FDP - Earnings call transcript Q3 2019 | Fresh Del Monte Produce Inc.

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Operator

Good day, everyone and welcome to Fresh Del Monte Produce Third Quarter 2019 Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] For opening remarks and introductions, I would like to turn the call over to the Vice President, Investor Relations with Fresh Del Monte Produce, Christine Cannella. Please go ahead, Ms. Cannella.

Christine Cannella

Christine. you, Thank and XXXX everyone, for our joining Good call. thank quarter conference third morning, you

As Christine mentioned, Del Christine I'm Monte with Investor Produce Fresh Relations Inc. Cannella, Vice President,

and Senior Vice and today's Mohammad discussion Joining Officer. President Officer; me Bezerra, Abu-Ghazaleh, Chief in Chairman Eduardo and Chief are Financial Executive

I Business the Wire. release hope a earlier issued review you to had this that chance press morning via

future copy distributions. company's of visit You the website to at register for as may for release, today's a as well also freshdelmonte.com

may As advised, measures reconciliations mentioned press to the forward-looking to this GAAP we securities in that previously include the providing much federal We within we SEC. any the today of harbor the morning you including filings in be review company's forward-looking would will that I in today, corresponding give of includes release response have statements safe of the included release, most press provisions our laws. we we recent the their ask the non-GAAP with issued like the we and financial you information measures. information remind your statements to answers questions,

am I Mohammad. turn today's pleased call over to to that, With

Mohammad Abu-Ghazaleh

us. per and of a sales the Good and basis per share generated I'm Christine. from for last third $X.XX gross from performance year's adjusted $X.X Thank you, of EPS up year an ago. $X.XX pleased quarter, profit we overall thank billion, a third you our morning, totaled everyone, with on Net joining in share, quarter. loss increased XX%

notably, as improvement our company business. America. fresh-cut volume a fruit line of we North continued Much Disrupting being banana Most to make a our product our business fresh value-added During of the on to business. progress strategic we the segment. value-added from the objectives, legacy our in and came quarter, higher based margin transform

from see to strong demand customers. existing new continue and We

and of the trends we of our open us keep Japan the global Our existing customer on track to have Yokohama, in base. quarter allow fresh-cut and foodservice new fresh-cut expansion is first with will and to facilities XXXX, pace in unit in our retail This begun expand UK. demand

Our also Packing during vegetable Mann performed the third quarter. business through well

we and of of Break part convenience our snacks. product meals of see line, launch snacks vegetable excited line our the to were Better As rich

We some our are and opportunities. ahead, moving as well of with newest biggest

our For business foodservice new which Middle grow partnerships Asia the example, for East, continue we and increasingly across to a focus us. is Europe, of

in the on possibilities open beverage the food of quarter are XXXX the schedule This looking are concept Middle in has itself proven first to fresh our Coral and States United United States. to store and We forward Gables. during also the the we East in in

every state-of-the-art our our Sustainability to more us We us margin better This on improve been the new over packing opportunity responsibility better corporate our we efforts look recognize sourcing and tomorrow. always our our impact Del we people will to goals opportunities has corporate environment. what released We facilities and forward and should our are making recently way and to about all building control to avocado on for a We positively our a to which additional commitment even Fresh to give highlighting Mexico, setting of Monte's are latest part secure and our new in serve the meet momentum advance an rapidly for online as goals the do responsibility avocados. day. tomorrow. report expanding social a is world sustainability we who meeting consumer website, market bring We make supply.

value and lifestyles come. product increasing transforming shareholder company the for generations our lines, to In summary, we remain healthier to inspiring committed growing

please. call now the more for turn over financial Eduardo, Eduardo details. me to Let

Eduardo Bezerra

everyone. morning, Good Mohammad. you, Thank

evolve to Our to Del and financial performance Monte strategy more focused Fresh that our is our in business the third underway. efficient, quarter profitable value-added, demonstrates

with third of $X.XX, XXXX, income line adjusted XX% $XX third year. million was Adjusted with For in year loss adjusted period. $XX diluted compared XXXX. increased Adjusted quarter loss $X the quarter adjusted profit in an for million, quarter prior per share in operating $XX of in of quarter gross income the share income net to XXXX, the net per to million million adjusted the an increased compared with prior in was Net with XXXX. were $XX $X.XX in million, million diluted XXXX. compared compared with And the $X sales the of of third net

segments compared our quarter third in of quarter in with business the vegetable product sales sales in value-added sales in higher to business fresh-cut $XX million net compared our million $XXX profit were the higher prior a with partially net avocado vegetable product and In segment product to Gross Primarily third period. product and million, line, pineapple fresh-cut, due XXXX, to by gross our fresh of profit increased of XX% result lines. lower net XXXX, offset the our and as year and lines. million, fruit, our and lines. $XX in primarily key Turning for $XXX pineapple non-tropical

the Our by point, trend the margin improved first percentage for half gross of maintaining profit the X.X segment of growth XXXX.

was and lower, volume The and in million, areas. unit lower growing the higher higher conditions adverse North result America than volumes, offset XX% the to selling Europe. category, net to our $XXX cost year was was production year in $XXX of sales prior to due period. decrease prices unit XX% X% prior higher The pineapple our million in In compared Overall was pricing by decreased production period.

volume than $XXX and lower volume period, America. higher primarily in was net with were to cost pricing quarter and primarily compared due of higher our with million prices compared X% category, fruit $XXX of the was the $XXX was X% fresh-cut in the of the $XXX than XX% unit Volume sales million XXXX. prior higher to the lower, unit was million, unit result North and prices. X% period. selling higher higher, quarter third prior unit higher million, sales selling year higher was X% XX% third In fresh-cut The In year Overall category, vegetable increased cost pricing was increase net our in sales was XXXX.

avocado million with result quarter was In industry higher tight category, Volume cost X%, in the increased category, was increased unit net our sales increased than XX% decreased unit lower. by compared X%, higher price due in was In of a million, with XXXX, $XX and the selling and period. third vegetable $XX as X% sales and fresh supported of higher XX% to volume X% $XX million, of increased Volume to unit higher prices year million net to supply. cost XXXX, prior third prices. increased quarter $XX sales compared our the selling pricing

to in due Volume period with primarily in our compared to category, unit X% pear, planned XXXX. million pricing line grape, with our apple, $XX low-margin the sales $XX decreased lower. beginning includes cherry third and In unit Net prior quarter citrus, plum, was peach, XXXX, non-tropical lines. of million, products of rationalization berry, year was kiwi in XX%, decreased category this which in the nectarine, product and cost

lines. traditional In Net our lines. gross impacted and canned prepared product products by product which category, selling prepared snacks profit volume, and our in sales includes to was the lower sales prices higher food increased, due traditional meals

last $XXX cost primarily than business was In worldwide XXXX, Overall quarter, net quarter in million, compared compared sales higher quarter increased a prior America XXXX, period was X% third to price increase worldwide X% East year's North the of year higher banana X% gross to of than million in percentage partially the lower volume the with Europe. reflecting were point $XXX lower period X.X gross prior increased due in the and net $XX year million, and the offset in over in profit segment, Middle and our Asia, by profit margin. banana $XX sales sales and million third unit with total third

moving selected we prior line data. the and Now were expenses, selling, with period. financial On year in to general administrative

foreign the quarter, and prior year, the due foreign and gross quarter an $X was the for at impacted million expense currency of lower $X our million was was during level the the impact to to volume. tax with profit sales America. million was for unfavorable debt with $X due $X compared at net Regarding third XXXX, with expense, the Interest the income earnings unfavorable the in taxable in quarter $X North of compared million, mainly tax million third Income quarter million. $X currency, higher by of level expense impact in third

$XXX due At $XXX accounts the of quarter, net activities operating activities flow end cash lower operating at income. end by additional of net same was $XXX period we debt an able million, million $XX million reduce to compared partially accrued the of our XXXX. from payable quarter, the and by in the to the higher expenses, -- of offset primarily cash our provided from At million end with of the to million XXXX, quarter cash $XXX second the by of were

unsecured we October with and extended restated billion our and facility XXXX, credit rate. XXXX, $X.X favorable credit agreement October more until In the amended a

And We also pleased the availability Fresh included confidence $XXX maintain appreciate and to we the continued of in increase have Del an accordion by, future. support the Monte's are lenders feature up they our to that million. could

November interim $X.XX increase per dividend XXXX period months to over release, on compared in the to million record on Directors with $XX is press results XXXX, or December capital we September Board the XX, spending, paid shareholders expenditures as financial XX% in same dividend it $X.XX cash $XXX an relates morning this XXXX. declared in a announced of XXXX. This our in Also invested As XXXX. in capital X, on nine of million payable of first share, of the our

review. This concludes our financial

now call can we for over So the Q&A, turn Christine.

Operator

Consumer from first Jonathan Your Instructions] Feeney from the question comes Edge. of line [Operator

open. Your line is

Jonathan Feeney

how value-added mid-cycle you've that where a a products have of I segment, the morning. about last you've a it well Good your say stay model and volatile, trying to addition years, fresh the me affects to going about doesn't was seem of right? flat, have I I and going forward. What average to question. kind gross very profit, consistent bigger $XXX old expectation year? think other of it's Packing, was appropriate that. this added it foods it's wanted you just pretty kind I lot we of, million, is essentially of to that with to added at assume combination bunch average your additional, like fresh something and I'm segment. Because to or is as Because Mann it others. five should least produce prepared which a the understand picture couple understand start the as but Thank that for to Thanks. all me like which product think as maybe before other of -- five anything most where line, would other be I'm do trying like it the to $XXX of, averaged can profitability million every of you years help the much. And

Mohammad Abu-Ghazaleh

very in Jonathan. by is opinion so quarter year morning, XXXX we been exchange very this and the building mean, Everything that we others two and at I hit time, unfortunate, actually a were good many and we market the and disruptive of is know, was, Yes, you or you the the or company sense planning what three last transforming have events, were climatic quarter reasons. the in same in other my have last up result that seen, in saw a years.

instance, sector, the several years, for supplying when I basis have say, and as historically exclusive mentioned, in are foodservice fruits. Middle or the eight seven, well an almost last for lettuce expanding years as would Now been McDonald's for that we know, other I know, into items, East you vegetable some you more, we the

or proved ourselves just to a supplier collaboration come getting not to we ourselves realize supplier. beneficial. multinational is very have more a kind local McDonald supplier dependable, and is mutually our regional As have and that more that and of, be a beneficial,

places especially other as don't expanded the mention every in now we have into and we expanding into every in well. months, Italy speak want are business this a lettuce last, of few terms region. for country -- actually Korea a we But together items, with So global in and becoming growing us certain vegetables. supplier as in Japan, or we McDonald is to I and have of

to countries further in sure grow my will in so same QSRs business also us we these the is and of are also ideas many also and we'll of go Middle operating. also and this serve for these QSRs I'm So, started new and will regions open opportunities McDonald. course, that introduce and East, further opinion, into are And new our have we that might in new also that do with a other have to as come interest that clients we the products the

the we of one is doing. are this things So

my We protein items, sandwiches proven and we competition. last it and better I to And that protein means have got when we in would business say grown opinion, that into This ingredients, have but salads, gained it six the fresh product protein adding gain moved go and can than up forward. businesses, only salads more not during has month, nicely, for think open as the items. door the other us well as deliver has also have as I quite we that we

have evolving that here. So the these some are been of things

moving trend that I be news company mean, diversified that of, towards. go value-added quarter-to-quarter, be kind as our Del what value-added will hearing about a would And many value-added banana-based company. a forward, to of, from into on. to will other all sure services about will very, like and add And kind products company is products, plan will so we highlight I a that you just is to am change well the more it be, Fresh Monte this more I disciplined initiatives that,

Jonathan Feeney

That's more out ask figure specifically. guess very maybe numbers. this to is I'm to the what clear on trying I

gross and be The produce pineapple about margin. in year by other line but business know, about good bad like, carried a dominated, and something largely you XX% was the fresh gold year XX% XX% be historically a influenced

down in of made lower get recovery nice a kind Now all like much modeling of but segment? like, And this X.X% of it that quarter, year? went any X%, changed that handle than that How margin it's of how in kind change flavor a on XX% is McDonald's this to how margin got margin is XXXX, we're that structure at at just business for structurally? X.X%, I'm is much to a last you've of, that that structural is? Is craziness on just business this has typically. what the trying

Mohammad Abu-Ghazaleh

should value-added clear. hopefully I not less be should mean, business than Any that be XX%,

As terms production that markets. three, year I be year that beginning the determinantal gold from far very was last there knew in years will -- four a of knew -- there the the and 'XX ago world. three there pineapple a when I happened the will and oversupply in that over oversupply XXXX went Costa market, in crazy like time over was an Rica be and will all late take XXXX that the years

growers almost wave, has So like of in we tidal than by that have gone of which to Costa over But kind for today other $X. Rica couple was survive is of course prices down endure for it sake a you can tell to any by the about argument to box sell course, only that the -- in Costa as I are only on know, produce three we to company the We produces of the operation continents. that's, produce different last used have we well. for the into as this in -- in leaders eight, reflects transformed world we it in Kenya. And nine Rica, and in market part a months, of -- can you fresh that years that today XX% a production $X do ago FOB and pineapple we I we fact market. Kenya, be better in of the pineapple

producing to or are our mainly in are Asian now will the Europe, which Philippines, the the us East Kenya At Gold to tremendously for dependence the producing of Asia part Monte and the margins help trying that supply market. even time, same improving our Del the in canned, on we reduce and we country. in Middle So to the to and for prepared

start testament company we So have in really To that going going our will is strength And business gives that's one our a the to something this which the production impact pineapple are it's we as where as and can leverage pineapple, markets. this, big very no world and to a pink to we to supply have, far forward. concerned. have make that our I only else will three very for pineapple add the soon. And we areas that patented marketing is believe

very So that the that to better. confident, sure all I'm -- had as hopefully far we levels we as pineapple, before, and will very the I'm return

answered So question. I hope that I your

Jonathan Feeney

very I what helpful for what the That Mohammad, you're you answer, lower on program, was a year. a one it. appreciate Can Mohammad maybe appreciate capital this as The or characterize you expect -- the would as Eduardo expenditure capital little on kind What hurdle possible, -- at? of you XXXX what been rates has what I expenditure? far capital for emphasis it. you're year? if looking And this

Mohammad Abu-Ghazaleh

Eduardo add If and I to have it. this will will I answer need I to,

Eduardo Bezerra

Yes.

So thank you, Jonathan.

emphasis year, been all So, investments value-added of first this tied our products. has the to

have in unit QX, to and running. our avocado we're So up going

a So the to that efficiencies some units, related bottom some there in Yokohama that fresh-cut this investment the that line commercial in Japan, adding we expect had There we also we're that are to not and as other come new big but we key vessels to we that operations foreseeing well. in the investments will with are important doing. expansions future was cargo in mention only there, it's year also our that that did also and in of our

we couple we we the doing related are a consider have further our capital business, we next would significant bananas. that four our a of on So -- planned cost operation. I investment question also the investment And And to we been A Also for your operations for that that been lowering put we rigor of we on regular same previous side. some consolidate probably more become think continue in efficient our up have ships make would that before. that doing those focusing investment cost to was And related our have further we review of more with come in on running. XXXX, Europe including in have we year and the to beyond process. year, fresh-cut have to core expansions Mann. sure our can that base on expansion our UK mainly How emphasis

we invest Panama, position cost advantage to versus continue our will a today. that that bring We in competitive have

Jonathan Feeney

Good I'll at your you helpful. time. very for leave That's that. Thank it quarter.

Mohammad Abu-Ghazaleh

you. Thank

Operator

[Operator Mitch Instructions] line of Your from comes from Sturdivant. the next question Pinheiro

Your line is open.

Mitch Pinheiro

pineapples expect ago? In mean, you years several back million you roughly on recover at Jon's I I follow-up say in revenue, recovery see $XXX, you the down look wanted you I a to at, full maybe XX%. like to profitability? so now where were XXXX, questions. of were $XXX couple did that's know, all plus when of pineapple a doing you I'm going Are you that to looking to

Mohammad Abu-Ghazaleh

kind I think, we we profitability is of, on And we really line. the message to is than that more bottom would are our at are has focusing focus been, be -- production this our all sales. volume be or what people, conveying the really have been that it

what reach same So few to through have buying that used either back. from we whenever a The on margins concerned about our to not need up and -- we our the hopefully to, more third-party I level volume, that line. the increasing much make improve ramp actually volume, to years need too we can to but production sure am bottom we has to or own

Mitch Pinheiro

your that's your a so has newer of too? this Okay. been volume the sort of strategy, profit just -- over And that's part

Eduardo Bezerra

proving very our are us value-added a new I why and why focus a more are position. beneficial where can efforts about put working us And be successful as and mentioned in we shifting that's which can on categories products very and on -- better Yes, to products money, mean, to which we we I actually company. make drive, that is we've

is is value-added what this not these margins cutting we into grown. along. future our products, I as services, and But sure volume the the are core maintained our is think areas products moving where rationalizing our well our and towards I'm we're that at as and making time same saying go under

everyone into are our think working geographical when is So kind in a saying opinion, have ability we a but region, cover we difference about like shortages that the -- it makes our else and in of, specialty becoming that to commodity years. to a in I'm And mentioned big one area, huge we where leverage, the, huge are makes future, our going which us I'd another that as kind huge don't us that a and that over not and a go minute producer, producer. make between coverage forward. that future I us a the three a producers from enjoy the ago near for I difference we different levels -- presence plus continents long-term even my want will will of in on both I gives the

Mitch Pinheiro

or What And staying would and the getting of how driver margin the The quarter fresh-cut vegetables rid the fresh the in was fresh-cut slightly. business? Or segment. Okay. you lower were accomplish that value-added in of that? down Is that?

Mohammad Abu-Ghazaleh

of the No. business, they sometime to items because have you items vegetable doesn't you make get short that that on certain sometimes on to cut you The us. other sense conditions are climatic and know,

it's is and acquired Packing a they in very of innovation successful creativity So just significant. last We beginning year. serve. the mentioned product company the of acquired market and we while presence the ago lines that a that the at in that Mann really Eduardo the and as And when terms nothing

something becoming the terms company working procedures, that financial, legal, is And have the all company we was of months the the last of, and from I the Del is think However, now in way. Monte policies lacking this for the several our, in governance, streamlined kind on systems, HR. been aspects

value. volume use United able -- it distribution, we will add means value as go more that way States say value business across in believe will leveraged more add streamlined I When well and and because I that the that see across us. distribution be will as products increase forward, would we the add more So centers, to to value, as I believe these that be we a our

Mitch Pinheiro

is And gross to that segment, mean, and should double-digit segment I value-added does that a the be reach margins? fresh able

Eduardo Bezerra

our So Mitch. target, that's

fruit consistently, think pineapple, components so have I profitability there, the right? of there think we the profitability on trending fresh-cut in margin. And profit you one re-establishing delivered increasing piece increase by improving starting that on meals in because tomatoes, So operations. have to an We're that were our that last we're So are recovery to seen our Also several in there gross as rationalization in the our the that did in important as that is direction, I as -- see this our we contributor year, of melons cereals, and well year. snacks, growth. very the also well. And it's

balancing So teens the average towards having, margin range on forward. high you we be I close pineapples I the to in on think segment, all others very the teens XX%, going -- by the should and think the know, in more

Mohammad Abu-Ghazaleh

to that expect And precise long been teens that because that the see, range. that cannot visiting some I some on get has and we when, you but But on the I you fresh should the priority, been exactly would of X% and X%, range bananas are in adjustment. the always should require run, our supply/demand and operation know, parts that then will has still, we depend value-added say we pricing, are products and to etc. between know,

to expect overall should we that So margin growing year-after-year. see

Mitch Pinheiro

bananas to a for second. Switching

current Just you outlook demand like look and help supply year-end? through us for the

Mohammad Abu-Ghazaleh

It's normal the trend. just

months demand of than four mean, three, lower year. last I are the that the the year. end the is much year usually the usually year the in of low first the of of half half second The

this difference year, which better more the the haven't same. that US, really we previous The normal than only difference more from less So At years. Europe seen is than North say we I the is this The a is sign. see it's would much of previous doing year normal. good time or years. America

Asia is trends the same as normal normal or and trending, behaving year.

see now happens, don't in this year. always unless very this to disasters, I surprises would end nothing business, are big sector so to year. natural sensitive the the a any So In from normal really of we be the banana

Eduardo Bezerra

this we Mr. And Yes. I'll just recovery think -- margins Abu-Ghazaleh's a complement need have to focusing on I also -- -- the on lot been in to segment.

So we and right we been the revisiting the and doing our the most of move believe where of that also to that's customers in decisions that that out we have making important investment. an can sense get product, focus portfolio

Mohammad Abu-Ghazaleh

banana are And I for XX, add business to retail, the be know, to turmoil name hold systems going to has the you in been, up level, even I everything. like is prices it the in believe And we -- banana low mean, that I this this time come shipper. go mean, the going has XX there cannot last this keeping I'd Transportation say a producer, on mean, forever adjust I like costs that prices it every going forward We on -- And are by point forever. -- Mitch, where you this, adjusted the go when the the this retailers, buyers to or understand years. -- will would they Yes, ourselves on shipping believe this. marketer, cannot I business on production I the ports, as can't be it. I the level, -- their mean on to producers itself -- I the either the you respect, in I unless there kill you will forward. the goose go forever. a or issues mean industry. that be will think, as

cannot sustained kind you the structure don't or know the the can business on This of don't Aside situation keep from you global produce follow-up go see, news, forever read I disease, in looking but and the you mean, a you know, this be I mention if produce can disease, overview. forever. or cannot actual industry, to you even -- want on if I of I

other see they and And so but many business. through very the because difficulties. in that have financial severe companies going areas only financial, coping cost really rationalizing produce with it's you And increase in will their been on the not not just bananas, of

are are we to my the I Fresh as the a and care in think my I future in of we Del I -- because we opinion in Monte, know area clear that are just believe Fresh think this into So way. take we see we opinion, how can pioneer Del Monte, but not future.

Mitch Pinheiro

I have year-end. $XXX just before differently a in or using What you new Can million leases leases than one operating way? up are question. more question, I operating sheet explain balance saw you -- that? from

Eduardo Bezerra

you the balance the guess So have Mitch, in on place took that I sheet. assets year with lease disclose you accounting the and Both new are that to this liabilities. aware the that

accounting reflect of that's new guidance. a So just

Mitch Pinheiro

required it But year? last wasn't from Okay.

Mohammad Abu-Ghazaleh

No.

Eduardo Bezerra

No, year. it started this

that's 'XX, that didn't we why December to disclose So have there.

Mitch Pinheiro

Then the are there? still looking you for comparison Okay.

Eduardo Bezerra

Yes.

Mitch Pinheiro

that's much. Thank Okay, it. you

Eduardo Bezerra

you. Thank

Mohammad Abu-Ghazaleh

Mitch. you, Thank

Operator

are no Abu-Ghazaleh, turn this call further questions time. you. back the to over I There Mr. at Mohammad

Mohammad Abu-Ghazaleh

thank on our thank forward nice I on conference look And day. time would next speak you call. everyone you the And, to like call to today. our we having a to to for and participate have

Operator

gentlemen, Ladies conference today's you concludes and call. for Thank this participating.

may now You disconnect.

Fresh Del Monte Produce (FDP) 29 Oct 192019 Q3 Earnings call transcript