Q4 2021 Fresh Del Monte Produce Inc Earnings Call
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Good day, everyone and welcome to the fresh del Monte produce fourth quarter and full fiscal year 2021 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.
We would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question. Please press star one again.
Opening remarks, and introductions I would like to turn today's call over to Vice President Global S. P. A day in Investor Relations with fresh del Monte produce and Miranda. Please go ahead Ms Miranda.
Thank you Chantelle and good morning, everyone and thank you for joining our fourth quarter and full fiscal year 2021 conference call I shouldn't tell mentioned I am and have you done that.
Vice President Global F P&A and Investor Relations with fresh del Monte produce joining.
Joining me in today's discussion are Mohammad Abu <unk>, Chairman and Chief Executive Officer, and there's a lot of over seven senior Vice President and Chief Financial Officer, I Hope that you've 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 of fresh del Monte Dot com for a copy.
<unk> of todays release and Investor Relations presentation on the site you can also 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, we issued today and on the company's website at fresh del Monte Dot Com under the Investor Relations tab 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 provisions of the Federal Securities Safe Harbor laws in today's press release and in our SEC filing we detailed mature risks that may cause our future results to differ from these forward looking statements are statements are as of today February 23rd and we have no obligation to update any four.
We're looking statements we may make with that I'm pleased to turn today's call over to Mohammed.
Thank you Ana good morning, everyone.
2021, we posted robust double digit operating income growth compared with 2012.
We demonstrated agility and industry leadership in navigating the current challenging macro economic environment as we focus on mitigating industrywide supply and labor headwinds.
We implemented inflation justified price increases towards the end of.
We made investments targeted ads information and focus relentlessly on productivity.
And the first half of 2021, despite these pressures.
Most profit benefited from strong performance across all of our segments.
Particularly higher per unit selling prices in our bananas.
This higher pricing helped offset incremental production and procurement costs. Following the hurricanes in Central America in the fourth quarter of 2001.
And higher demand in key product categories related to relax restrictions.
Social gatherings and some of our main markets compared with 2012.
However.
In the second half of 2021 and financially the inflationary.
Cost pressures intensify negatively impacting gross profit.
The price increase which took effect towards the later part of the Union.
That is an improved performance as we move through the end of the fourth quarter.
Overall during the year, we increased adjusted EBITDA to $207 million.
From one July two.
2020.
As a result, adjusted EBITDA margin increased 40.
40 basis points to four nine from $4 five.
Okay.
As a brief recap during the year.
We made significant progress on our strategic initiatives and I would like to focus on that.
We added two state of the answer refrigerated container vessels in the first half of the.
Bringing our fleet to a total of 13 vessels.
As previously mentioned six out of the 17 vessels are new.
US in a stronger more agile position.
We continued to price to provide reliable service to our customers.
Our fleet also enabled us to expand our Sam pumpkin straight surfaces.
In keeping with our shareholder accretion accretion approach in the second half, we increased our quarterly cash dividend from <unk> to <unk>.
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Our total dividend for the year to 50 cents.
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Same approach will continue in 2022.
In 2021 would reduce long term debt by approximately $1 million to $3 million.
Throughout the year, we also made progress on our strategic partnerships.
We successfully implemented a licensing agreement with one of Europe's top.
Frozen goods retailer.
The name is Iceland.
We offer a broad product mix generally consistent.
Hi.
In June we invested in a split of.
Subsequent global athletic pumps.
The funds invest innovative growth stage companies applied technology in various infrastructure sectors.
Including logistics.
Supply chain and agriculture.
Which are complementary or adjacent solid business.
In November .
Chip with some cap private equity.
Invested in purely Elizabeth category, leading organic consumer products.
Their product offerings include granola ultimate mixes.
The partners the partnership is that opportunity to expand our business and the convenience categories.
Providing the platform for us to work together on the capital of unique and innovative products.
Additionally.
Yeah.
Excited to leverage our vertical integration to support our partners with supply chain and logistics services.
Our progress in 2022.
We announced today another brand partnership with good growth.
Culture.
2014.
Company focuses on high quality culture dairy products.
Specifically cortez cheese and sour cream.
They have been an innovator disruptor.
In this space gaining significant market share.
Its inception.
Both investments purely Elizabeth culture were facilitated by <unk> food and nutrition team.
Such as for reps that have proven that says <unk>.
In the market and ready to scale up that business through strategic alliances.
And we are excited to announce.
A partnership with Mccormick at company.
Global leader in the playbook.
Agriculture.
Aligned very closely with our vision and strategy.
With this project we.
We are leveraging technology and data.
With our agriculture expertise.
The growth products, while minimizing costs.
Preserving the environment.
At this moment, both companies have decided to keep the location at products and production undisclosed.
In 2000, but the one we made great progress on our sustainability journey.
We were the first global marketer of fruits and vegetables.
So committed to the science based target consistent with the levels required to meet the goals of the Paris agreement.
The science based targets initiative has since validated that our emissions.
Reduction targets conforms with his criteria and the recommendation.
And we released our 2020 sustainability report.
On the people front last month, we announced the appointment of Mohammed above as executive Vice President and Chief operating Officer.
I joined the company in 2009 and has served in various leadership roles.
Clothing head of our Asia, and Middle East regions I'm excited to have him in his new role what I have said that it would add significant value to our operations.
Having said that I'm confident in our team's ability to continue to execute on our long term strategy of growing our core business, increasing the reach of higher margin.
Value added categories implementing leveraging technology solutions as we evolve into an equity Tech company.
And expanding our customer and brand partnerships throughout our global operations.
At this point I would like to.
Over the quarter with one to talk about the financial results. Thank.
Thank you Mohammad and good morning.
Start with our fourth quarter performance by product lines, followed up by a consolidated overview of our full fiscal year 'twenty to 'twenty one.
Net sales for the fourth quarter of 2021 increased $15 million or 2%.
Third with the prior year period, the increase was driven by higher net sales in our other products and service segment, which includes third party freight services, and poultry and meat category and our fresh and value added products segment.
As it relates to comparability between periods. The fourth quarter of 2021 consisted of 13 weeks compared with 14 weeks in the fourth quarter of 2020.
The additional week in the fourth quarter of 2020 contributed an estimated $72 million in net sales on.
On a comparable basis net sales increased $87 million or 9%.
Adjusted gross profit for the fourth quarter of 2021, plus almost $40 million compared with $49 million in the previous year.
The decrease was primarily driven by the continuation of inflationary and other cost pressures, which resulted in higher per unit production and distribution costs, including packaging materials fertilizers inland freight labor and fuel.
The decrease was partially offset by an inflation justified price increase effective toward the latter part of the fourth quarter the.
The increase was implemented in an effort to maintain our continuous supply and service levels with our business partners, having said that during the fourth quarter, we realized sequential improvements in gross profit specifically in December and in addition to pricing gross profit benefited from fluctuate.
<unk> in exchange rates.
Adjusted operating income for the fourth quarter was a loss of $7 million compared with a loss of $4 5 million in the prior year period, primarily related to lower adjusted gross profit, partially offset by a decrease in selling general and administrative expenses.
And adjusted net loss was $8 $5 million compared with a loss of $3 7 million in the prior year period.
Our diluted earnings per share for the fourth quarter was a loss of 24.
Compared with earnings of <unk> <unk> in the prior year period.
Adjusted diluted earnings per share was a loss of 18.
Compared with a loss of eight cents in the prior year period.
Adjusted EBITDA for the fourth quarter was $15 million compared with $24 million in the prior year period, and a corresponding adjusted EBITDA margin decreased to 145% from two 4% in the prior year period.
Let me now turn to segment results, beginning with our fresh and value added product segment.
Net sales for the fourth quarter of 2021 increased by $12 million or 2% when compared with the prior year period. As previously noted the fourth quarter of 2021 consisted of 13 weeks compared with 14 weeks in the fourth quarter of 2020, the additional week.
Prior year periods contribute an estimated $42 million in net sales.
Variable basis net sales for the fourth quarter of 2021 inquiries $54 million or 10% compared with the prior year period.
Primary drivers were increases in our melon and pineapple product lines.
<unk> net sales increased in North America, driven by higher sales volume and per unit sales prices and pineapple net sales increased across most regions driven by higher per unit sales price.
As an offset sales of fresh cut vegetables decrease during the fourth quarter compared with the prior year periods fresh cut vegetables, net sales decreased primarily North America, including our men banking operations. The decrease was driven by lower sales volume and lower per unit sales prices.
Related to lower demand from food service channel and lack of sufficient labor of the ability.
For the quarter adjusted gross profit in the fresh and value added products segment was $28 million compared with $32 million.
In the prior year period.
The decrease was driven by inflationary and other cost pressures, which resulted in higher per unit production and distribution costs as it relates to comparability. The additional week in the prior year contribute an estimated $2 million in gross profit.
From a broader view the primary drivers of the various war.
<unk> gross profit decreased primarily North America, driven by lower sales volume growth, coupled with higher per unit procurement and distribution costs fresh cut vegetables gross profit decreased in North America, primarily in our man packing operations maintenance.
Driven by lower net sales, coupled with higher per unit production and distribution costs.
Decrease was partially offset by higher gross profit across most of our other key product categories, including non tropical fruit melons and pineapples.
Moving to our banana segment for the fourth quarter of 2021, net sales decreased by $13 million or 3% compared with the prior year period, primarily driven by North America and Asia. The additional week in the prior year period contributed an estimated $28 million.
Net sales on a comparable basis net sales for 2021 increased $15 million or 4% compared to prior year periods.
Adjusted gross profit for the fourth quarter of 2021 was $9 million compared with $17 million in the prior year period, primarily driven by North America and Asia in both regions. The decrease was driven by lower net sales.
As it relates to per unit cost North America gross profit was negatively impacted by higher production and distribution costs.
Asia was negatively impacted by higher production and ocean freight costs.
Now moving to selected financial data.
Selling general and administrative expenses was $44 $5 million compared with $54 million in the previous year. The decrease was driven by lower provision for credit losses, and lower promotional promotional and other administrative expenses.
Net interest expense was lower related to lower interest rates and lower average debt balance.
Income tax were a benefit of approximately $7 million during the quarter compared with a benefit of $4 million in the prior year period, primarily due to the release of evaluation allowance as it was determined.
The FERC tax assets will be utilized.
Now turning to our full year.
2021 results.
For the full year 2021, net sales increased $50 million or 1% compared with the prior year period in both periods. The increase in net sales was driven by higher net sales and our other products and services segment, which includes start.
Party freight services and poultry and meat category.
And by our fresh and value added products segment. The additional week. Indeed prior year periods contributed an estimated $72 million in net sales on a comparable basis net sales for 2021 increased $122 million or 3%.
Adjusted gross profit was $307 million.
Compared to the $284 million in the prior year period.
As previously mentioned by Mohammed and the first half of 2021, despite inflationary and other cost pressures gross profit benefited from strong performance across all of our segments debenture.
The banana segment realized higher per unit price selling prices.
Higher pricing helped offset incremental production and procurement costs. Following the hurricanes in Central America in the fourth quarter of 2020.
In the second half of 2021 inflationary and other cost pressures intensified coupled with seasonality negatively impacting gross profit as it relates to exchange rates gross profit was favorably impacted by fluctuations versus the euro Costa Rican colon.
And British pound, partially offset by a stronger Mexican peso.
For the full fiscal year adjusted operating net income was $112 million compared with $89 million in the prior year period. The increase was primarily driven by higher gross profit and a decrease in selling general and administrative expenses adjusted net income.
Was $81 million.
Compared with $55 million in the prior year period.
Diluted earnings per share was $1 68, compared with $1 three and three.
In the prior year period, while adjusted diluted earnings per share was $1 69.
Impaired with a $1 15 in the prior year period, a 47% improvement year over year.
Moving on to cash flow for the year, we generated $129 million in cash flow from operating activities compared with the $181 million in 2020.
The decrease was primarily attributable to higher levels of inventories as we proactively increase the inventory of key raw materials. So secure cost and availability inventory was also impacted by the increase in cost of goods largely related to current cost pressures partially offsetting.
The decrease were higher net income and higher balances of accounts payable and accrued expenses.
In the second half of 2020, we announced our optimization program.
Program involves selling non strategic and underutilized assets, including land and facilities. The program is improving our return on assets shoring up our balance sheet and reducing operational costs.
The program was announced we generated $57 million in cash proceeds out of which 17 million came in 2021, We express we expect progress towards achieving our target of $100 million cash in cash proceeds to continue in 2022.
As it relates to capital spending we invested $99 million in capital expenditures in 2021, compared with $150 million in 2020, the lion's share of the spend relates to the last two new container vessels added to our fleet.
Investments in Asia, North America, and Europe , and improvements to our banana and pineapple operations in Central America as mentioned by Mohammed our Capex investments are heavily focused on automation.
Turning to long term that we have repaid approximately $23 million.
Bringing our balance from $542 million at the end of 2022 of $519 million in 2021.
Based on a trailing 12 month period, our total debt stands at two five times adjusted the beat to that.
As announced this morning in our financial results press release, we declared a quarterly cash dividend of <unk> 15 per share payable on April <unk> 2022 to shareholders of record on March nine 2022 for full fiscal year 2021.
We declared four quarterly cash dividends totaling <unk> 50 per share.
This concludes our financial review, we can now turn the call over for Q&A Chantelle.
At this time I would like to remind everyone in order to ask a question press star the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Yes.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
Okay.
There are no questions at this time.
I will turn the call back over to you.
Thank you very much I appreciate the attendance of.
Our <unk>.
Investors and whoever is on the call.
Look forward to speaking to you on our mix.
Quarterly call. Thank you very much have a good day.
This concludes today's conference call you may now disconnect.
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