Earnings call transcript Q2 2023

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Operator

Good day, everyone, and welcome to Fresh Del Monte Produce’s Second Quarter 2023 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 Vice President, Corporate Communications with Fresh Del Monte Produce, Claudia Pou. Please go ahead, Ms. Pou.

Claudia Pou

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

As Claudia mentioned, Del Rob I’m Monte with Corporate Produce. Fresh Communications Pou, Vice President,

Chief are Joining today’s Chief Financial Senior Mohammad Executive and Officer; Abu-Ghazaleh, Vice me President and discussion Chairman in Officer. Vicente, Monica and

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

distribution. investorrelations.freshdelmonte.com be to website also may visit future conference You register access and call. earnings materials and replay IR being at the is this today’s to website our for webcast available This call on after company’s live for will

in Please note to that and much which like will is non-GAAP our these financial you today that measures website. we be to speaking today, may give including differ harbor. your statements material to in available laws are remind press on securities earnings include presentation, the In our the in forward-looking cause and forward-looking these I release our call non-GAAP set the safe statements. today’s questions, may we would of future release measures. press of our include answers provisions risks press detail our information Reconciliations forth filings, federal from the results and release of we the response SEC to that within

make. we obligation to no have update as and statements Our X, are forward-looking we August statements may today, of any

by second question-and-answer a will XXXX call, session. the along an followed of provide we update, a quarter During with overview financial results, business our

turn Abu-Ghazaleh. today’s With call that, over to I Mr. am pleased to

Mohammad Abu-Ghazaleh

good and morning, Claudia, Thank you, everyone.

well doubled profit to our with part our Net for margin with Central debt. with substantially asset our and income when same year, the the quarter, prior-year commitment in We idle in more plastic our business reduced we optimize Chile second quarter our of Gross and and America pleased second last of the as sold period performance are as In the as compared lands increased further gross period. we ‘XX. South compared than base. truly

of to our portfolio continuously are our looking on for areas We return opportunity investment. within maximize

and performed second quarter, continue contributed varieties, improvement demand Honeyglow the Our for and and to very and pineapple, well pineapple Pinkglow in our products, strong see the value-added which core banana fresh to the segment. product margin we in

Our avocado program is growing. also

volume, We have have also sales expanded to our Peru. increased Colombia customer sourcing and diversified and our and Dominican and base include Republic origins we

our technology We help We this continue will to sourcing refine link technology that and further pricing avocado elevate believe for avocados. the business. missing our is

hard avocado you pricing of been in As Mexico. conditions ever-changing has and historically know, the to market predict because weather

the record at going all not In months, patterns witnessed to seeing climate patterns. these as farm These are well. heat typical level we recent weather issues end, changing weather have we and are and

embarked on and effort continuous We Del find part an our freshness as have solutions quality, some Monte of our to focus commitment of for all-out brand challenges of reliability. these on

get climate-related these works have of We to challenges. new that the in several projects the root

help to working while and improve our lands. our optimize and preserving growing methods scientists uncover researchers are protecting to farming and Our diligently yields

focused a on towards are circular move economy drones our We continue to leverage technology to we farms. and smart which like farming ways on in can

making understand can. survival. the focusing and protecting an for It environment our human agricultural for It is basics, and air, global a our believe progress believe we our water, we soil, as the industry trees to we tomorrow. are As company, importance example. vision the survival. it to And essential is of is an for essential set duty on we wherever brighter We leader,

that chain. been shortlisted the the reduction our sustainability from leading of a the XXXX agricultural Monte carbon-neutral Award awarded we launch by which across value its SEAL new Sustainability pineapple recognized to was sustainability Recently, Award organizations. Fresh our work emissions for is Business Monte were for emissions have Zero in certified in pineapple, We for different for World two greenhouse Del offsets Sustainability category gas farm And Del market.

the The pineapple examples segment our we pineapple able value than has been sales year. more to our we several pineapple were and create is of and outpacing of After our our only for business years last operating pineapple Zero with one a supply, development, can how versus doubling Del produce. Monte within same while research Demand of just sustainably. big consumers for period creating that innovation is Pinkglow

and America product alone, color XX% extra that unique sweet up sales has Similarly, demand a to premium sales. quarter. the in continues in second more were the pineapple, taste, golden increase Honeyglow our North In than

and Both Fresh interest their pineapple innovations, market show category. in innovation and Monte’s are crucial how acceptance and Pinkglow Honeyglow is the Del

As everybody off. paying knows, this and successful we space, are leaders our are innovations in

go our innovation X-year with and hand-in-hand Sustainability clearly defined roadmap.

in strength extensive We Our supply strategic coupled and deep through exceptional become is chain. service, knowledge technology-driven development, vision this company library. industry doing on and agriculture by customer asset sustainable optimization, data to our plan with partnerships leveraging innovation, and and our research a

eat vision out of We companies, understand fruit. the is seed take very time. plant that not the you all day know achieving the day We, will the this well you transformational that

as our speak. are transformational We for we making groundwork the vision

Lunchables Lunchables feature to with Monica, Heinz select and Lastly, announced new a this in fruit, Lunchables multi-fruit fresh week, meal the partnership pass kits. the over I prominently which before with launching Kraft call we will

the selling expansion testing in of in U.S. We of central are with early of south, retailers to stages the currently fruit, fresh Lunchables regions further U.S., with market. goal the the into the

brand a in a category. a kids combos years Kraft market, is leader in the Kraft XX there meals the than partnering more Heinz with Heinz. in With is believe like significant We potential

vegetables, products with and our showing mission to great to closely product On convenient younger the aligns we in helping and a nature up provide consumer front, front and and consumption children’s second lifestyle to as partnership make already perspective to enjoy. generations change fruit inspire everyone. by a ideally know center this healthy see wholesome and and they opportunity vegetable around fruits This to

the this call turn quarter At talk results. will to second financial about Monica I Monica? point, the to

Monica Vicente

and Mohammad, thank joining us call. on you, today’s Thank for you

XXXX The second offset the turn to Let’s quarter volume the pricing segment, lower pricing net our $X.XX driven compared was second products specifically value-added increased billion and fruit. Mohammad in net of were year. bananas, mentioned, lower fresh by This of billion prior by per of quarter of sales variance of XXXX due Net by financial results. avocados and unit conditions, higher market $X.XX primarily and sales partially sales to sales volume. as with the for was driven nontropical

of the of increase by $XX with million, the profit combined higher compared and an product segment, prior-year and with profitability. lower the Gross for quarter from XXXX distribution second higher profit banana value-added in fresh benefited was product costs XX% Gross period.

with Operating the income income was profit. with second gross million was was income compared $XX year, operating XXXX million $XX with million adjusted FDP income compared higher of income compared compared FDP $XX prior million. and $XX million $XX the million. increase in with quarter due million operating in net in was year, the net $XX million for prior and adjusted adjusted The $XX $XX to primarily was the

EPS per diluted $X.XX on quarter related adjusted diluted year. share $X.XX. underutilized of earnings between during per in the diluted the per Adjusted was $X.XX of earnings with share assets. of prior was GAAP with sale The Our XXXX compared and the to share $X.XX second compared $X.XX was difference gain

with X.X% Adjusted was EBITDA compared EBITDA and year, XXXX second prior margin in adjusted was the $XX for of million compared with quarter year. the X.X% corresponding million $XX prior the in

value-added and to our now segment. Let’s the turn segment beginning fresh product results, with

of As unit fruit, due to we sales for net of market prices the primarily volumes of lower fruit, avocados as our said, with year, to with offsetting higher conditions, per million prior in combined decrease per sales second quarter prices Partially selling compared million due were were well the volume. the of vegetables lower $XXX as unit result avocado fresh-cut and a nontropical net pineapple, higher sales $XXX higher melons

an $XX segment lower increase prices of profit was gross the distribution quarter by million costs. was increase Gross ocean the in and this The with XX%. most XXXX second positively compared freight in selling in unit per for prior products of million higher and year, for $XX impacted profit

saw avocados higher also unit lower product costs to gross higher volume. and per due profit We of

the strong Mohammad mentioned, Honeyglow gross demand profit. to As for higher our contributed varieties pineapple and also Pinkglow

Rica Partially cost impacted of be higher procurement these costs by lingering and Costa well as offsetting were as Colon. continue reductions which of production stronger most a to pressures the impact inflationary products,

margin a in of gross compared the prior factors, X.X% with these increased to As result year. X.X%

and Europe North segment, per volume America result year, banana the our sales increased in X% unit America. primarily compared net XXXX $XX or Europe a to of by and second higher quarter higher and of for prices Asia, with selling our in prior million as sales Moving North

million costs gross sales a higher year, Banana continuing second $XX profit and impact XXXX quarter Costa impact partially of to the of in in ocean stronger procurement with distribution lower due higher combined with gross costs, and the the and profit Rica offset by production the net the freight of by inflation, Colon. of increase was compared $XX in The prior an XXX%. driven was increase million

As of X.X% year. with gross compared a the to XX.X% result in factors, these prior increased margin

softened as segment third-party for year result lower the $X the margin this XX.X% X.X% in of global year of were Gross sales of quarter a services was the due sales. prior $X freight net million of $XX lower with million net year. $XX other Gross compared for million segment a services with in result and in second prior to Lastly, compared with demand. net products profit million prior the was sales our compared the as

line Selling, rates, year. quarter to the remained of debt driven offset general interest by lower compared interest second moving higher balance. Now expense prior at Net financial slightly with XXXX the expenses $XX data. prior increased administrative million to relatively by and for the in year, selected partially compared

quarter million to primarily remeasurement. for losses million net sheet increase was $X relates second Other losses, $X in currency-related foreign of with higher on XXXX prior expense the The to balance due unrealized year. compared the

million Income jurisdictions, business related higher provision prior plastic compared due our the the was income sale to year. to tax subsidiary. the tax tax effect increase with provision in The million tax was with certain $X increased of the $XX in earnings in combined

$XXX million Net and was primarily higher the our materials combined net attributed Now million with supplies the lower moving activities to prior income. compared The $XX of inventory, XXXX cash in for of increase was levels packaging year. provided X to cash months raw by with flows. operating

at debt, to lowering to decreased also Long-term our the this compared to adjusted $XXX By million year. of quarter. last fourth X.XXx second at the the quarter debt $XXX of with compared quarter has our million ratio decreased of XXXX the end leverage end of X.XXx

the in prior expenditures to capital XXXX X relates million first invested $XX it million capital in As we year. $XX the with months spending, of in compared

As quarterly call in announced results Q&A. turn to X, XXXX XXXX. share, this concludes financial payable over on a morning This can XX, the Rob? We per record review. cash dividend our September our shareholders of August $X.XX declared release, we for financial press now on of

Operator

your from And first Pinheiro of Sturdivant from Instructions] comes [Operator question Co. & line the Mitch

is open. line Your

Mitch Pinheiro

Hi, good morning.

Mohammad Abu-Ghazaleh

Mitch. morning, Good

Monica Vicente

Good morning.

Mitch Pinheiro

So don’t value-added. I – first, queue down. Sales fresh I to were and the I’m want talk yet. to see about the just trying

I the sales – some detail, pineapple So to correct? wanted up, get were of so but

Monica Vicente

it to the all and performance. segment products price and volume of that’s non-tropicals. of avocados, be still selling the Overall, lower, was prices, Yes. segment what But had selling higher of caused the because and but a down because strong other fresh value-added was the the

Mitch Pinheiro

been were that Okay. XX% down, so in down I a... what, the million have avocados – $XX maybe Is couldn’t year-over-year, quarter. guess avocados

Monica Vicente

don’t you on they – with avocados year. extraordinarily last So if if sell what high. know approximately pricing recall last happened the prices of what I are This year, year, was half avocados were avocados,

because impact on the selling pricing well. impact significant. of as down a impact. huge really is definitely profitability avocado It the cost our avocado had doesn’t But goes the So prices the

Mohammad Abu-Ghazaleh

revenue. On

Mitch Pinheiro

fresh Okay. were in that and up And fruit – in terms the of quarter? was they the fresh-cut business, veggie

Monica Vicente

those value-added and – we’re sure we’re giving I’m includes – yes, all yes. those cut at products, talking fresh the The all segment, fresh not details

Mitch Pinheiro

Yes.

up So and year-over-year? fresh-cut fresh-cut was vegetables fruit

Monica Vicente

were and vegetable Fresh-cut fresh-cut fruit basically flat.

Mitch Pinheiro

food you service? are flat retail it And Okay. any side – because on due to I or seeing is mean the flat

Mohammad Abu-Ghazaleh

In decline In a of we addressing have we issues the been terms has are volumes speak. of there of more of fruit, vegetal and terms we capacity in case which as in fruit, case revenue. vegetables, processing

Mitch Pinheiro

it is is a I is – issue? that that Or service channel Is mean, – issue? Or is is really... across a it all food it channels

Mohammad Abu-Ghazaleh

Across all channels, Mitch.

Mitch Pinheiro

but business? when you the we And it’s your at Okay. it’s curious is I where are big small, pineapple know within look and And now. growing. that I just Pinkglow, Honeyglow mean how I’m

Mohammad Abu-Ghazaleh

North is the need that America global. you only produce with are Costa Kenya, Honeyglow produce in and not a we Listen, We Philippines. in into Rica, Honeyglow. we in we consideration have produce to

on So of to our And Honeyglow ranging XX% total we XX% it’s have areas. these volume. three about sourcing between

we has So Monte we a strong believe, position well more Del back. as percentage. kind we has we competition and a several started the in Honeyglow. imitate for have I been years produce that, believe efficient tried very doing what have that technology this knowledge I to have and I and in technologies to as because way know of And copy the higher Fresh the a this. this fine-tuned have, much But have

after was America strong and very follow last position the So not global Philippines. to the in actually have North in we market Guinea one and only America. North the a

the of North potential optimization in haven’t market. So American we yet seen

We’re quarters just starting actually ago. a few

will going believe impactful. that become I a more forward, So

Mitch Pinheiro

Okay. margin of this in a I’ve the side, seen on is strongest then while. quite the And guess I banana quarters one

I with this think went what And I of sustainable your drove any the banana of second I sort time this back into margin business the – third quarter? that? in to What mean, the quarter. last had is XXXX

Mohammad Abu-Ghazaleh

the have the as on much fruits the the the third because half Well, third and is softer waste demand supply helped And that that a quarter, there. in our regions helped drove kind But maintaining as I in one. lot equilibrium competing first well that and half as having and by is the increased of than lot I way freight historically, and years. number inputs terms out supply previous kind eroding synchronized in pricing year we [ph]. where opinion, the bananas more you usually believe we two, of has margins not That’s peaks occasions, other and in to compared Number items were and say, what of and that the and rationalized, quarter lot have cost the fourth of well. other has as know, quarter think summer that of have a kind second don’t really demand a in of and of heat terms didn’t as wasn’t my you of a school. the of this,

the the same more more – less same range. or are on or in We less

Like other rationalization, have of However, it’s general, have that banana, and the to improve optimization a I cost in many more helped more assets. our said, margins factors at it’s the maintain level. reasonable

Costa have for we in negatively foreign in impacted though XXX year, it even been around So, with think the no, around… I was was last exchange or – instance, particular, Rica, XXX

Monica Vicente

and... XXX

Mohammad Abu-Ghazaleh

are Yes, XXX, XXX. XXX-something. Today, we about talking

that the [indiscernible] So, costs of the that impact you see of can impacted tremendously. of kind our has strength

Monica Vicente

with our normal we pricing, our last we think actually also to QX year’s up our And because remember Mitch, Usually, was second caught that inflation, is lower I a than need quarter and the hadn’t strongest quarter. second of quarter etcetera.

because the also that, bit is a really impacted too. – – So, it’s of little that comparison

Mitch Pinheiro

Okay.

this at efforts continue part on just this, profitable are And focus your to cost, a of that’s so taking longer still any all any no correct? of you to volume, volume part is

Mohammad Abu-Ghazaleh

That is correct.

Mitch Pinheiro

And supply and balanced? now, the would the quarter right global that Okay. in the for market? How you is demand upcoming describe

Mohammad Abu-Ghazaleh

the this – we are I we month third that quarter. what in second starting third normal, would the just quarter, the is a started as It’s we – see right say now of a in

the down and So, – patterns not mode drastically, the has a but historical the the market statistics. quite definitely and of – pattern consumption numbers kind like of we see historical that in same banana the and gone market

softer, but quarter. and that definitely it’s not the quarter than first softer much the second So, total a collapse, it’s believe I

Mitch Pinheiro

significance? It to Sure. was And see in left terms of of sales asset last quarter. question. the in nice there anything asset the Are sales

Mohammad Abu-Ghazaleh

would assets I no. to are thing that sell It’s with so Fresh Del assets the is our the going you of assets, tell across like we to sake world. for Monte selling rich that not just one

that is for like assets little We too the or underutilized that it may are where lands, same – of we it kind margins plastics, even are of the pace utilized, will are that we that their of assets selling This we buildings, spin not have. that’s really instance, believe we other assets sell, done have last kind of We that kind couple but the not years. off. have during in do we the businesses

Mitch Pinheiro

slow you bit? still your going down it’s – a to will but portfolio, So, optimize your little portfolio asset

Mohammad Abu-Ghazaleh

are the in I many we that you if I said, what other so details, forward. the have going are like the so But mitigating have I initiatives you sure. many give call, kind business will Mitch, today from future. last this. so see that for projects said our said of our there remember, I things much but business, can’t as mean in pipeline on Yes, the and transform change that that pipeline to is will I there

Mitch Pinheiro

Okay. you the Well, for questions. thank

Monica Vicente

Thank you.

Operator

we of over I call final question-and-answer comments. back for to turn session. will closing the now reached management our the And have end any

Mohammad Abu-Ghazaleh

Thank you you and today talk so next Wish call. your you. good much, everyone. the to hope attendance I to day. you Thank on Bye. a appreciate

Operator

you call. This conference concludes participation. your today’s Thank for

You may now disconnect.

Fresh Del Monte Produce (FDP) 2 Aug 232023 Q2 Earnings call transcript