Fresh Del Monte Produce Q1 Earnings Call Highlights

Key Points

• Fresh Del Monte closed the Del Monte Foods acquisition late in Q1 for about $308 million, contributing only one week of results to Q1 but expected to add roughly $600 million in 2026 net sales and be accretive ~$23 million to adjusted EBITDA; the deal was funded with cash and revolver borrowings and pushed long-term debt to $438 million.
• Management warned of rising input costs from geopolitical disruption — forecasting about $40–45 million of Middle East‑related pressures starting in Q2 (ocean freight, fuel, fertilizer, packaging) plus an additional $20–25 million of headwinds from FX and U.S. logistics — which should flow through in Q2–Q3.
• Q1 results: $1.0 billion net sales, adjusted net income of $30 million (adj. EPS $0.63) and adjusted EBITDA of $58 million; full‑year 2026 guidance targets 13–15% sales growth (includes nine months of Del Monte Foods) with updated segment margin ranges (Fresh 11–12%, Bananas 3–4%, Prepared Foods 13–14%).

Fresh Del Monte Produce NYSE: FDP used its first-quarter 2026 earnings call to highlight the late-quarter closing of its Del Monte Foods acquisition, outline how geopolitical developments are affecting input costs across its fresh produce operations, and provide updated full-year expectations that reflect both the transaction and a shifting cost environment.

Del Monte Foods deal closes late in Q1

Chairman and CEO Mohammad Abu-Ghazaleh said the company reached “an important milestone” with the closing of the Del Monte Foods transaction, which he said brings the Del Monte brand “back under a single owner for the first time in nearly four decades.” Because the deal closed late in the quarter, Fresh Del Monte recorded about one week of contribution from the acquired business, and Abu-Ghazaleh said the financial impact to Q1 was “limited due to timing.”

Abu-Ghazaleh framed the purchase as strategic alignment rather than scale for its own sake, calling it “bringing the brand, the portfolio, and the platform back under a single focused owner.” He said the combination expands the company’s presence “across both the perimeter and center of the store,” enabling a broader, more integrated offering for customers.

Chief Financial Officer Monica Vicente said the company is in an early assessment phase, including reviewing cost structure and spending to establish a near-term baseline and identify efficiency opportunities over time. She also said the company is evaluating Del Monte Foods’ operating footprint and noted the “recent purchase of a warehouse previously leased by Del Monte Foods in Wisconsin,” with a focus on optimizing asset utilization and portfolio alignment across facilities.

Geopolitical disruption and rising costs

Abu-Ghazaleh devoted part of his remarks to the operating environment, saying the conflict in the Middle East has created a “meaningful shock” across inputs tied to food production, including energy, fertilizers, packaging, and transportation. He emphasized the time-lag dynamics in agriculture, pointing to pineapples’ longer production cycle and bananas’ faster cycle as examples of how cost changes can hit categories differently and at different times.

He said the cost pressures that emerged during the quarter are “now embedded in the system and will continue to move through the value chain” in coming periods. Abu-Ghazaleh added that the company is already seeing higher fertilizer and packaging costs, as well as increased ocean freight and inland transportation costs driven by fuel and labor, with a more pronounced effect in the fresh business. He said the company expects pressure to build in Q2 and Q3 as costs move through the system.

Q1 results: $1 billion in net sales, margin improvement, and acquisition-related charges

Vicente reported net sales of $1.0 billion in the first quarter. She said the year-over-year result was primarily driven by lower net sales in the Fresh and Value-Added Products segment, reflecting the divestiture of Mann Packing and lower avocado net sales due to “industry-wide oversupply,” which lowered per-unit selling prices. The decline was partially offset by Del Monte Foods’ initial contribution and favorable foreign exchange impacts, “primarily the euro,” she said.

Gross profit was $89 million, which Vicente said reflected lower gross profit in Other Products and Services and the Prepared Foods segment. She attributed Prepared Foods pressure to lower selling prices in the poultry and meats business due to “softer demand and the conflict in the Middle East,” along with higher per-unit production costs. She also cited supply chain disruptions in the Strait of Hormuz and the unfavorable impact of a stronger Costa Rican colón, partially offset by higher per-unit selling prices in banana and pineapple and the contribution of Del Monte Foods. Gross margin increased to 8.5%, while adjusted gross margin was 8.7%.

Operating income was $20 million, with Vicente attributing the decline to higher asset impairment and other charges, which she said were related to the Prepared Foods acquisition. Adjusted operating income was $40 million.

Fresh Del Monte posted net income of $10 million, or $0.21 per share, and adjusted net income of $30 million, or $0.63 per diluted share, Vicente said. Adjusted EBITDA was $58 million, representing a 6% margin, which she said reflected “disciplined cost management amid a dynamic cost environment.”

Segment performance: avocados, bananas, and one week of Del Monte Foods

In Fresh and Value-Added Products, net sales were $549 million. Vicente said the result reflected strategic reductions in fresh and fresh-cut vegetables tied to the Mann Packing divestiture and lower avocado prices from oversupply, partially offset by higher pineapple net sales driven by higher per-unit selling prices and favorable exchange rates. Segment gross profit was $60 million, aided by the absence of Mann Packing’s negative gross profit in the prior year and higher pineapple pricing, partially offset by higher per-unit production costs and weather-related North America events that reduced fresh-cut fruit volumes and weighed on melon pricing. Gross margin rose to 10.9%.

In Bananas, net sales were $357 million, primarily due to lower volume and market disruptions across regions, including adverse weather and supplier changes. Vicente said higher per-unit selling prices across all regions and favorable currency movements partially offset the decline. Banana gross profit was $16 million, pressured by higher production and procurement costs, with gross margin at 4.6% (adjusted gross margin 5%).

In Prepared Foods, net sales were $83 million, including $22 million from Del Monte Foods during its first week in the consolidated results. Vicente said the segment also faced lower net sales in Europe due to supply constraints for pineapple used in its canned pineapple line. Gross profit was $9 million, reflecting lower net sales in Europe and higher per-unit production and distribution costs, with gross margin of 10.8%.

Other Products and Services posted net sales of $56 million, which Vicente said reflected higher third-party freight services net sales partially offset by lower poultry and meats net sales due to lower per-unit selling prices. Segment gross profit was $4 million, and gross margin fell to 6.8%.

Capital allocation and 2026 outlook

Vicente said the company paid total cash consideration of $308 million for Del Monte Foods, consisting of a $285 million base purchase price plus $23 million tied to wind-down and closing costs and working capital adjustments. The acquisition was funded with cash on hand and revolving credit facility borrowings, she said, and the consideration “closely approximated the fair value of the identifiable net assets acquired.”

Beginning in Q1, Fresh Del Monte updated segment reporting to add a new Prepared Foods reportable segment that combines Del Monte Foods with the company’s existing Prepared Foods operations; prior period segment information was recast for comparability, Vicente said. She also noted the Mann Packing divestiture closed in December 2025 and that Q1 results reflect continuing operations.

At quarter-end, long-term debt was $438 million, up from $173 million at year-end, which Vicente attributed to the Del Monte Foods closing. The company’s average adjusted leverage ratio was 1.4x EBITDA. Capital expenditures totaled $14 million, including pineapple expansion and packing facility construction in Costa Rica, equipment investments in Kenya, and maintenance capital, she said.

The board declared a quarterly cash dividend of $0.30 per share payable June 11, 2026, to shareholders of record May 19, 2026, Vicente said. The company also repurchased 100,000 shares for $4 million at an average price of $40.24 per share. Vicente said that as of March 27, the company had $160 million available under its $150 million share repurchase program.

For full-year 2026, Vicente said guidance reflects continuing operations, excludes Mann Packing, and includes nine months of Del Monte Foods. The company expects net sales to increase 13% to 15% year over year, including an expected $600 million net sales contribution from Del Monte Foods. The acquisition is also expected to be accretive to adjusted EBITDA by approximately $23 million in 2026 “as operations normalize,” she said.

On costs, Vicente estimated Middle East-related pressures of about $40 million to $45 million beginning in Q2, primarily from ocean freight (including bunker fuel and war-related surcharges), inland transportation, fertilizer, and packaging. She also projected additional headwinds of $20 million to $25 million over the balance of the year, driven roughly half by foreign exchange—“primarily related to the Costa Rica colon”—and the remainder by higher domestic transportation and logistics costs related to U.S. driver availability. She said tariffs implemented beginning in March 2025 have largely operated as a pass-through, had a modest impact in Q1, and the company has not assumed any tariff refunds due to uncertainty around recoverability and timing.

Vicente also provided segment gross margin expectations for 2026:

• Fresh and Value-Added Products: 11% to 12% (compared with 14% last year), reflecting higher production and distribution costs and pineapple supply constraints.
• Bananas: 3% to 4%, reflecting supply, cost, and market dynamics, including trade dislocations and higher costs tied to lower Costa Rica production and disease management efforts.
• Prepared Foods: 13% to 14%, reflecting the higher-margin branded profile of Del Monte Foods alongside integration and input-cost volatility; Vicente said the range does not yet reflect the “full margin potential” of the platform.
• Other Products and Services: 12% to 13%, consistent with prior years.

SG&A expense is expected to be $270 million to $280 million, which Vicente said reflects inclusion of Del Monte Foods and an “intentional shift toward a branded CPG operating model,” along with wage inflation and investments in technology and organizational support. Capital expenditures are expected to be $85 million to $95 million, including production expansion in Central America, growth investments in Europe across fresh and prepared foods, warehouse and other acquisition-related investments, and core technology systems.

Net cash provided by operating activities is expected to be $40 million to $50 million for the year, Vicente said, reflecting a shift in cash flow seasonality with the addition of a branded CPG business, including higher working capital needs in Q2 and Q3 as inventories build, followed by stronger cash generation in Q4 and into Q1 tied to seasonal demand. She added that working capital needs will be higher in 2026 than in future periods due to the timing of the acquisition.

The call concluded without a Q&A session, as the operator said there were no questions in the queue. Abu-Ghazaleh thanked participants and said the company looked forward to speaking again on the second-quarter call.

About Fresh Del Monte Produce NYSE: FDP

Fresh Del Monte Produce Inc is a leading producer, marketer and distributor of fresh and fresh-cut fruits and vegetables worldwide. The company offers a wide range of products including bananas, pineapples, melons, grapes and avocados, along with value-added items such as fruit salads, vegetable trays and snack packs under the Del Monte® brand.

Founded in 1989 as a spin-off from Del Monte, Fresh Del Monte has developed a global supply chain that spans production farms, ripening facilities and packaging centers across Latin America, North America, Europe, Asia and Africa.

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