Q4 2020 Fresh Del Monte Produce Inc Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily on.
Until that time your lines will again be placed on music hold.
For your patience.
[music].
Good day, everyone and welcome to fresh del Monte produce fourth quarter and full year 'twenty 'twenty conference call.
Today's conference call is being broadcast live over the Internet and is also being recorded for playback purposes.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question. During this time you will need to press Star then one on your telephone.
If you would like to withdraw your question you May press the pound key.
For opening remarks, and introductions I would now 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.
Thank you Amy good morning, everyone and thank you for joining our fourth quarter and full year 2020 conference call as Amy mentioned I'm, Christine Cannella, Vice President Investor Relations with fresh del Monte produce joining me in today's discussion are Mohammad Abu Sally.
Chairman and Chief Executive Officer, and Eduardo Bezerra, Senior Vice President and Chief Financial Officer.
I hope that you had a chance to review the press release that was issued earlier. This morning via business wire. You May also visit the company's website at fresh del Monte Dot Com for a copy of today's release as well as to register for future distributions.
For this call is being webcast live on our website and will be available for replay after this call.
Please note that our press release includes reconciliations of any non-GAAP financial measures, we mention today to their corresponding GAAP measures I would like to remind you that much of the information we will be speaking to today income.
Food in the answers we give in response to your questions May include forward looking statements within the provision of the federal Securities Safe Harbor laws. We ask that you review the forward looking statements information included in the press release, we issued this morning and in the company's most recent filings.
With the SEC.
With that I'm pleased to turn today's call over to Mohammed.
Thank you Christine.
Good morning, everyone.
As everyone on the call.
<unk> 2020 game with unprecedented challenges.
I am extremely proud of how our global team has responded and adapted to the ever changing conditions to continue to get our products to market serve our communities with donations, while taking the necessary precautions to.
To keep our production environment sales for our team members.
We made progress on many fronts in 2020.
Building, a solid foundation for a strong future.
I would highlight in a minute.
However, I will I want to first mentioned events that affected our quarter performance.
The COVID-19 pandemic continues to impact production doesn't want, especially in our largest market North America price.
Brian.
Result of ongoing disruption in the foodservice business.
In November on how it goes and I hope that book, that's gone on Guatemala, Honduras and Nicaragua.
Despite the devastation sustained on our forums and communities, we quickly engage a global team to lend support and assistance to our team members and decide on being hard hit communities.
Thankfully no lives what loss.
As a result of the hurricane dynamics supply from these regions image.
In December to meet the needs of our customers and deal with the highest growth of fruit production ample.
In procurement, we declared force majeure.
<unk> implemented a surcharge best Bulks on North America, but on a contract prices the surcharge remains in place today.
Collectively these factors hampered our 2024 for financial performance.
Net sales were $1 billion in line with the fourth quarter of 2019.
We reported adjusted gross profit of 49 million balance compared with $48 million in the fourth quarter of 2019.
With gross profit margin improvements in our fresh and value added products segment.
<unk> reported adjusted loss per diluted share.
<unk> compared with adjusted loss or 45 cents in the for the fourth quarter of 2019.
Now I would like to highlight a few of our accomplishments in 2020.
During our third quarter 2020 conference call, we announced a 100 million asset sales optimization program to strengthen our balance sheet and free up cash flow.
I am pleased to share with you that for 2020, primarily in the fourth quarter, we achieved 40 per cent of our goal.
We are on track for completing the most of the program in 2000.
What do you want.
Last year at this time I shared with you that we embarked on a five year plan.
Transform fresh del Monte.
You may recall, the key elements of our transformation where.
Protect and grow the core business.
Drive innovation and expansion growth on value added growth categories.
Evolve our culture to increase employee engagement and productivity.
The company's technology, driven company to drive efficiencies.
A consumer driven company.
And last but not the least sustainability waste less for a better world Tomorrow.
Today, even in the face of a yearlong pandemic, we on a different company than we were a year ago.
And the U S.
We debuted our newest product for the pin globe pineapple and other variety with a big flush.
We recently announced a partnership with Queensland University of Technology in Australia.
To develop new varieties of disease resistant bananas.
The research partnership will focus on utilizing breakthroughs implant three pence to cultivate bananas.
Less susceptible to crop threatening diseases.
We completed the move to our new Gonzales, California facility today, our free Mann packing facilities and Fresno fresh cut fruit facility.
Operating under one roof.
Which we anticipate will enable us to improve gross profit in our fresh and value added product segment.
By approximately $10 million on.
And you wouldn't basis, a benefit which we expect to achieve in 2021.
We opened a new state of the other distribution on fresh cut facility in Yokohama, Japan.
We accelerated the one year anniversary of our new avocado packing facility in Mexico.
Which has further strengthened our competitive position.
We continued to expand our global customer supply partnerships.
They play important roles in the value added product diversification strategy for our distribution channel.
We welcome for of our six new container vessels.
In addition to the lower carbon footprint, our new ships enable us to offer a more convenient and competitive commercial cargo broker.
But the customers in trade lanes sales.
By these new vessels.
We made capital investments in technology and automation to become a more efficient produce it.
Implemented ERP and some of our facilities, we launched e-commerce platforms and debate on Dallas.
And we are focused on further expansion of our diversification strategy.
We opened our fifth North America, food and beverage store.
Named Fresh Street in December and quality games.
Bringing our products closer to on ultimate consumers.
In October we published a book.
Our 2018 19 corporate social responsibility report.
Demonstrating our continuous commitment to deliver on sustainability and social responsibility objectives.
This can be measured through numerous awards and accolades we received in 2020.
Such as the Pea at a daily award from Green and environmental stewardship, and numerous social responsibility awards for the COVID-19 pandemic relief such as the Guatemala 2020, President's Award for COVID-19 support and it would be a thousand Wednesday hunger relief.
Champion to name just a few.
And our team members are our most important asset during the pandemic they showed resilience focus and attention to detail.
To continue to operate within the highest standard of quality and efficiency.
They have my heartfelt respect and appreciation.
As we move forward from 2021.
We will continue to advance our five year strategic transformation delivered stronger long term shareholder value.
We remain firmly committed to prudently growing the company improving our operations efficiency expanding in new geographies developing innovative new value added products and adding more opportunities for direct to consumer engagements.
Bond to the shift in delivery channels, driven by a threat towards stay at home economy.
Thank you for joining us today, and I would say on the cold blooded off too.
To talk about financial results Eduardo please.
Thank you Mohammed and good morning.
Despite the COVID-19 disruption during the full year and the impact on Hurricanes ethane.
In our Central America operations in the fourth quarter of 2020, we achieved a net income per diluted share of $1.03 per <unk>.
Net income per diluted share of $1.37.
Full year of 2019.
Excluding among other things the effect of other product related charges, which resulted in a $34 million gross profit impact related to charges attributable to our fresh and value added and banana products segments, and the $22 million gain on disposal.
All properties, we delivered adjusted net income per diluted share of $1.15 compared with adjusted net income per diluted share of $1.12 for the full year 2019.
Additionally, despite the headwinds of the COVID-19, pandemic and hurricane we generated $181 million in operating cash flow during the year, we have reinvested $150 million in capital projects return $35 million to work.
All of our shareholders through dividends and share buybacks and reduced our long term debt by $45 million compared to the end of 2019.
I might mention we made excellent progress with dollar assets sales optimization program, completing 40 of the $100 million of objective.
In 2020.
I will now get into the results for the food for the fourth quarter and full year 2020.
In regards to the product lines, we want to date, you on fourth quarter numbers.
For the full year 'twenty 'twenty net sales were $4 $2 billion compared with $4 $5 billion in 2019, we done the favorable exchange rate negatively impacting net sales by $16 million day.
The COVID-19 pandemic impacted net sales during the year by an estimated 300 and for millions of dollars.
Partially offsetting the decrease in overall net sales was all our fiscal year cycle, which consisted of a 53 week year for fiscal 'twenty to 'twenty as compared to a 52 week year for fiscal 2019, resulting on an estimated $72 million.
The increase in net sales.
Adjusted gross profit was $284 million compared with $318 million in 2019.
However, I would like to point out that if you apply the adjusted gross profit margin of $6 five per cent to be $304 million on net sales impacted by COVID-19, we estimate that we would have delivered an additional $21 million and not just the gross profit.
Adjusted operating income for the year was $89 million compared with $113 million in the prior year and adjusted net income was $55 million in line with the prior year period in 2019.
For the full year 'twenty 'twenty net sales in our fresh and value added business segment decreased by $220 million to $2 $5 billion compared to the prior year, primarily as a result of lower net sales in our fresh cut vegetables fresh cut fruit.
Avocado value.
Symbols melons prepared food products Central May book product lines, partially offset by higher net sales in our non tropical fruit and pineapple product lines.
Every dollar full year 2019 performance for this segment the COVID-19.
Dynamic affect the dollar net sales, our fresh and value added products by an estimated $243 million during the year driven by reduced demand in our food service channel and shifting demand at retail due to the button dynamic.
So the continuing effect on the November 2019, Mann packing voluntary product recall affect the dollar net sales in the full year of 2020.
Our gross profit decreased $35 million to $158 million.
Other product related charges represented $25 million for the segment primarily related to an event for you right Gulf South pineapples and fresh cut vegetables, as a result of volatile supply and demand conditions as well as additional cleaning and social distancing protocols.
Associated with the pandemic, along with inventory write offs, resulting from damages to our metal operations in Guatemala due to Hurricanes anything you all day in the fourth quarter of 'twenty point.
For the full year net sales in our banana business segment decreased by $53 million to $1 $6 million compared to the prior year.
As a result of lower net sales in North America, and Europe, partially offset by higher net sales in the middle East and Asia.
As compared to $1 full year 2019 performance for this segment. The COVID-19 pandemic affected our net sales on bananas by an estimated $60 million.
Gross profit decreased $20 million to $84 million, primarily due to lower selling prices and sales volume.
Other project related charges represented $8 million for the segment primarily related to inventory write falls as a result of damages to our banana operations in Guatemala due to hurricanes, depending on that during the fourth quarter of 2020.
Long winded volatile supply and demand conditions caused by COVID-19, pandemic as well as incremental costs incurred for cleaning and social distancing protocols associated with the pandemic.
The company collected approximately $3 million in insurance recoveries associated with the storms, which is included in other product related charges.
For the fourth quarter of 2020 adjusted loss per diluted share was eight cents a share compared with adjusted loss of 45 cents a share in the fourth quarter of 2019.
That increased by $23 million to $1 billion in comparison to the prior year period in 2019.
Unfavorable exchange rates negatively affecting net sales by $2 million.
The COVID-19 pandemic, Inc.
<unk> net sales during the quarter by an estimated $71 million as compared with dollar fourth quarter of 2019 performance.
Partially offsetting the decrease in net sales for the fourth quarter of 2020 was an additional week in November 2020, so when compared to 14 weeks versus on a regular 13 weeks of sales, we estimate on increasing fourth quarter 'twenty 'twenty net sales of $72 million on.
Adjusted gross profit was $49 million compared with the adjusted gross profit of $48 million in the fourth quarter of 2019.
However, I would like to point out that even for you apply the adjusted gross profit margin of three 9% to $71 million on net sales impacted by COVID-19, we estimate that we would have delivered an additional $3 million in adjusted gross profit.
Adjusted operating loss for the quarter was $5 million compared with an adjusted operating loss of $6 million into prior year and adjusted net loss for the quarter was $4 million compared with an adjusted net loss of $21 million in the fourth quarter.
2019.
In our fresh and value added business segment for the fourth quarter of 2020, net sales were $586 million compared with $597 million on the prior year period, primarily attributable to lower sales volume in all other mellow vegetables fresh cut fruit.
Food and prepared food product lines, partially offset by higher net sales in our pineapple fresh cut vegetables, and non tropical fruit fly.
We haven't made it that the COVID-19 pandemic came back that net sales in the fresh and value added products segment. During the fourth quarter of 2020 by an estimated $49 million as compared with the fourth quarter of 2019 performance there.
We estimate the impact on net net sales is attributable to reduced demand and the company's food service business and shifting demand at retail as a result on continued government imposed mandatory restrictions and social distancing initiatives associated with the pandemic bar.
Partially offsetting the decrease in overall net sales was the impact on one additional week in the fourth quarter of 2020, which contributed an estimated $42 million increase in net sales.
Gross profit increased to $25 million compared with the $21 million in the fourth quarter of 2019.
Other product related charges represented $6 $8 million for the segment primarily related to.
Inventory write offs of by Naturals fresh cut vegetables.
Volatile supply and demand conditions caused by the COVID-19, pandemic as well as for $4 million in inventory write offs, resulting from damages to all of our metal operations in Guatemala due to hurricanes it on yourself.
In our pineapple category net sales were $127 million compared to $115 million in the prior year period, primarily due to higher sales volume in selling price in Asia, Europe, and Middle East overall volume increased 9% you'll need to price it.
Increased to one per cent and unit cost decreased to one per se.
In our fresh cut fruit category net sales were $110 million compared with $116 million in the prior year period, primarily due to decreased demand in North America and the Middle East as a result of the continued impact of COVID-19, pandemic and the shortage of raw materials.
The decrease was partially upset by higher net sales in Europe and Asia.
Overall volume decreased two 6%.
I need to price increased 1% and unit cost increased to five per se.
In our fresh cut vegetable category net sales were $99 million compared with $96 million in the fourth quarter of 2019.
The increase was primarily due to higher selling prices in North America.
Volume decreased 3% unit price increase to 6% and unit cost decreased 2%.
In our avocado category net sales were $69 million in line with the fourth quarter of 2019 supported by higher sales volume as a result of increased customer demand.
Volume increased 22%.
Pricing decreased 19% and unit costs decreased 22%.
Our Mexico packing facility and changes in how we procure avocados continue to drive lower cost and improvement in margins in these product lines.
In our vegetable category net sales were $40 million compared with $47 million in the fourth quarter of 2019.
Primarily due to lower sales volume as a result on.
The continued impact of the COVID-19, pandemic, partially offset by higher selling prices.
Volume decreased 17% unit pricing increased 2% and unit cost increased 16%.
In our non tropical category, which includes our grape Berry Apple citrus pear Peach Plum nectarine, Cherry and Kiwi product lines net sales increased to $35 million compared with $33 million in the fourth.
Quarter on 2019.
Volume increased 11%, you'll need to price and decreased 5% and unit cost increased eight per se.
In our prepared food category, which includes our traditional canned products and meals and snacks product lines net sales for the fourth quarter decreased 5% compared with the fourth quarter of 2019.
The decrease was primarily due to lower sales in our meals and snacks product line due to the impact of the COVID-19 pandemic. The continued back of the 2019 product recall and product for rationalization efforts in our man packing operations in North America, which resulted in the car T.
Discontinuance of low margin products.
The decrease was partially offset by increased per unit sales prices of Canada by natural products higher per unit sales of candidates nonprofit called fruit due to improved customer demand and a higher per unit selling prices off by that book concentrates products due to lower industry supply.
In our banana business segment, net sales were $384 million compared with $399 million in the fourth quarter of 2019, primarily due to lower sales volume and selling prices in Europe, partially offset by higher net sales in north.
America and Asia.
We have estimated that the COVID-19 pandemic impacted net sales in the banana segment during the fourth quarter by an estimated $22 million as compared with the fourth quarter of 2019 performance for this segment.
The estimated impact in net sales was attributable to reduced demand and the company's food service business and shifting demand at retail as a result of continued government imposed mandatory restrictions and social distancing initiatives associated with the pandemic.
Partially offsetting the decrease in overall net sales was the impact of on additional when you can do for fourth quarter of 2020, which contributed an estimated $28 million increase in net sales.
Overall volume decreased 3% compared with last year's fourth quarter worldwide pricing decreased 1% over the prior year period worldwide Banana unit cost was in line with the prior year period.
Gross profit was $10 million compared to $14 million in the fourth quarter of 2019 other.
Other project related charges represented 6 million for the segment primarily related to inventory write off as a result of damages to our banana operations in Guatemala due to hurricanes. It on your auto during the fourth quarter, we have collected approximately $3 million in insurance recoveries associated.
With these thoughts.
Now moving to selected financial data.
Selling general and administrative expenses were $196 million for the full year 5 million lower than 2019 due to several contingency measures applied in 2020, including travel restrictions due to COVID-19 impact during the quarter selling general.
As for it to be expenses were $54 million compared with $51 million in the fourth quarter of 2019.
The foreign currency impact at the gross profit level for the full year was unfavorable by $11 million.
The same impact at the gross profit level for the fourth quarter was unfavorable by $900000.
For the full year interest expense decreased $4 million to $21 million compared with $25 million in the fourth quarter of 2019.
Interest expense net for the fourth quarter was $5 million in line with the fourth quarter of 2019.
During the fourth quarter income tax benefit was $4 million during the quarter compared with income tax expense of $1 million in the prior year for.
I'm merely due to reduced earnings in certain higher tax jurisdictions income.
And junction with that.
A benefit resulting from the restructuring of our European operations as well as a benefit associated with the cares Act in North America.
For the full year, our net cash provided by operating activities was $181 million compared with a net cash provided by operating activities, although $169 million in the same period of 2019.
The increase in net cash provided by operating activities in 2020 compared for 2019 was principally attributable to higher balances on accounts payable and accrued expenses and lower levels of inventory principally due all due to our optimization efforts associated with.
Moving on working capital usage.
Partially offsetting these increases was lower net income in 2020, compared with 2019 higher levels of prepaid expenses and Nordic were in Texas.
Net cash used in investing activities was $109 million for 2020, compared with $52 million for 2019 net.
Net cash used in investing activities for 2020 consisted of $115 million from capital expenditures, partially offset by $14 million, Inc. Proceeds from sales of property plant and equipment, while net cash used in investing activities for 2019.
Consisted of $122 million and capital expenditures, partially offset by $69 million in proceeds from sales of property plant and equipment net.
As it relates to capital expanding spending we invested a $150 million in 2020 with a significant portion related to the acquisition of for a.
Refrigerated container vessels.
Our total debt decreased from $587 million at the end of 2000 $19 million to $542 million at the end of 2020.
As announced this morning in our financial results press release, our board of directors declared a cash dividend of 10 cents per share payable on April Satcom, 'twenty 'twenty, one to shareholders of record on March 10 2021.
This concludes our financial review, we can now turn the call over for Q&A.
At this time, ladies and gentlemen, if you would like to ask a question. Please go ahead and press Star then the number one on your telephone keypad.
Again star one to ask a question.
Your first question today comes from the line of Jonathan Feeney with consumer edge.
Please proceed with your question.
Good morning, and thank you.
Itemize a number of headwinds.
From uninsured losses from Hurricane Matthew.
Hold on $21 million on adjusted gross profit for Covid.
And yes, maybe not.
Not a headwind, but a calming tailwind maybe you made some significant investments in streamlining your cost structure, particularly with the West Coast Mann packing operations consolidation.
I'm trying to understand how much all of that affects 2021.
Maybe if you could take those three line items. It in whatever detail you can be comfortable giving us I know you gave us very helpful detail about what the impacts were for warranty I'm trying to understand how much comes back in 'twenty. One just so I can understand if you annual run rate at a normal basis.
Where we're thinking about for modeling thank you.
Yes.
Okay. Thank you Jonathan So let me give you some color about that right. So we're talking about the day impact on the.
Yeah.
Arthur.
But we do not expect that to happen in 2021, Oh dull.
We may see in fact in our on our cost because we're going to need to source from different.
Sources, you know, mainly Ecuador that has a not only a higher cost, but also from a logistics standpoint.
On Ocean freight that's going to be higher and from a GAAP dollar standpoint, we're going to need to rebuild a lot of the infrastructure that was damage it.
In those areas. So that's the first one.
The second on the one you know.
So we did the as you mentioned and we are very proud of all the different actions, we took in 'twenty 'twenty two streamline our cost structure.
So we took a lot of measures to improve our asset utilization and so we do expect that to bring.
The improvements, we anticipate and we share the $10 million adjusted by consolidating the operations.
All for different units at all or new Gonzalez.
Unit there in banking, but also we do expect for recover to sales that are were impacted in 'twenty 'twenty not only because of food service, but also because of the product recall of course, there that will happen throughout the year right because some of the other.
These volume has been shifted to other supplier.
Suppliers and it takes some time for you to recover that but we do expect that there's a significant contribution and the third one I would say that.
As we look into our operations in different geographies you know, we do expect a by simplifying our cost structure to see on improvement as part of these overall to me optimization.
In Middle East in Asia, as well as in our operations in C cabin self on America.
So those are the three main areas that are I would like to highlight that they're doing with it.
So it sounds like.
You mentioned capital expense just so on soup clear on that that's not a net earnings factor rate for 'twenty you'd be just didn't need some capital expenses for repairs basically.
Yeah. So much earnings that you talked about.
Yeah that was mainly on on the Hurricanes that we had been in Guatemala.
Let's not let's keep in mind that we still have two vessels that we could receive in 'twenty 'twenty, one so there'll be some capital associated with that as well.
Debate.
Lower kept on investments in 'twenty and 'twenty, one that's compared to 2020, but in terms of earnings improvement as I mentioned the actions that we took in a man packing as well as optimizing our business on around the world. We do expect a reduction in our run.
The rate of cost of doing business.
So just to just so I understood clearly water, so $10 million or so in that kind of savings and if.
Magically magically retroactive to January one.
There was no COVID-19 and out we went back to normal levels of behavior, Let's just say we're back to the kind of demand. We had in the January February 2020 across the world all of a sudden just hypothetically we're back on.
That would be a 'twenty in your estimation because you gave us a $21 million number that would also be a $21 million tailwind for your business all things equal if I correct.
Yeah, that's it that is correct and that side too.
You know a $300 million on net sales that we had to impact. The challenge is always you know how long it's going to take to really see a force of course COVID-19.
I would like to add I would like to add to this Jonathan is that day.
For off of men was at the end of.
2019, which was about November sometime in November 2019.
That was a big drawback for us going into 2020.
And right. After we came into 2020, we would hit with the Covid. So imagine like a double whammy you know you you'll have the equal in the first place.
Then you've got the COVID-19 to make it even worse.
For all of the food service business almost gum.
Overnight.
And only we were left with repo, mainly and retail of course as because of the equal and we had so much business that was unfortunately, you know stopped by the retailers. So we get some of this business during 2020.
In terms of retail business, we have.
We are seeing now some back some life and activity in the food service, it's coming back.
As much as a whole, but at least we see life coming back into the food service business. So we have optimistic really tonnage that hopefully by and for me that.
Normality comes back to the market in terms of food service and are opening up for restaurants, and hotels and doing all day.
Yeah.
The whole sector. So we have.
Net income for the general about really going into the future I have no doubt and don't forget that moving for.
Relative to one <unk>.
During the Covid period, with so many suppliers and so many new machines and so many technicians that they have to come it was like mission impossible, but thanks. Thanks.
Our people really would have made.
Unbelievable achievement by putting up everything and as of as we speak today.
It was completely achieved and now it's fully operational with one unit other than for different units. So you can see what would be the.
Operations efficiencies and the net.
By consolidating all this together.
Yeah.
It will be significant.
Thank you. That's that's that's really really helpful. Just one more question from me.
40 per cent of the way through your asset sale program or are you happy with the prices you're getting them on we see the gains. So [laughter] gallons are happy but are you relative to what you understood to be the values here or are you happy with these values are they going up with the with the it seems like the asset prices of everything else in the world right now.
How long do you think it will take you to be finished with that.
Giving you an exempt from just to give you an exemplar for instance, we have a piece of land up on both of them.
They take us into Chile.
Our 22 actors.
That cost us about probably at the time when we bought that property was like three or $400000 eight a member.
And we sold it.
Last the last year for the end of last year.
At the $12 million.
Price deck. So just to give you an idea of what kind of assets that we have and what kind of valuation for that.
I don't need to go with it is.
Yes understand.
Exactly.
Actually one flavor mode.
And that piece of land by the way was sitting idle.
We did come to visit and if he could just sit in that you know and.
On Unutilized.
Well, thank you well it sounds like you are happy with it I appreciate it. Thanks, so much and great work and we'll talk soon.
Thank you Jonathan.
Yeah.
And again, ladies and gentlemen to ask a question. Please go ahead and press Star then one on your keypad.
Your next question comes from the line of Mitch Pinheiro with I'm sorry, There is no company name. Please proceed with your question.
Hi.
Hi, Jimmy.
Yes.
So.
So just following up on John's.
The next question is.
In terms of the asset sales is it can it would be mostly I guess its land correct is that what youre selling.
No. That's some of it is land.
Some of it for.
Silly things that we.
We really are underway.
He is not utilized or other retailers to the point that it doesn't make sense to keep it.
What we do is consolidate that business into another facility, where we optimize and.
Maximize efficiencies so it's a mix of NAND.
On the facilities that are on.
Utilized on not utilized at all.
Okay.
I just wanted to.
Look at the banana.
So.
As we're looking here really short term.
You still have force majeure in place I guess.
In the United States.
Yes.
You know so.
Are we going to see are you able to bill volume at this point.
I mean, we're getting close to that we're almost two thirds of the way done in the first quarter.
Are we going to expect a volume decline, perhaps in the banana business in the United States for North America.
And then how does that balance against the price and you can get and are we going to see.
Normal gross margins are.
In North America, or anything that you can talk about would be helpful.
Bananas, I don't believe that the prices are going to move from where we are today.
We are on that so much pressure you know as a banana produce it in terms of costs.
And procurement.
And as well as much as the damages we have been facing you know in our producing areas as well as just so you know as closely I mean last week and on what I mean, we had so much disruptions in our operations in Texas and in other areas in Nevada.
If not is because of the storms and ice on the so that also add that you know that all adds to the additional.
Additional cost and disruption that we have be it on bananas or other.
So I don't see any movement on the banana pricing going forward you know at least in the.
Near future or even in the midterm.
That's as far as bananas as far as you know the other business I believe that as we go you know as we go forward in the year, what would be for clinicians that taking place with the decline in day rate of infections, you know and so I'm very optimistic on and I'm very.
For that by hopefully by June.
We can see a much more relaxed and much more on what kind of that's.
Back on.
Normal lives.
North America, and then other parts of the World you know what I mean.
Just to give you an idea just.
We have been hit hard.
In Indiana in the Middle East and Asia with bananas because.
And on market was closed for almost now two years.
And that market used to import and consume a huge amount of the Netherlands, when I'm, saying, you know probably a couple of million boxes.
Or more.
And just recently.
As of last week are they decided to open the market again for banana imports and that has already given a big push.
And prices and other that would relieve the pressure on Asia as well as manner.
With with volumes, which would be going into Iran, and already we sold the spot market and the Philippine shooting by at least three for Ballard.
Additional you know in terms of pricing so a win and I'm very confident on portfolio you know going forward I see the market changing yesterday, we had two years of.
Very.
Difficult environment.
And in southern France, but as we go into 'twenty, one and.
I'm really full of confidence about the future.
And in Europe.
You've done better in Europe than I than I would've thought.
Just watching the pricing.
Spot pricing banana pricing in Europe.
Down it seemed down a lot.
Look at your your business from the quarter in it.
You know hold up very well.
As.
Or are you doing something differently.
In the European market.
Bananas.
Yes, we are as it must have affected the way that we sell all of the bananas, we have structural change in terms of having long term contracts that other than just depending on the spot market. So we had kind of.
Mitigating the risks.
Which which helped us in achieving better results and.
As well as our sourcing from different you know companies that can support the European market. So it's just it's a simple don't affect us, but I believe that going forward as I said for.
The other market Seattle, as well would it be normalized and will be a lot more you know.
Kind of.
Consistent than that in the past.
Aside from that Europe is also diversifying our product lines and they have done extremely well in.
We are introducing new new fruit lines and they are big and they are really achieving very good news on that as well. So all in on the Europe is doing quite well as well.
And then I'm not sure really.
And when you look at this.
Reading about all the.
In Europe, and wanting wanting to provide.
Oh sort of requesting banana producers to have you know.
Sort of have fair trade certified bananas.
On the stat.
And then obviously not wanting to pay for that.
Sort of that yes.
For you, but how do you guys think about.
You know fair trade pricing.
As it relates to your business as it relates as it relates to the broader market.
Well you know what.
Everybody is affected in the same way all the banana players all the banana operators have different issues and challenges.
Yeah on offense.
It is it did you know kind of what.
Very very elastic in terms of how people what do mean by share trade I mean, the fed trade you know retailers asking for fair trade on all this and then a defense when you come to negotiate with them. They want to step you down and on ticket the even below your cost.
That doesn't flip and that's something that went on to refuse it even two biggest.
Biggest challenge in Europe, right now is the M on Adam which is a chemical that Europeans.
Right to breath. It by the end of this year. This is one of the and this chemicals that we use which is safe because we use it on other parts of the world.
Is something that will affect the quality of the bananas, if we ship it into trips like for Europe. So what is happening right. Now is the Banana Association Yeah. I mean, it is taking steps hopefully to be addressing this through the proper.
Chinas government channel.
And this is Danielle.
Tenants other than that.
Net.
Our business will always face challenges not.
Daily Weekly monthly you know on a continuing.
Our process, so we need to be ready to meet these challenges and find solutions.
Yeah.
Okay, and just one last.
Okay.
I don't know if you mentioned it but what are your Capex plans.
For 2021.
Approximately what you intended.
And what you mentioned.
On a dimension.
The Capex, we have is very clear we have two ships that we still have to pay the balance for the value. These two ships we have other.
Other projects that needs to continue on these projects that started a couple of years ago.
And we have day maintenance and repairs, which isn't all of them on every single year. So what do I have wanted to do is really rationalize our capital expenditures to the best of our abilities and not.
Not investing any.
The new projects that we.
And then other investments.
With long term net bad debt.
That's the kind of the policy that we are undertaking.
Okay.
So approximately what level of spending.
B you know you did $150 million this year.
$122 million in the year prior where it really is expected to fall this year relatively speaking.
We do not we do not.
As far as we are concerned here, we that's the trigger that.
But they have already you know the units are delivered to you at the beginning of the year as we go forward in the year.
We're always fine tune this and that is as well.
Try to only Ah.
Approve the really what is really needed on what is really essential.
As we go forward you know on them by the second quarter I would be able to give you a better picture of how the year on what shape and how we would look but you know well.
On top of that.
It's not like a.
Like open.
Open checkbook.
Okay. Thank you.
Q.
Yeah.
And there are no further questions at this time I turn the call back to Mr. Abu <unk>.
For closing remarks.
I would like to thank everybody for joining us today.
Hopefully.
How confident for.
Next quarter to be a very bright.
For everybody.
But that day and happy a day is a doubling.
And the next few months. Thank you very much and have a good day.
This concludes today's conference. Thank you for participating you may now disconnect.
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