Q1 2023 Dole plc Earnings Call
Speaker 2: Welcome to the Dole PLC first quarter 2023 earnings conference call and webcast. Today's conference 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 presentations there will be a question and answer
Speaker 3: earnings couple's call. Joining me on the call today is our Chief Executive Officer Rory Byrne, our Chief Operating Officer Joanne Linden and our Chief Financial Officer Jacinta Devine. During this call we'll be referring to the presentation slides and supplemental remarks and these along with our earnings release and other related materials are available on the investor relations section.
Speaker 4: statements.
Speaker 3: Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings and press releases. Information regarding the use of non-GAAP financial measures may be found in our press release, which also includes a reconciliation to the most comparable GAAP measures.
Speaker 3: Following the agreement to sell the Fresh Vegetables Division, its results are reported separately in our financial statements as discontinued operations.
Speaker 3: Unless otherwise noted, our discussion of results and outlook in today's presentation are on a continuing operations basis.
Speaker 3: With that I'm pleased to turn today's call over to Rory.
Speaker 5: Thank you James. A very warm welcome to everybody and thank you all for joining us. So today we're very, very pleased to report a strong start to the 23 financial year. While the focus of our remarks today will be on our continuing operations, we are also pleased to note that the Fresh Vegetables Division has been
Speaker 5: to be with DAG growth, driven by strong performances in our fresh food and diversified fresh produce EMEA segments. Group revenue increased by 1%. On a like-for-like basis, excluding the impact of foreign currency translation movements in M&A, it increased by just under 4%.
Speaker 5: These increases continue to be driven by higher pricing. Adjusted EBITDA increased by 9.3% to $100 million, while adjusted diluted earnings per share decreased primarily due to higher year-over-year interest expense.
Speaker 5: Moving on to our operational highlights, in our fresh fruit segment we delivered a very strong results in Q1 driven by an improved performance in our European operations. 2022 was a challenging year in Europe as we could not quickly pass on the significant cost increases in shipping, fuel and sourcing costs to customers.
Speaker 5: Our North American operations perform solidly with a healthy supply and demand balance and bananas allowing for continued good performance. As always, supply and demand dynamics in the banana market remain an important variable for the year ahead. Overall, we believe the industry remains in a good balance as we head into Q2 and with our diverse sourcing base.
Speaker 5: Certain markets volumes have been more challenging. However, overall, our businesses have performed well through prudent cost management and the continued expansion into growth products and markets.
Speaker 5: On an underlying local currency basis, we are very pleased with the performance of this segment. And now the more favourable FX comparative starting in Q2, we hope to see an improved performance on a reported USD basis also.
Speaker 5: Our Diverse Tonight Project's Americas and Resto Worlds segment has had a relatively slow start to the year.
Speaker 5: This is partly due to timing differences for the important Chilean charities in this year, and also due to the implementation of a more conservative strategy for the export of certain products following supply chain challenges in 2022. We also experienced some disruption as a result of the fire and one of our Chilean operations during the quarter.
Speaker 5: although this did not have a material impact in operations and the damage incurred was covered by insurance. Despite these impacts, the scale and range of activity in this segment still allowed us to maintain a solid level of performance overall in Q1.
Speaker 5: We continue to perform well in a number of our key product groups such as Chilean cherries and potatoes in North America and additionally began a number of important strategic initiatives to further accelerate growth in these products as we move forward. Looking ahead to the rest of the year, we are confident that the strategy we've taken will deliver results particularly in the second half.
Speaker 5: Before I turn over to Jacinta, I also want to say a quick word on the ransomware attack we mentioned on our last call. Our efforts to quickly contain the threat and secure our systems results in our limited overall impact on group operations. Our continued operations incurred approximately $4.8 million dollars of costs relating to the incident.
Speaker 6: with that on hand, you're over to just end to give the financial review. Thank you, Rory. Good morning and good afternoon, everyone. Firstly, turning to the group results on slide 10. As noxious by James and Laurie earlier, the results of the fresh vegetable segments are reported separately as discontinued operations in our financial statement.
Speaker 6: and the focus of our discussion is therefore on the results of continuing operations. We deliver the strong results in the first quarter with revenue increasing 19 million or 1%. However, on a likes or like basis, revenue increased 73 million or nearly 4% driven by higher pricing.
Speaker 6: The justice EBITDA increased 8.5 million or 9.3% to 100 million, with the increase driven by a strong performance in fresh fruits and first by fresh pre-adjusted media, often as by a decrease in diversified fresh produce, America, and rest world.
Speaker 6: On a like-for-like basis, adjusted EPD-A increased 9.9%.
Speaker 6: Adjusted net income was 32.3 million, and adjusted to EPS was 34 cent in the quarter, compared to 40.5 million and 43 cent in the prior year. The decrease was predominantly due to a 10 million increase in interest expense.
Speaker 6: Now looking at each of the segments in more detail, and turning to slide 12 for fresh fruits.
Speaker 6: The fresh fruit segments delivered strong results in quarter, revenue increased to 6.5%, primarily driven by higher worldwide pricing of phenomena and pineapples.
Speaker 6: volumes of phenomena so increased on a worldwide basis, whereas pineapple volumes were lower.
Speaker 6: adjusted EVA-DA increased 14.6% compared to the first quarter of 2022.
Speaker 6: driven by revenue growth, which offsets higher-sourcing costs and higher cost of shipping, packaging, and handling.
Speaker 6: Now turning two diverse slides first produce in the on slide 13, this division performs strongly in the quarter with revenue increasing 1% driven by higher pricing. And a like for like basis revenue increased 7%.
Speaker 6: The EBA DA increased over 21% to 23.4 million. And on a like for like basis, the increase was 26%. There was a strong performance across the segment with the UK performing well and an approved performance in South Africa. Finally, turning to diversified fresh produce, America and rest of work.
Speaker 6: continued strong performance for producers and audience in North America.
Speaker 6: The challenging quarter for berries and grapes was the primary driver of the adjusted EBITDA decrease of 36%.
Speaker 6: Now turning to slide 15 and reflecting on capital allocation and leverage.
Speaker 6: Chapter dedication continues to be a key focus of the group, especially as interest rates continue to rise.
Speaker 6: To manage this headwind, we are focused on being strategic with the investments we make, efficiently managing our working capital and on identifying opportunities to dispose of non-core assets.
Speaker 6: In that regard, we are pleased that as of 3rd March, we have received proceeds from non-core asset sales of 6.5 million. And post the end of the quarter, we received a further 6.7 million from sale of two vessels. 3rd March,aser 2015?? war chain fle ?er bTy.
Speaker 6: We expect to deliver further asset sales as the year progresses. As of 31st March, we had 40 million of assets held for sale and actively marketed properly on our balance sheet. Capital expenditure for the first quarter was 20 million with investments in farm renovations as well as IT, logistics, and efficiency projects.
Speaker 6: in our warehouses, our processing facilities.
Speaker 6: For 2023, we continue to expect CAPEX to be circa 120 million. We are pleased that our leverage at the end of the quarter came out at 2.8 times, below our targeted level of three times, driven by strong electricity, but DA performance and an efficient management of working capital across the groups.
Speaker 6: Interest expense have increased to approximately 10 million to 21 million, following the rise in rates over the past 12 months.
Speaker 6: For the full year, we are retaining our forecast of
Speaker 6: Finally, we are pleased to give it an 8 cent for the first quarter, continuing our commitments to return cash to shareholders.
Speaker 5: Now I would hand you back to Rory who will give an update on our full year-out of the Excellency Memorial. Thanks, Jacinta. Well, the operating environment so far in 2023 continues to bring with it both new opportunities and some new challenges. As we know, given our last update so far in 2023, we do see signs to improve the logistical efficiencies in several areas.
Speaker 5: very crops in that region.
Speaker 5: Lastly, looking at the macroeconomic environment, we do continue to see positives for our business with the strengthening euro, more stable fuel prices and continued signs of inflation and moderation in certain areas. However, we are also seeing headwinds with interest rates remaining high.
Speaker 5: and on mutual currency movements, particularly with the cost of the weekend column, being on health for to our cost base.
That said, overall we believe our strong first quarter has put us in an excellent position to deliver on our full year financial targets. Our business is well positioned for growth and while the environment we operate in remains dynamic, we do continue to expect to deliver adjusted EBITDA from continuing operations of $350 million for the full year of 2023. In conclusion, we are very pleased not only with the strong start we have made to the
a disability approach to capital and acceleration growth in our core business.
I want to finish by thanking again all of our dedicated and committed people for their ongoing efforts to drive Dole PLC forward, as well as our suppliers and customers for their ongoing support, which provides us with confidence as we look out towards the remainder of the year. So with that, I'll hand it back to the operator and we can open the line for questions.
At this time I would like to remind everyone in order to ask a question press star then the number one on your telephone keypad. Your first question comes from a line of Chris Barnes from Deutsche Bank. Your line is open.
Hi, good afternoon, guys. I sat a quick, I guess the first question was just around the EBITDA guidance for the year. I mean, one cue was.
a lot better than we on the street expected, but you only reaffirmed the year. I appreciate the challenges that you're having and with the California weather and just uncertainty in the macro, but can you maybe just elaborate on the decision to reiterate, is this just prudence on your part or?
Or are you expecting something specific to unwind, to unwind some of the strength, particularly as we move into the second half when some paracens get tougher and macro conditions are at least expected to deteriorate? Thanks.
Yeah, thanks Chris for the question. Yeah, I mean we're comfortable with the 350 and it's still relatively early in the year. Last year, as you know, a very, very strong Q4 in particular and forecasting in the current world that we live in is quite, quite complex. You know, we've got some very big macro issues still ongoing, whether it's the war, whether it's the war, whatever the situation is, the situation gets really, really tight and
I just covered them obviously the weather has been a serious issue with the you know worst rains I think at a hundred years in California You know the country Kalapalam, where we source pretty much all of our plant upwards So it has appreciated very significantly But I think you know our history shown we've been able to manage our way through those challenges. So
That really is the overall position we've taken on arm guidance and sticking with the 350.
Understood, that's helpful. And then just to follow up, it looks like you're absorbing about 11 million of overhead costs with the restatement of like the segment EBITDA, just as you discontinue fresh vegetables. So to what degree do you expect to work these costs down, whether...
this year over time and I guess is there any timing associated with when you expect to extract some of that stranded overhead or is it really just part of the base going forward? Thanks. No, I think Christopher to say that our objective would be to reduce the head office cost allocation.
when we sell that division, when we sell the division. It's an ongoing process. We've got over the last year, so we've had a lot of cost associates that have been to the requirements of the SEC, SOX costs, and some of those issues are quite expensive. Until you get them fully embedded into your systems, and we've made great progress.
Thanks very much, you'll pass it on.
And your next question comes from a line of Ben Benvenut from Stevens. Your line is open.
Hey, thanks. Good morning, everybody. Congratulations.
I want to start following up with the comments that you made just on rains in California. What are the near-term impacts of what you've seen there and then what's the follow-through effects that you see as we move through the rest of this year?
Johan, do you want to make a comment on that? Yeah. So. Yeah.
We had two interdental brain in California. The first one was not too bad, but the last one that came about really took some of the crop out.
So what has happened is that now, where we are right now, we have seen some scarcity and therefore we've seen higher pricing and that's one of the reasons also where we have the good Q1. We're also starting off okay with vegetables, but what we see because of the rains and because on how that impact the planting, we see a lot of more volume coming towards the end of Q2.
So we do see an oversupply in the market towards Q2.
Do see an oversupply in the market towards Q2? That's the direct impact.
And some higher bench cost right now that for our value added business because of scarcity.
I'm in programming operations probably on the very side that business has been quite significantly disrupted as well. And the overall scheme of things is not a hugely material number first.
Okay, okay very good. And then thinking about the rest of the year, once you complete the sale of fresh vegetables, the balance sheet is in a great position, can you talk a little bit about your desire to grow again?
inorganically from an M&A standpoint and with rates having risen how has that impacted multiples of potential targets that you might pursue? Yeah I mean obviously the last year or two have been periods of consolidation and you know such a dynamic environment we have been really focused on making sure we adapt to all the cost changes and adapt to our business but at the same time we've been keeping a close eye on it.
to keep our eye on. So far, despite interest rates going up, we haven't seen pricing coming down. I think I've mentioned that before. It does seem to be something of a disconnect still between the private markets and the public markets in terms of valuation. So that's a question for us and I think over time they will get closer. But it's, you know, our plan is to continue to grow.
Adam Samuelson from Goldman Sachs. Your line is open.
Good morning everybody. This is actually here most depending for Adam. I was wondering if you could provide any of these not-color on the drivers for the year over year softness in the diversified fresh products produced for the Americas. And the visibility of those drivers improving over the coming quarters.
reporting in some segments of our business can be a little bit misleading. So, you know, you look at last year, for example, the great business out of South Central America was very strong in Q1 of 22 and this year for some of the supply dynamics was considerably worse. Having said that, the opposite has now happened in Q2 of 23 versus Q2 of 22 where the research because of supply chain problems.
talking about cutting back primarily on some of our export great volumes that because of some of the problems the markets suffered last year. Looking at all those factors we still do expect that the full year item for this division would be more than satisfactory. One thing to add there, Rory, is also that this is anality when it comes to shareies.
follow up on consumer demand elasticity and if you've seen any change in the trend either across the business or across geographies.
I know, you know, we haven't seen any material in collective price elasticity, elasticity on demand. Perhaps a little bit of pressure at some of the individual products at the higher price per pound or per kilo of the product, a little bit of pressure perhaps in organics.
Super helpful. Thanks, Dan. I'm going to turn the water.
Super helpful. Thanks, Annak. I'm going to turn the water. Thank you.
And again, it is Star One to ask a question. Your next question comes from a line of Brian Spillane from Bank of America. Your line is open. All right, thanks operator. Good morning, everyone. Two questions for me. One, just simple. I just wanted to, I don't know if I caught the whole thing. I thought you said.
In the first quarter, there was an asset sale of $7 million, and then there are another 40 million of properties, I guess, that you're expecting the sale. Just wanna make sure I heard that comment in terms of asset sales.
Yeah, no, that's correct. So we have sales proceeds of 7.6 million in Q1, and they would have been on our balance sheet at the end of December . And then at the 31st March, we have another 40 million splish between about 10 million of assets that are for sale, and about 13 million of actively marketed property. So...
there will be a cash attack impact on those. Okay, and then it sounds like, well, my impression or listening to it, it sounds like, you know, you've identified and maybe there's some buyers for some of the properties and other assets you have. So like, is there a chance that that number will be a cash attack?
The asset sales actually creep up as we move through the year. Like is there potential for more activity there? And we hope so. So I am. It's all just a challenge. I mean, we have others and those figures that have called as we have sold the best sold. So they weren't on our balance sheet at the end of December for sale. So that's an additional.
That was two vessels that we didn't use in our business. And the majority of the rest of us relates to Hawaii land. Land, okay, okay. Yeah. Yeah.
Thank you. And then second question, I guess, as we're looking at the end market in the US, I think one of the things we've observed is...
as even as some produce prices have come down, retailers are kind of slow to show changes in their cost to consumers. So just wanted to get your sense, is that accurate? You know, there's been retailers actually capturing a little bit of margin maybe as their costs have come down. And then, you know, kind of your expectation as we move through the year, do we see a difference?
do we think that we'll see more of a accurate or a real-time reflection, I guess, of what's happening. Not understanding that there's ups and downs with lots of different types of produce, but just our observation and checks suggest that retailers have been trying to hold on to that margin.
want to understand if that's a structural change or just something that's more transient. Yeah, my sense of it, Brian , although it's always hard to call it, is that it's probably something more transient. I think retailers have been realistic in terms of the requirement and the need to pass on genuine close to increases on at the same time trying to balance the ultimate reason.
of the margins of retailers are taking out of pricing. So I'm Europe , it's a broadly similar situation. So I think your last comment was the relevant one that it's across such a wide range of products. And when non-Banana pineapples, we were very flexible, dynamic pricing models.
you know nothing moves would would would currency be at a tailwind to reported results over the balance of the year
Yeah, no it certainly would. So if we take Eurodollar, it's probably the major currency for us. And so while we're down approximately 4% in the quarter, it's actually up 5% versus Q4.
and about 2% from full-year basis. So yeah, we should see some positivity there in our retrotubate numbers, similarly with the SEK and, yeah, certainly. So.
Although the S. Right. Yeah. Now predicting currencies, but if it stays the same, it'll be it'll it'll it'll it should contribute to you. Got it. Balance for the year. Persons last year. Yeah. Absolutely. Correct. All right. Great. Thank you.
Thanks Brian . And your next question comes from a line of Gary Marden from Davy. Your line is open.
Morning all, congratulations on a strong set of results. Just a few questions on my side. I'll just start with fresh fruit just to begin with. That was particularly strong. I suppose just looking out Q2 and H2, I mean do you think that banana and pineapple supply and the land dynamics are still...
quite a good place. I'm expecting Q1's robust performance to continue into the rest of the year for basically be the gist of my question.
some new expecting, you know, kind of Q1's robust performance to continue in the rest of the year for base TV, the Justa Location. The only one to comment on that.
Yeah, so overall we started a year when it comes to bananas with a very tight supply. We don't see that continue the same way into Q2 with you much more balance, demand supply, so it's a balance.
compared to a tight one. However, on the pineapple side we have seen supply tighten up. So there we see a little bit of a shortness. We believe that is good. So overall we have to feel that we are in a good place when it comes to supply the man if you put it all together for fresh fruits.
So we believe in the Q2 also that will be healthy. Excellent. I'm just kind of associated with just the Fresh Fruit segment. I see commercial cargo. I didn't do with those no color in either the presentation or the results. I could just get an update and just have us performing. I mean, obviously I think you spoke previously about
the strong performance in FY22 not continuing into 23, has there been some strength remaining?
Yeah, we're seeing the profits of the contribution that division is down and a lot of the Stry Cargo and the rates of dry cargo have moved off some of the peaks in 2022, so it's down, but still doing well.
Excellent. And then just a second question, just on, just the kind of ladle land on costs. I'm going to think you call that inflation overall as just moderating, but I suppose just in terms of shipping and sourcing, just to kind of get some of the puts and takes to regard to what's increasing and what's decreasing and just your view for the rest of the year.
I think the only broad comment we can really make on medicine does appear to be a greater degree stability around those causes. I think it costs shipping so far on some of the dry containers. You're seeing some reduction of the rates. That hasn't flown through fully into reforecontainers.
And there are no further questions at this time. I will now turn the call back over to CEO Rory Burns for some final closing comments. Thank you. Well, thank you all for participating in the questions. So I think we can be very pleased with another strong quarter. Obviously, we had some major challenges out there and we believe we've now...