Fresh Del Monte Produce Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 30, 2025

There are 5 speakers on the call.

Operator

Good day everyone and welcome to Fresh Del Monte Produces First Quarter twenty twenty five Earnings Conference Call. Today's conference call is being broadcast live over the Internet and is also being recorded for playback purposes. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. For opening remarks and introductions, I would like to turn today's call over to the Vice President, Investor Relations with FreshGel Monte Produce, Ms.

Operator

Christine Canela. Please go ahead, Ms. Canela.

Speaker 1

Thank you, Regina. Good afternoon, everyone, and thank you for joining our first quarter twenty twenty five conference call. Joining me in today's discussion are Mr. Mohamed Abu Ghazali, Chairman and Chief Executive Officer and Ms. Monica Busente, Senior Vice President and Chief Financial Officer.

Speaker 1

I hope that you had a chance to review the press release that was issued earlier via Business Wire. You may also visit the company's IR website at investorrelations.freshdelmonte.com to access today's earnings materials and to register for future distributions. This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non GAAP measures. Reconciliations of these non GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website.

Speaker 1

I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward looking statements within the Safe Harbor provisions of the federal securities laws. In today's press release and in our SEC filings, we detail risks that may cause our future results to differ materially from these forward looking statements. Our statements are as of today, April 30, and we have no obligation to update any forward looking statement we may make. During the call, we will provide a business update along with an overview of our first quarter twenty twenty five financial results, followed by a question and answer session. With that, I will turn today's call over to mister Mohammad Abu Ghazali.

Speaker 1

Please go ahead.

Speaker 2

Thank you, Christine, and thanks all everybody on this call for joining us for our February earnings call. We began the year with continued momentum building on the progress we made throughout 02/2024. Our results this quarter reflect a strong start driven by solid demand in key categories, a more optimized product mix, and continued focus on operational efficiency. We saw meaningful year over year improvements in both gross profit and gross margin, particularly within our fresh and value added segment, affirming the effectiveness of our strategy and the discipline behind its execution. Pineapples continue to perform well with demand once again exceeding supply, a clear reflection of our leadership in this corner store category.

Speaker 2

Leveraging that leadership, we are closely tracking global production conditions and actively managing the ongoing imbalance between supply and demand. As consumption continues to grow across markets, we have taken strategic steps to strengthen supply continuity and secure consistent availability for our customers, allowing us to stay ahead of the curve and better anticipate future demand. At the same time, we continue to see strong consumer interest in avocados and fresh cut fruit, two categories that are central to our long term growth strategy. These products play an increasingly important role in how consumers engage with fresh fresh fresh produce, And they are a critical part of our expansion plans, which we look forward to sharing in more detail in the months ahead. This quarter further demonstrated the operational resilience provided by our vertically integrated supply chain, particularly amid this persistent global shipping disruptions marked by container equipment scarcity, constrained vessel capacity and escalating port congestions.

Speaker 2

To date, we have been able to move products with minimal to no delays, giving our customers a level of service continuity that few can match. On the topic of agility, it is important to address the current conversation around tariffs. The situation is evolving quickly, and we are monitor monitoring it closely. As of now, none of our major growing countries have been hit with additional tariffs beyond the existing 10% baseline. I would like to highlight a key strategic move from this past quarter.

Speaker 2

In March, we announced our acquisition of a majority stake in Abolio, one of Uganda's leading avocado oil producers. This is more than a supply chain investment. It is a clear example of our strategy in action. We believe that this investment will allow us to take avocados that may not meet fresh market standards and convert them into premium avocado oil. That means less waste, more value, and a stronger foothold in a fast growing higher margin category.

Speaker 2

This investment ties directly to our vision for 02/2025 through 02/1927, maximizing true transduce, creating value added solutions, and advancing sustainability across every part of our business. Now that we have closed out a strong first quarter, I think this is a good moment to share how we are thinking about the future and what we see as our North Star. As we look ahead through 02/1927, our vision is to lead the industry in fresh and value added products, anchored in our commitment to quality, innovation, and sustainability. It's about doing more with what we grow, turning waste into opportunity, and making sure every resource is used with purpose. Our mission is to deliver products our customers can trust through ethical farming, advanced operations, and sustainable practices.

Speaker 2

And at the core of all of it all is our strength in Pineapple, which continues to set the standard for everything we do. To bring this vision to life, we have focused on five key positions, innovating and diversifying our product portfolio, using resources more efficiently and reducing waste, driving operational excellence through automation and integration, expanding globally while reducing reliance on any one market, and investing in our people and building lasting trust. That's the future we are build building towards focused, purpose driven, and designed to create long term value for everywhere for everyone we serve from our customers, consumers and business partners to our shareholders and the environment we all depend on. With that, I will turn over to Monica to discuss our first quarter twenty five results in detail. Thank you.

Speaker 3

Thank you, Mr. Abu Ghazali, and good morning, everyone, and thank you for joining us on today's call. I will begin with our financial results for the first quarter of twenty twenty five, and then I will share our outlook for the remainder of the year. As Christine mentioned, our press release and our call today include non GAAP measures. Reconciliations of these non GAAP financial measures are set forth in the press release and earnings presentation, is available on our website.

Speaker 3

Now let's move on to our financial results for the first quarter of twenty twenty five. Net sales were a billion 90 8 million compared with a billion a hundred and 8 million in the prior year. The decrease was driven by lower net sales in our banana segment, primarily a result of lower sales volume and the negative impact of fluctuations in exchange rates, partially offset by higher net sales in our fresh and value added product segment, driven by higher per unit selling prices. Gross profit for the first quarter of twenty twenty five was $92,000,000 compared with $82,000,000 in the prior year. The increase in gross profit for the quarter was driven by higher net sales in our fresh and value added product segments, partially offset by higher per unit production, procurement, and distribution costs.

Speaker 3

Gross margin for the first quarter was 8.4% compared with 7.4% in the prior year. This also includes this also reflects a sequential increase from 6.8% in the fourth quarter of twenty twenty four. Adjusted gross profit for the first quarter was 92,000,000 compared with 81,000,000 last year. Operating income for the first quarter of twenty twenty five was $45,000,000 compared with $44,000,000 last year. The increase in operating income was driven by higher gross profit, partially offset by lower gain on disposal of property, plant and equipment net.

Speaker 3

Adjusted operating income was $44,000,000 compared with $31,000,000 in the prior year. Other expense net for the first quarter was $3,000,000 compared with $8,000,000 in the prior year. The decrease was primarily due to lower foreign currency losses. Net income attributable to Fresh Del Monte for the first quarter of twenty twenty five was $31,000,000 compared with twenty six million dollars in the prior year, and adjusted FDP net income was $30,000,000 compared with $16,000,000 last year. Our diluted EPS for the first quarter was $0.64 per share compared with $0.55 in the prior year.

Speaker 3

Adjusted diluted EPS was $0.63 compared with $0.34 per share last year. Adjusted EBITDA for the first quarter of twenty twenty five was $61,000,000 or 6% of net sales compared with $44,000,000 or 4% in the prior year. I will now go into more detail on our first quarter twenty twenty five performance for each of our segments, beginning with our fresh and value added product segment. Net sales for the first quarter of twenty twenty five were 683,000,000 compared with 677,000,000 in the prior year. The increase in net sales was primarily a result of higher per unit selling prices in our avocado product line and higher sales volume and per unit selling prices in our fresh cut fruit product line in North America due to strong market demand.

Speaker 3

The increase was partially offset by lower net sales in our Freshpet vegetable and vegetable product lines due to our strategic operational reductions in the fourth quarter of twenty twenty four, which also included the sale of certain assets of Fresh Leaf Farms. Gross profit was 69,000,000 compared with 56,000,000 in the prior year. The increase in gross profit was primarily driven by higher per unit selling prices in our pineapple and melon product lines, partially offset by higher per unit production, procurement, and distribution costs. Gross margin increased to 10.1% in the first quarter compared with 8.3% in the prior year. This also reflects an improvement from 7.5% in the fourth quarter of twenty twenty four and nine point three percent for the full year 2024.

Speaker 3

We're making solid progress toward our goal of delivering double digit gross margins in the low teens for this segment as we continue to improve our product mix. Moving to our banana segment, net sales were $364,000,000 compared with $380,000,000 in the prior year. The decrease in net sales was primarily a result of lower sales volume and per unit selling prices in Asia due to a combination of lower market demand and excess industry supply, along with lower sales volume in North America due to lower industry supply and weather related logistic disruptions. Additionally, net sales were negatively impacted by fluctuations in exchange rates due to a weaker euro and Korean won. The decrease was partially offset by higher per unit selling prices in North America.

Speaker 3

Gross profit was 17,000,000 compared with 22,000,000 in the prior year. The decrease in gross profit was driven by lower net sales and higher per unit production and procurement costs. Gross margin decreased to 4.6% compared to 5.7% in the prior year. Lastly, our other products and services segment. Net sales were 51,000,000 in line with the prior year.

Speaker 3

Gross profit was 6,000,000 compared with 5,000,000 last year. The increase in gross profit was primarily due to higher per unit selling prices in our poultry and meats business. Gross margin increased to 11.9% compared with 8.9% last year. Now moving to selected financial results for the first quarter of twenty twenty five. Our income tax provision was 7,000,000 compared with 5,000,000 in the same period last year.

Speaker 3

The increase in income tax was primarily due to increased earnings in certain higher tax jurisdictions. Our effective tax rate for the first quarter was 18. Net cash provided by operating activities for the first quarter of twenty twenty five was 46,000,000 compared with 19,000,000 in the prior year. The increase in net cash provided by operating activities was primarily due to working capital fluctuations, mainly driven by higher levels of accounts payable and accrued expenses, lower levels of accounts receivable, and higher net income. The increase was partially offset by higher levels of inventory when compared to the prior year period.

Speaker 3

We ended the first quarter of twenty twenty five with 233,000,000 of long term debt, an 11,000,000 or 5% reduction from 244,000,000 at fiscal year end twenty twenty four, and also a decrease of 42% compared with the prior year period. Our adjusted leverage ratio is less than one times EBITDA. Our CapEx investment for the first three months of twenty twenty five was 10,000,000 compared with 13,000,000 in the prior year. As announced in our press release, we declared a quarterly cash dividend of 30¢ per share payable on 06/06/2025 to shareholders of record on 05/14/2025. On an annualized basis, this equates to a dollar 20 per share, representing a dividend yield of 3.5% based on our current share price.

Speaker 3

Also, during the first quarter of twenty twenty five, we repurchased $7,600,000 or 254,000 shares of our common stock at an average price of $29.97 as part of our 150,000,000 share repurchase program. These actions reflect our commitment to a strong sustainable dividend and a balanced capital allocation strategy that includes opportunistic share repurchases. As we look ahead, excluding the impact of tariffs and recent macroeconomic developments, we continue to expect full year 2025 results to be in line with the outlook we shared during our year end earnings call in February, which reflects our confidence in our strategic initiatives and current visibility into our business. That said, we continue to closely monitor developments related to the evolving tariff situation or other geopolitical developments that remain fluid at this time. We reiterate our expectations for the full year of 2025.

Speaker 3

We expect to see net sales grow 2% year over year. And as far as gross margins by business segment, in our fresh and value added segment, gross margin is expected to be in the range of 10 to 11%. In our banana segment, gross margin is expected to be in the historical range of five to 7%. For our other products and services segment, gross margin is expected to be in the range of 12 to 14%. As far as our selling, general, and administrative expenses, we expect that to be in the range of 205 to 210,000,000.

Speaker 3

Our projected CapEx are expected to be in the range of 80 to 90,000,000. And we expect net net cash provided by operating activities to be in the range of a hundred and 80 to a hundred and 90,000,000. We recognize that the current environment marked by tariffs, global tensions, and possible logistical uncertainties continues to evolve. We have weathered external disruptions before, and our diversified sourcing strategy is designed for resilience. Our product mix remains in demand, and we're focused on long term value creation.

Speaker 3

The fundamentals of our business have not changed. This concludes our financial review. We can now turn the call over to Regina.

Operator

Regina? Now begin the question and answer session. Our first question will come from the line of Mitch Pinero with Sturtevant and Company. Please go ahead.

Speaker 4

Yes. Hi. Good morning. Can you hear me?

Speaker 2

Good morning, Mitch. Yes, we can hear you. Good morning.

Speaker 4

Great. Good morning. So Mohammed, I was wondering if you could talk a little bit about the produce category and your categories within that. What you're seeing in terms of demand? We've obviously, the consumer is under pressure.

Speaker 4

But what are you seeing in your categories relative to that? And what do you expect here in the next quarter or so?

Speaker 2

What we see is a very continuous solid demand in in the in our sector, which is the fresh produce, be it fruits or vegetables. We don't see any kind of reductions in in in demand or consumption. I believe this will continue as we are very kind of basic, reasonably priced, you know, segment in terms of cost. So I'm I'm confident that this is not going to change. As a matter of fact, you know, disruptions that is happening right now in the market sometimes opens opportunities for us, which, you know, we we are looking at and maybe a a good time for probably, you know, picking up some some good opportunities there.

Speaker 4

So yeah. I mean, it's interesting. What are you, are you seeing significant players in the industry having sort of logistic issues that you're going to take advantage of? Or is it you know, more broadly, just some of the weaker players, you know, sort of more broadly having issues?

Speaker 2

I you definitely nailed it, Mitch. Actually, you know, you know, with this kind of environment that we are going through, the disruptions be it on the logistics side, on all fronts, really, have put, you know, I would say, put small, medium sized companies or operators at a disadvantage because of the hardships that is being created by these disruptions. So in our case, yes, we are very flexible. We are we're very, very agile. We can adapt to the situation.

Speaker 2

Our logistical, you know, full integration from the supply chain gives us a very big leverage in terms of being able to move forward without any disruptions or interruptions in our operations. And that's most important thing is that your, you know, your customers' demands or your customer requirements are fulfilled on time without any interruptions. And that's that's really the the the big element here in in this situation is between somebody that can deliver, you know, on time and in in full and someone that cannot do that. So you are right. What you just mentioned is very true.

Speaker 4

Let me ask. So with with regard to the the 10% baseline tariffs, what's happening in the market? Are we seeing producers such as yourself and retailers passing it through to the consumer? Is there any part of the of the of the sales processes seeing any particular group eating some of the tariffs to keep prices low or are gonna pass it all through?

Speaker 2

Well, we have been mitigating this in in in a very friendly and and cooperative way with our buyers, you know, and in order not really to negatively impact, you know, the consumers in a way. So we are working very closely with our buyers to mitigate this tariff increase, which I believe for the best for the good of of of buyers and and sellers as well. So, we are mitigating this with our buyers.

Speaker 4

Okay. And then, you mentioned in the prepared remarks or on the slides that part of the margin driver in fresh and value added was pineapple, I guess, in melons. I was curious how you were doing in avocado.

Speaker 2

Well, avocado is doing very well as as Christine mentioned. You know? And and this category is growing, and we are diversifying as well our sourcing from Peru, from Colombia, and other places. So this I believe that this segment of the business is to keep keep growing going forward. But it's not only pineapple and avocados and and fresh cut.

Speaker 2

We do have other items right now. They are maybe small, not to mention them, you know, in any significant manner, but they are started to be becoming very important also, part of our portfolio. I mean, you know, on the logistics side, this is one side. On on all new businesses that we are just in the infancy stage, you know, on the residues, on on other as we go forward, you know, quarter after quarter and year after year, this will be very meaningful, going forward. And we cannot just say right now what we are doing, but everything that will happen in the in the next few quarters will be announced and will be, you know, kind of, highlighted to to to the market.

Speaker 2

Because there are many things in the pipeline that is already, started, you know, probably, you know, in one way or the other step ramping up. And some of it, probably a little, you know, like, on the bio fertilizers, like, even on conventional fertilizers that we started, you know, working on, production and and distribution. We are talking here about, you know, margins in the high twenties and and and things like that. So these business, as they grow and they are growing, will have a significant and and very impactful, you know, results going forward in the future.

Speaker 4

Right. And then are we at point in fresh cut where, you know, you've absorbed a lot of the the newer capacity you added and that we should see more stable and increasing sort of margins as you leverage those fixed costs here? Are we at that point where you're beyond even some volume disruptions that you can still maintain pretty strong margins in that area?

Speaker 2

Yep. I think we do. I believe that our our fresh cut fruit operation is getting stronger year after year, you know. And with our rationalization and increased efficiency, you know, and and better sourcing, that gives us a leverage to to continue performing similarly or even better going, you know, forward in the future, Mitch. So I'm not very concerned about the fresh cut.

Speaker 2

I think, you know, just to give you an example with our fresh guacamole, which we started, let's say, less than a year ago, we are having double digit growth every quarter over quarter. You know? I mean, it's it's it's we cannot cope even with demand.

Speaker 4

And then last question was on, the pineapple business. Obviously, it's your core business and what drives everything at your firm at your company. But why could you just go back? You know, obviously, pineapples have been in sort of short supply for a little bit, but what what what was driving that? And and how long does it take for supplies to normalize at from this point?

Speaker 2

Let let's put it in another way. Maybe consumption is increasing and demand is increasing, and and that's why we see now more or less the supply is a little bit shorter than the demand. I mean, I'm not saying, you know, drastically shorter, but little bit shorter than demand. I I think the major factor here is that the demand and consumption is increasing. If you look at the price of pineapples compared to any other fruit in on the shelf, be it apple, be it grapes, be it berries, or or or any other fruit, you will realize that the cost of pineapple compared to the rest is quite favorable.

Speaker 2

It's it's very, still inexpensive to I mean, as a family, as a household, I would take a pineapple that can feed the whole family, you know, maybe for two days, rather than having, two pounds of apples or oranges that would cost me three times as much. So I believe, you know, I mean, this is one of the factors why we see more consumption pineapple. Aside from the, you know, the young generation realizing that the health benefits of pineapple as well is extremely high, compared to other fruits. So I think there are several factors playing here. One is the price compared to others as well as the, all the health and wellness benefits coming from pineapple rather than other fruits.

Speaker 4

I also think, your your Honey Glow is is, you know, a fantastic, pineapple variety. And, I think that in and of itself getting that kind of quality of pineapple, would also induce, you know, demand, you know, continued purchasing of that of that product. So Absolutely. Kudos kudos to you. Yeah.

Speaker 4

Kudos to you for the innovation in that and your other your other Pink Glow and Ruby Glow and other innovations. That's all I have here. But thank you for your time and the answers.

Speaker 2

Thank you, Mitch. I appreciate it. Thank you very much for your comment.

Operator

That will conclude our question and answer session. And I will now hand the call back over to Mr. Mohammad Abu Ghazali for closing remarks.

Speaker 2

Thank you so much. I would like to thank everyone today for having the to be with us here and hope to talk to you on better news on our next quarter. Thank you. Have a good day.

Operator

Ladies and gentlemen, that will conclude today's meeting. Thank you all for joining. You may now disconnect.

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Earnings Conference Call
Fresh Del Monte Produce Q1 2025
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