have decided to use our existing funding resources to take advantage of this opportune window in the shipping industry, when these specialty ships can be built at very competitive costs,” said Carter. “While Dole is also seeking to monetize its excess Hawaii land holdings by actively marketing the approximately 20,600 acres of land that it is not currently farming on the island of Oahu, we do not expect that this land will provide a near-term source of liquidity given the magnitude of farmland involved. With the approximate $165 million investment in ships and the drag on earnings due to significant losses in our strawberry business, the share repurchase program is being suspended indefinitely.