Banana Enterprise Performance Comparison(BA11026)

This is a final research report from Hort Innovation’s historical archives. Please note that as these reports may date back as far as the 1990s, the content and recommendations within them may be superseded by more recent research.

What was it all about?

Over the five elapsed years in which this project was undertaken the Australian banana industry produced between 15 million cartons (13 Kg equivalent) per annum and 25 million cartons per annum from an average producing area of 9,700 hectares per annum. Approximately 8,800 full time employee equivalent units (FTES) were employed annually to achieve this.

Participants collectively accounted for approximately 30% of total national banana production over the period of the project. The average yield achieved per producing hectare for the participant group was 2,331 cartons equivalent (13 Kg) for an average Gross Sales Return of $22.34 per carton equivalent. After paying for marketing and ripening costs, the average Net Return to Producers1 was $20.93.

Participants on average spent $21.40 in total operating costs to produce a carton equivalent of bananas. Total operating costs showed an average increase per annum of 3.9% over the period of the project whilst producer’s returns showed an average increase of 2.6% per annum over the same period.

The most consistent measure to use in reporting average financial profit achieved by participants was Cash Profit. Cash Profit, equal to EBITDA (a measure used in financial circles) equates to Earnings Before Interest, Tax, Depreciation and Amortization (Cash Profit herein).

The average Cash Profit achieved per carton equivalent for project participants over multiple years was demonstrated to be $2.27 per carton equivalent. However, the range of Cash Profit achieved across one hundred and fifty five (155) participants in three normal years was also important to note. Cash Profit ranged from a loss of (-$35.04) per carton equivalent to a profit of $13.15.

We required Cash Profit participants to fund any external finance used in their business, replace and depreciate plant and equipment and deliver an acceptable return on the capital they have invested inland and water assets, plant and equipment and working capital.

Thirty two percent (32%) of the participants made operating losses per carton, twenty one percent (21%) achieved sub-average profits and 47% made profits per carton equivalent to or greater than the group average.

This may be similar in ‘approach and mindset’ to the activities that led the Western Australian industry in a somewhat different direction.

This project made recommendations to:

1. Encourage and promote the dissemination of these findings and how they can assist individual enterprises to improve their business outcomes. Included in this was the encouragement of collaborative effort such as the adoption of ‘best practice’ groups and similar, by groups of like-minded producers
2. Leverage the accumulated body of knowledge and also the extensive data that resided in the banana data base at the time. The data was stored in a flexible way that enabled currently collated information and additional information to be interrogated extensively.
3. In particular, to re-design aspects of the processes developed to date, so the program could have more resource allocated to analysis and interpretation, reporting and interaction with participants, and working with participants and industry. The objective being to maximize the implementation of improvement steps in banana producing enterprises.
4. Undertake future research and development focused on key differences demonstrated in this project between highly successful banana producing enterprises and those that have much opportunity for enterprise improvement, namely:
   • Managing to maximize yield
   • Plant Nutrition and Plant Protection designed to maximize yield and pack out,
   • Managing Labour and Labour Costs including process review and re-engineering in key areas of on farm activity
   • Increase understanding and adoption of Decision Making Tools, aides and technologies and the benefits of professional external advice.