FDP - Earnings call transcript Q2 2020 | Fresh Del Monte Produce Inc.

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Operator

Good day, everyone and welcome to Fresh Del Monte Produce’s Second Quarter 2020 Earnings Conference Call. Today’s conference call is being broadcast live over the Internet and is also being recorded for playback purposes. [Operator Instructions] For opening remarks and introductions, I would like to turn today’s call over to the Vice President, Investor Relations with Fresh Del Monte Produce, Christine Cannella. Please go ahead, Ms. Cannella.

Christine Cannella

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

As am mentioned, Fresh Lindsay I Del Relations President, Monte with Investor Produce. Christine Cannella, Vice

and morning Senior Vice was press and today’s Mohammad discussion you Joining hope Officer. release via issued President Officer to had me Bezerra, Abu-Ghazaleh, that a Chief in chance Chairman Business Eduardo Wire. and Chief I are this that Financial earlier Executive the review

replay today, response for information including call a like within includes of their that the the speaking safe we the today forward-looking ask you federal your harbor the for may to give statements our provisions that well securities we to include answers our the visit may this any to webcast We freshdelmonte.com questions, laws. be release that for will website be You much to in live filings that, and today’s included the issued will GAAP the morning review press of most to Mohammad. in over of company’s as we with note call copy press reconciliations at I With I as future measures. recent remind release mention available also today’s corresponding the information the SEC. distribution. am release this pleased company’s you turn would call. we is non-GAAP on forward-looking register in to statements, after and This Please of website financial measures conference being to

Mohammad Abu-Ghazaleh

maintain the will with pandemic, to model that a diversification that be we understanding. resiliency. business by second Fresh quarter the driven vertical new the Produce to everyone. Even continuity challenges in message XXXX. world challenge want of of somewhere strength today and the always by our integration brought helped on understands our portfolio deliver in in is is Christine morning one Monte Thank there The line with good a team operate and and COVID-XX philosophy you, Del under we and

in operates different XXX business were globe, to including impacted of As on each our in times different and COVID-XX over degrees different schools, the restaurants, around countries shutdowns, government foodservice ways mandatory a that closures. global locations and at based business by

from quarterly did benefit North certain shipping minimal firms, distribution as experience well re-openings during in we customers While demand the our ongoing in and in America as financial quarter the foodservice globally, and retail from gradual our challenges, shifts continued in restaurant regions and our that reduced our to disruptions operations. industries Despite plants in logistic demand with operational remained global at these suffered performance. we centers

also we strengthened able liquidity debt despite to market our were and the position disruption. our reduce We

one from fresh-cut our Salinas end vegetables of to fresh-cut This third also in as XXXX will properties available processing California in to have Mann the business future. to and facility consolidation move utilization through we focused our fund economic of us business Fresno, beyond the new work We facility opportunities global pandemic includes sooner do operations that the environment capitalized us to and position with our and liquidity hold, goal use identified to fresh-cut our on with efficiencies our commenced the intend Mexico, the moving quarter production to took facility plan on roof We our The assets and the to one offer avocado in de-leverage than facility, will Valley. months We quarter consolidated not of to processing investments potential of Packing we advantage under Gonzales, of the the our improve we of and During for the better the our several pandemic. our transformation remained the drive in California provide for Gonzales. respond expected. up XXXX. unique X as fruit the by ramping new impact performance sale

highlight offer the our of containerized Another is savings. of Arizona, July, Phoenix, will significant believe transformation new received first we early our In X consolidating in vessels. which we X facilities

X We in the are closer ensure replace us our generate vessel chain our X vessels scheduled spread expand chartered business as and commercial each of optimization, year. vessels commitment tons to will to positive logistics, to We savings will by over environment, substantial food sea of as receive these on existing quality additional new containerized which months, next nearly emissions the XX%, us vessels. well a cargo have believe metric our to increase savings XX,XXX allow an fuel estimated impact reduce getting our with

aligned we in optimize marketing North an quarter, one further leader America we team work operations under sales, our as the During way the and organization. to

I to in look area, allowing and business taking bringing our near our enhancing the Another market. the of we am share mid-July our America, in e-commerce initiative expanding future, Middle to to the launched to directly consumers. us expansion market brand to delivery products pilot myfreshdelmonte.com Del offerings e-commerce forward Dallas, message the example to our of of to largest our of and North launched We accelerate Monte additional Texas areas our quarter. in East in transformation was pleased a steps that the in first strategy

e-commerce Del introduce We are pineapple we extremely new coming our on our Monte proud in the glow site pink will that weeks.

At launch call this summary, execute balance Our our talk with well operations point, the about we we turn to share focused quarter excited has to I continuing to results. innovative plan Eduardo? Eduardo on the gone consumers. to fortify further our second to initial test our In financial product sheet. and this will intensely strengthen remain and are

Eduardo Bezerra

income extremely of brought want and shifting of share share an retail share of Thank this $X.XX good the second morning and diluted COVID-XX and unprecedented at about achieved XXXX, team demand focus foodservice for during per the circumstances sale a and diluted everybody. challenges of am by to quarter per income pandemic in disruption I per key versus quarter XXXX. continued their Despite the proud Mohammad the extraordinary in of you, second accomplishments. our net situation. through $X.XX some presented net set of perseverance highlight we financial I

other other of we the to profit impact resulted income write-offs, per in included $X.XX adjusted effect net the a gross product-related per second delivered to share among share million related adjusted XXXX. which donations charges, inventory things, diluted of communities, with which of in quarter $XX.X diluted compared Excluding products local net income of $X.XX of

we out would additional have margin million by $XXX in $XX would point adjusted that delivered I profit that However, gross if X.X% like of estimate to million we apply an of the sales adjusted impacted COVID-XX, gross to the you profit. net

the of our strong COVID-XX we of focus long-term million a cash we has liquidity we since the $XX keeping end generated debt headwinds debt XXXX. from end the XXXX key Additionally, reduced flow Despite and the million by operating $XX team. in million by during first long-term our pandemic, been activities with the the quarter, for $XXX second quarter compared reduced our of of

assets. review our higher-margin focused and During a the also critical, quarter, undertook optimize we investing capital operations underperforming projects to we of on in

fresh into compared apparent negatively and As now in Mohammad With year, $XX Fresh will quarter XXXX, pineapple of sales $X.XXX was The and gross fresh-cut $XX the million adjusted avocado, net the sales the business products this second food pandemic. performance vegetables, with compared sales in of million for compared of our in million $XX the in the rate in of $X our diversity emerge $XX second unfavorable billion most in In of strength from results value-added second primarily Net $XX mentioned, are line. income Adjusted for million prepared quarter million decrease Del sales net net regards compared with result period. and compared the of income second $X.XXX segment confident portfolio of Adjusted quarter the million company were in was challenges that, XXXX. remain food our in I $XXX the and decreased million was sales the with was get in net Monte $XXX billion imposed million stronger times and will million XXXX, quarter to the profit prior net with I to our the quarter XXXX. like these, the by and by the year with with exchange impacting lower XXXX. product operating in million. prior $XX our $XXX

our second the unit Europe. XXXX. demand the lower, prior XX% as Other were Overall, higher COVID-XX of the Club vegetable and in sales result lower for $XX were original product year $XX million and during demand imposed of X% primarily COVID-XX of to XXXX. our in cost in fresh-cut the expectation, measures world. primarily an primarily the net line, fresh when of for was COVID-XX fresh-cut in a selling million Mann charges to were including quarter and around in sales quarter with the million Store significant was Middle unit compared lower, sales compared resulted quarter quarter sales $XXX the prior compared volume million fresh-cut distribution million was $X by prior product-related governments quarter, compared our with sale million recall in $XX a the X% of driven compared higher pandemic, of effect with pricing period, year the mainly November the original year for XXXX. million sales In period. with the second Overall, XXXX in in cost of in donation during to period. related the the Packing XX% product pineapple million of in represented pineapples, The business in net product net net Also, with Asia million Gross In write-offs, the $XXX inventory sales melons. our As segment vegetables and impact Partially Packing reduced expectation, the and due $XXX $XX net demand profit Also net pineapples. our decrease of of was which channel million prices to The the food our was subsidiary. in foodservice price line, and $XXX net North affected volume contributing products XXXX. unit this the $XXX result America of our decreased prices the $XXX X% due higher was our our pandemic, the our second X% distancing pricing competition effect than compared unit were channel. affected million higher value-added offsetting resulted voluntary sales selling was of sales lower decrease by and and lower global sales East. estimated second volume in was line, reduction the social decrease of In volume in the the in Big lower higher net most by which pandemic with retail quarter than decrease continuing Box was to product Mann in

million of our product X% and primarily result lower sales volume of the XX%, higher X% $XX a cost our as higher lower product peach, prepared kiwi XXXX. traditional lines, was million increased due Packing’s prior product was pandemic segment, sales We XX% $XXX cherry year primarily our product product than selling net $XXX was product look products net of recall $XXX pricing was prices increased lines, primarily compared Volume higher due sales million effort in to our North in offset prior a in per $XX XXXX, $X.X Gross sales non-tropical product prepared X% worldwide worldwide and the to including North COVID-XX quarter as in due line in sales line estimated of also our and sales favorable versus decreased the quarter prepared second rates In versus voluntary to impact America decreased partially sales new compared year lower concentrate America by continuing net product quarter pricing million a COVID-XX. and period performance XXXX. million the due donations. the of higher entering meals to and The lower result and Mexico. In as to related our to the prices X% with as which $XX Packing recall in Middle prior XX% in represented the Overall, contracts. in and partially sales a continuing increased to cost berry, demand was and processing faced with with Volume $XX The our primarily impact original due compared year than Asia. snacks meals to includes COVID-XX to the of was charges net year due XXXX. apple, net $XX quarter a customer of the was supply. into expectations. the quarter lower in product volume for XX% XX% impact second unit profit was product-related due pineapple result sales X% period. In America. demand the of unit segment and pricing voluntary decreased nectarine, new sales banana our cost in Uruapan, which of unit X% total XXXX pandemic, increased grape, offset compared and line pandemic the with principally of of prior the result lower selling due recall. net compared sales for in line, lower, in Volume In COVID-XX unit the X% banana East million year and line, second Other decreased million higher the in million million as to prior food were X% million an lower exchange $XX to In net sales company’s cost COVID-XX Mann higher volume and decrease $XX primarily the volume lower inventory net our net higher Mann the prices volume includes decreased was million food unit prices Volume the was lower, result pineapple operations We of affected Europe unit of selling citrus, company’s higher our to pricing effect decrease products quarter pricing was in due X%, period period. with sales to vegetable second to of facility the XXXX line, decreased by was lower. selling and the The the lower and million product rationalization of second avocado efficiencies product industry during decreased plum, than contracts by unit canned $XX decreased November and sales unit our lower. $XX and unit of banana pear, were XXXX. improve XX%, led to product and over write-offs, North cost of and million snacks

at interest currency and was offset profit in second were in The selling, to of we and several of million the of costs lower to for tax $X.X certain with was These income expense market. the quarter the XXXX with was hedges The the income second taxable the administrative $X exposure hedges year in compared XXXX, most our The recognized in XXXX. the intended selling prices the selected with XXXX average compared million to to Interest the the effect in in $X million to volatility hedges gross of in was loan level in moving to our to Now extend $X Asia. net minimize for million fuel shipping line in quarter. provision expense into for decrease balances end In earnings market hedges advantage that different through our fuel reduce by during in unfavorable taxes March in $X and our was of quarter and the of in that of jurisdictions. regions data, compared Americas impact general during take due million the financial will second due exposure our lower marketing an second the provision the an The foreign income exposure second to in the lower foreign and in the unfavorable quarter $X quarter increase of expenses to million fuel quarter period. of The primarily administrative expenses quarter entered countries rates. quarter are XXXX. financial reduce for are expenses travel, partially have place promotional prior we with decrease by lower tax currency similar products. the

X levels million of lower activities accounts offset activities income. the The cash months to period provided of the by $XX our cash provided $XXX and net attributable XXXX. receivable, For inventory of payable of cash net operating net XXXX, million and was net expenses compared accounts same million primarily $XX operating in lower payments of with by increase accrued and by lower partially in was

total of XXXX at quarter of from of Our debt the decreased end XXXX. at the the first to of $XXX million end million $XXX quarter second

As several it compared capital of the of We well the XXXX as in quarter $XX the second postponed second as XXXX. in have XXXX. with year we expenditures quarter invested in relates to capital million the projects half million into spending, to second $XX of

first For of X the period months XXXX, we million in of million with same invested the $XX $XX XXXX. compared

the a to while prioritize year. position strong the continued We liquidity for remainder keeping of investments

key of of our Mohammad Arizona. the as facility, new Phoenix, our Our in operation pipeline, delivery new Mann distribution be of our that projects Fresno the investments the XXXX and the in California including X will consolidation were in Packing container centers mentioned, X Gonzales, in in and consolidation vessels,

in on as Q&A. September We review. repurchased can XX, During payable Board this on This now concludes $XX cash XXXX August X, call and over turn of share an XXXX. record financial the Directors morning per approximately for of our financial dividend approximately quarter, the announced shareholders our $X.XX results we release, of second for press million, XXX,XXX our interim shares declared to

Operator

[Operator with a Instructions] do the line question And Pinheiro with [indiscernible] Mitch Sturdivant & sorry, we from have Co. –

open. Your line is now

Mitch Pinheiro

good There, Hi. morning.

Mohammad Abu-Ghazaleh

Mitch. Good morning,

Mitch Pinheiro

of So, things. a couple

so – million where than margin, operations here. looking Other quarter? also that there unusual obviously unsalable any there the than write-off weren’t can the anything of the your in the fruit and call a of of the First, – normal other costs sales, just we at of $XX the in gross that part of out like affected virus related sort loss other

Mohammad Abu-Ghazaleh

to but of $XX had lockdown volumes that could people the a cases, that time, goods And especially so, XX% caught coming figure, of think with inside. the to or markets even that there down, all course don’t of much on well as the into working the issue whole got their business, rationalize. the into the inventory it’s completely banks, donate down I not, the is almost distribution I we receive as – having not in because the a were food disruptions with Mitch. we because of in the COVID foodservice same able dump and believe at stores XX% million centers that or and actually, almost was water our in sudden unfortunately so retailers and of to some we customers, shut less

actually realized was have course, of market. only to we As that the was enough they in that things why the were of rationalize the going had shock, well kind stores their we than well put unfortunately. And kind didn’t loss to That the that, because why shelves on we volumes vegetables. started as to fruits conditions. as market and want couldn’t they of our And overwhelmed – into Other they main once this mainly reason reason. that’s – as of we that it got

March, is matching Retail we Still, under as started saw supply speak. not by started things market foodservice but the much is second once are to quarter, again. XX% we down kind and course demand now early control still of down, So about also the normalize in with we especially of May. in as and the as April

Mitch Pinheiro

as was the foodservice sell you that much as into The was. it avocado your Is avocados because was sector? business, it down a I of lot surprised

Mohammad Abu-Ghazaleh

Not really, no.

mean, $XX – Our avocados food FDA why Last one we the certain price second about buy and there second quarter into – of it quarter of of QSRs. the us affect we certain does year. $XX had difference And per market a the our in supply. according reasons goes But demand. saw the and retail really $XX, year main we – while – not main box, because over prices during around saw reason – between I is most we the the because course, $XX demand prices of to during last of and and the $XX the

went also So in drastically. the Mexico prices down

all well and pricing, we retail. But going selling a foodservice our sales. of in few matter are because retail to it’s food sales not or are as the to So, into major

Eduardo Bezerra

complement. may I if Mitch, And

So with significant change. business Mexico, the opening was of our there facility in a model

we in source the past our As co-packers. you products may remember, would through

so Mr. the with last or mostly were Ghazaleh prices in the the spike year And that ones growers were either as huge co-packers that. the mentioned, they from benefited

change the growers our model, we Mexico. in directly are in from With sourcing business

quarter you basis to if in better more the that in so able points quarter. because with last this versus grower and than currency the margin almost And the variance our as costs managing benefit this took capture place were compare from relationships our also we expanded margins, year XXX

achieve business of the we original as full capacity was strength a the end that and we we more able were advance, and that originally highlighted, our The months other so we the important to focus than would faster of also thing our to expected. what we better and that towards given the expectation ramp X is year margin up gave have in it contributed

Mitch Pinheiro

the maybe same, Thank look quarter little tad of sort then so June. fair you Is see the at up as was area QX? it And that. can in more talk of the bit here, going for you more third are a of a in it better we Okay. than foodservice of a so in same is opening more be will to little that because we the fresh-cut sort maybe –

Mohammad Abu-Ghazaleh

what quarter. being impacted than in mean a by really I is we see down honest XX% as second are is with we getting be Mitch, bit seeing we speak. the No. we what little very the QSR still you, And better XX%, hard. foodservice foodservice to saw

believe is the we I again situation believe more – yes, is up, a the and club So clarity the to are but in and going in the it’s open little see now, the bit spreading speak still retail it because going foodservice that as really improvement is from clears section don’t future. I – the down, I the we until believe the don’t foodservice say, we pandemic has back up that, Though still let’s XXXX. in saw down. improved it’s we still stores, down what year-over-year second quarter, but that on

Mitch Pinheiro

Okay.

Eduardo Bezerra

you a seeing I in very clear the sign. So, positives, And but – an sustaining Chairman right? end the if was impacted mentioned and positive I that’s wanted value-added look highlight It’s towards is of recovery year, important we second pineapples, into complement, quarter going the in if some Mr. are to may and products, not Mitch, prices. hardly so to fresh the if that’s be what

So, I passed the cannot the to are fruits, the look most you cost. When fresh-cut although we control into control think able difficult of demand, our part we year. we

we in there markets still because the with to and place see all is in to And mainly the took on with the away the in logistics do continuing. going And around if into going to later taking snacks, of out our margin to – around. believe able to look same moving we have quarter fresh-cut take trend that to improve improve of we recovery right that the and products of opportunity profits volume, of be going today. vegetables, able that’s are we that managing quarter, Mann lower able bringing by of the lots leases our cost because world. facilities to is meals because associated vegetables of When Packing – were XX% costs place certain are XX – consolidation third in get we And are the X%. look, So, start were will is we even focus we you there our

with in lower higher also much that will drive labor that So consolidating one state-of-the-art facility costs. automation,

that because margin, be in significantly important oversupply suffered So significant Kenya. competition so we a and traditional in the last in the contribution over margin marketplace improved that also the we have are expansion of significant And we thing our that’s going that years couple is and optimize prepared working the turn it. will Europe, prices a on inventories – able operations the our to products lot expect that lower of into has drove losses factor we also, even for were be reduce as profit year. that able improving reduce to and a to this And capital and a there in that

reducing efficiencies efficiencies, important to significant of contribution see going that predict that optimizing to and to it’s that that hard asset underutilized of – the so we the lower new with highlight costs, they it’s So towards this that to to year. our our last of operations, the quarter but be demand, a the happen is used from driving also going what’s the our to aside in improving going is going And everything is year in to under cheaper, are run more control efficiencies consumption fuel drive at lower terms that’s last vessels in in quarter and that, speed, in XXXX. of coming the are help

Mitch Pinheiro

Appreciate that. I color. for you. queue. will you Thank back Thank the into And Okay. hop

Operator

Instructions] next Holdings. line [Operator question [indiscernible] Our from of the comes

now Your open. is line

Unidentified Analyst

that call of congratulations have on a but pandemic. announced control what stock have you in Did well you you shares comments, on earlier And quarter? missed Thanks call. the I Hi, your you been in good in you program. how repurchase in first the the this quarter, for controlled morning. to taking able the had the all, repurchase reauthorized any might have

Eduardo Bezerra

shares Yes. $XX XXX,XXX million. almost We repurchased approximately for

Unidentified Analyst

have much you Okay. on secondly And left authorization? how – then and the

Eduardo Bezerra

the you question? I repeat sorry, could am

Unidentified Analyst

much have on authorization? You how left the

Eduardo Bezerra

still a able authorized of we company. makes to be in significant XXXX, if $XXX for volume have repurchase were We in that that of excess sense shares million would board that by the the

Unidentified Analyst

some on you it. during a sold seems when sold low Mohammad care hit XX the stock secondly, the to when Okay. comment stock he weeks quarter, And Would like which – that?

Mohammad Abu-Ghazaleh

No. probably X Actually, some cash. stocks haven’t sold for years. the needed I I last

matter. this to nothing It do company a personal So, is has or with the the results.

Unidentified Analyst

the estate but disconnect trading. the close I probably a all And seems between have that of finally be the company, gap? Board then term, a more stock is term is the question, value vis-à-vis Okay. real your I where you and to the to mean tangible guess assets real book there post-pandemic, discussed longer longer assets, ways

Mohammad Abu-Ghazaleh

mean, on aspiring I maybe sooner later. to day, our hopefully we unlimited stock levels course. than are of price, one go to Yes, XXX up

Unidentified Analyst

Appreciate Alright, your Okay. much. very Thank you. time. thanks

Mohammad Abu-Ghazaleh

pleasure. My

Operator

Our line with next Wells from of Katia Fargo. question comes the Tavarez

Your open. now line is

Katia Tavarez

thank Hi, you the for questions.

follow-up looking value-added the fresh on net to and wanted products Just decline. and sales at the

we if much Thank – you that only like of at mix or of can mostly volume volume and look because we losses, volume tell and rationalization you assume other price that just consumer which to how factors the of recalls? decline what’s I aside put do came you from America, demand you. like attributable loss product us how mentioned, much So, was North

Mohammad Abu-Ghazaleh

them? categories mentioning fresh-cut fresh-cut or there we vegetables, you are mean fruits both two or have You of do because

Katia Tavarez

entirety the products. value-added of Yes, and like fresh

Mohammad Abu-Ghazaleh

divide this to like would two. into I Well,

sales Mann Packing, we As that vegetables are by of is the during aware had the the mainly quarter. the impacted recall when is if end you and which first has been far at our the affected and has XXXX as that concerned, fresh-cut second of negatively this

And into will which facility and we – all a us facilities to Gonzales, of believe we roof that X the have assurance as under in and going from different in in recoup to we new the and tremendous give into go the last is our state-of-the-art our months months end or quality moving moving kind which four we facility, are lost of business our consistency. with contain is year are what one ‘XX. Salinas Now going we forward leverage of X towards in the as

well stores. convenience again it itself, foodservice, and because in especially the as as cater as far QSRs as of the areas the foodservice industry, as retail, convenience was particular As fruit of in fresh-cut the others. mainly well retail We many to stores and closures

to that So, decline we we when at and vegetable saw had look foodservice as we of above as in And almost sales sales. the of in reduced far sales. quarter XX% the minimum during itself, fruit the XX% XX% about itself,

have fresh because back. see in as in that to the – restaurants and the about closures XX% year-over-year. just sales big we mainly foodservice buyers. We And speak decline of fruit today, and of it’s XX% the we decline still coming XX% As see we as far a area still foodservice,

Katia Tavarez

Thank helps. that Okay, you.

Mohammad Abu-Ghazaleh

you. Thank

Operator

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

Mohammad Abu-Ghazaleh

hope that you to market as take are because thank very much everything facing that to will on disruptions and time that today gave to mitigate the on call. be in the risks and the that speak, us like assure doing I would and about to us we very this profitable will call. the you we Thank measures we are as top future But want I I we on we of and And confident pandemic. all next speak Thank the of you. to the everyone are always. am to the you it as keep

Operator

This concludes conference today’s call.

now may You disconnect.

Fresh Del Monte Produce (FDP) 30 Jul 202020 Q2 Earnings call transcript