Q3 2023 Dole PLC Earnings Call
Okay.
Welcome to the adult plc third 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 presentation, there will be a question and answer session.
For opening remarks, and introductions I would like to turn the call over to head of Investor Relations with Dol plc, James over again.
Thank you.
Welcome everybody and thank you for taking the time to join our third quarter 2023 earnings conference call and webcast.
Joining me on the call today is our Chief Executive Officer, Laurie Burns, our Chief operating officer, and Linda and her team.
And I said about a third just to buy it.
During this call, we'll be referring to presentation slides to supplement our remarks. These along with our earnings release and other related materials are available on the Investor Relations section of adult plc website.
Please note our remarks today will include certain forward looking statements within the provisions of the federal Securities Safe harbors.
Reflect circumstances at the time, they are made and the company expressly disclaims any obligation to update or revise any forward looking statements.
Actual results or outcomes may differ materially from those.
Expressed or implied due to a wide range of factors, including those set forth in our SEC filings and press releases.
Regarding these non-GAAP financial measures maybe found in our press release, which also includes a reconciliation to the most comparable GAAP measures.
I'm pleased to turn today's call over to Laurie.
Thank you James and welcome everybody and thank you for joining us today as we discuss our results for the quarter.
So turning to slide six of the financial highlights for the third quarter.
And following on from a good performance for the first half of the year. We are very pleased to report strong results in third quarter.
Delivered revenue and adjusted EBITDA growth driven mostly by our diversified fresh produce segment.
Group revenue increased by four 2% driven largely by higher pricing adjusted EBITDA increased by seven 6%.
Adjusted diluted earnings per share was 24 cents for the quarter compared to 28% the prior year with the reduction primarily due to higher year on year interest expense.
We continue to focus on optimizing our balance sheet.
Nice report that in excess of $45 million cash proceeds were realized from the sale of surplus lands in Hawaii on home Jewish in quarter combined with good working capital management across the group. These proceeds contributed to a reduction of our net acreage to two four times at the end of September.
And then I would turn to slide eight for our operational highlights.
Fresh foods segment delivered another keep yourself in Q3. The result was driven by strong performance from our European operations, which continued to benefit from a better supply demand balance of 23 compared to 22.
With America, our operations are continuing to perform well despite intense competition in the marketplace higher sourcing costs.
The impact of lower commercial cargo profitability.
As always supply and demand dynamics in the China market and to a lesser extent the pineapple market remain important variables as we approach the end of 2023.
Weather remains the most important area of alarm monitoring the impact of El Nino in particular.
Very high levels of accumulated greenfield in Ecuador in the year to date, which impacted production volumes and spot prices.
Benign supply is kind of the types of is forecast to decrease for next year.
Hey, Matt This is Sean just close by saying you know very well.
Keenly focus on the day.
Drainage irrigation on flood protection, and our farms and optimizing our diverse sourcing base.
Continued to service our customers, while even if supply challenges persist.
Moving on then to our diversified business.
Business.
So it'd be a nice segment has continued its good momentum from the first half of the year delivering another quarter of strong revenue and adjusted EBITDA growth.
Revenue growth continues to be driven by higher pricing as well as the expected benefit from foreign currency translation athletes experience translation headwinds in 2022.
Current exchange rates, we expect to see a further margin benefits from ex FX translation in the fourth quarter.
We continue to make good progress by managing our cost base efficiently.
We have synergies across this segment.
The benefits of our investments and ripening handling and pre backing these sports sporting further expansion across the European marketplace. We also continue to identify and execute on small bolt on acquisition opportunities.
Delivering value for the group.
Altogether, we expect them to have a positive that into 'twenty two 'twenty three in this segment.
Our diversified of our Americas segment have improved performance.
Russia benefiting from a favorable prior year comparison.
Crude supply chain conditions in 2023 Airlines, a better export conditions, and we anticipate a more stable performance in this regard in the fourth quarter also.
Performance in the North American market.
Remains robust across most of the commodity and market driven by stronger pricing, which is offsetting lower volumes and some ongoing challenges in the dairy category.
Looking ahead to the remainder of the year, we are keenly focused on the stocks in the southern hemisphere export season, and some of them are important categories, such as cherries grapes on delivering a strong service to our customers.
Turning on turning to the fresh vegetable divisions as you know earlier this year, we announced.
Our decision to sell our pressure Exchangers Express express.
On the regulatory review is still ongoing we do need to let that review play out. So we cannot provide any substantive updates today.
I have some concerns regarding the length of the regulatory review.
While the combination with fresh express is still in our view the best outcome for all stakeholders, if we're not able to close that transaction due to regulatory reasons or otherwise we remain committed to exiting the business gets you to believe that doing so will benefit our strategic priority of acceleration growth in our core business areas.
Tom I'll hand, you over to Jessica to.
To give the financial review.
Thank you Rory and good day, everyone. Firstly training the group's fly results on slide 10.
From a group perspective, the results for the third quarter were very pleasing revenue increased 82 million or four 2% and on a like for like basis. The increase was one 2%.
Adjusted EBITDA increased 6 million to $85 2 million growth in diversified fresh projects EMEA and diversified fresh projects Americas and rest of world were the key drivers and our fresh fruit segments delivered a strong strong results against a strong prior year benchmark.
On a like for like basis, adjusted EBITDA increased four 2%.
For the first nine months of the year, we delivered 308 million of adjusted EBITDA, an increase of 25 million compared with the prior year.
Net income increased to 64 million from $46 6 million and income from continuing operations was $65 7 million compared to $58 3 million.
The increase in net income was driven by higher adjusted EBITDA and a gain on sale of assets of $28 8 million.
<unk> EPS from continuing operations was 50% and diluted EPS was 48 cents, a 14% increase from the prior year.
Net income decreased to $22 6 million from $26 2 million and adjusted diluted EPS was <unk> 24 cents compared to 28 cents in the third quarter of 2022.
The decrease was predominantly driven by the increase in interest expense over the last 12 months as well as higher income tax expense, partially offset by the increase in adjusted EBITDA.
In the third quarter underlying falling within the fresh vegetable business continues to improve despite an ongoing challenging operating environment and this can be seen in the decreased loss from discontinued operations for the third quarter of 2023 compared to 2022.
Turning now to the divisional updates for our continuing operations and starting with fresh fish on slide 12.
Fresh Foods Division delivered good results in the third quarter revenue decreased marginally by <unk>, 3%. The decrease was primarily due to lower banana pricing in North America, which was partially offset by higher whereas like volumes have been honest showed an.
An increase in worldwide pricing of pineapples and stronger banana pricing in Europe.
Adjusted EBITDA decreased by 4 million or eight 6% due to a strong comparison per quarter in 'twenty to 'twenty two.
The decrease was mainly due to lower revenue higher fruit sourcing costs and a decrease in commercial cargo activity.
Partially offset by lower shipping and logistics costs as well as by strong underlying pricing.
Turning to diversify approached fresh projects to be a.
This division performed very strongly in the quarter with revenue, increasing 12, 7% driven by a favorable impact from foreign currency translation and price increases across the segment on a like for like basis revenue increased four 8%.
Adjusted EBITDA increased by $4 million or 13, 8% again positively impacted by foreign currency translation on a like for like basis. The increase was six 6% driven by a strong performance in Ireland, the UK, Spain and the Netherlands.
Finally diversified fresh produce Americas and rest of whereas on slide 14 as expected. This segment outperforms comparison period in the third quarter.
Revenue decreased 2%, primarily driven by lower revenue for berries in North America, as well as by lower volumes. Most all the commodities, partially offset by inflation justified price increases.
Adjusted EBITDA was $5 2 million an increase from a 900000 loss from the prior year.
Prior year loss was due to one off supply chain disruption, which impacted the Chilean grape business.
There was a continued strong performance in most markets and products in North America in the quarter.
Now turning to slide 15 to discuss our cash generation capital allocation and leverage first thing I'd draw your attention to our cash flow statement in our GAAP financial statements and highlight that this is not a space between continuing operations and discontinued operations.
We have a definition of free cash flow from continuing operations, a non-GAAP measure in the appendix of our press release and also on this slide our earnings presentation.
For the first nine months of 2023 free cash flow from continuing operations was $105 8 million driven by strong adjusted EBITDA performance and good management of working capital across the group for.
For the full year, our current expectation is that working capital will be neutral.
We are targeting free cash flow from continuing operations of at least $110 million.
Capital expenditure from continuing operations was $15 7 million in the third quarter expenditures included farm renovations in bananas, you plantings and plantain and ongoing investments in I T logistics.
Logistics and efficiency projects in our warehouses and processing facilities for.
For the full year, we now expect Capex from continuing operations to be 85 million with.
We continue to dispose of non core assets within the group and as already mentioned, we received proceeds of $45 5 million in the quarter, primarily from the sale of a large parcel of land in Hawaii at.
At the end of September the combined value of our assets held for sale and actively marketed property was $24 million and we remain optimistic that we can deliver further asset sales in the fourth quarter.
Interest expense has increased approximately $5 2 million year over year to 29 million following the rise in rates over the past 12 months.
For the full year, we are retaining our forecast of 19 million, which is inclusive of interest expense allocated to discontinued operations.
Our commitment to return cash to shareholders. We are pleased to declare a dividend of eight <unk> for the third quarter.
We paid on January 4th tranche of 24 to shareholders on record on December 14th 2023.
Finally, we are pleased that the strong free cash flow generation and asset sales contributed to adopting our new bridge to two four times at the end of the quarter continuing the downward trend in our leverage over the last 12 months.
Now I will hand, you back to Larry who will give you an update on our full year outlook and closing remarks.
Thanks, Jason.
Well there is also the group over the first nine months of the year have been very pleasing group revenue of $6 2 billion was three 2% ahead of 2002, our group adjusted EBITDA of three <unk>.
Maryland is 9% ahead of.
This translation and translates to an adjusted EBITDA margin of 5% compared to its full points.
I guess first.
First nine months of 'twenty two.
While the wider macro environment continues to remain complex.
Weather impacts remain unpredictable.
Our confidence in the strength of our diversified supply base and the experience and quality of our operation teams across the globe to deal with challenges I'll say rise overall, our strong results for the first nine months position us well to deliver good results for the full year.
Now we're targeting adjusted EBITDA for 2023 of at least 365 granddaughters.
Strategic priorities for the remainder of the year.
We're gonna insane to top things off acceleration and growth in our core.
The business areas and categories exiting fresh vegetable business.
Focusing on cost control and operating efficiencies across our businesses, including the ongoing value creation deep collaboration projects.
Continuing with a disciplined approach to capital.
I want to finish by once again thanking all of our people across the group for their ongoing commitment dedication to dry adult plc board.
For suppliers and customers for their ongoing support which provides us with confidence as we look towards the remainder of the year with 100 back to the operator, we can open the line for questions.
If you have a question. Please press star one on your telephone keypad Jewish remove yourself from the queue simply press Star One again one moment. Please for your first question.
Okay.
Yeah.
Your first question comes from the line of Chris Byrnes of Deutsche Bank. Your line is open.
Hi, good afternoon, and thanks for the question I guess first Rory.
I just wanted to ask you about El Nino.
I know you called out the Ecuador rains impacting banana supply conditions, but theres also been a fair amount of trade press regarding shipping bottlenecks through the Panama Canal. So.
Amid the drought there so like it'd be great just to hear a status update on what you're seeing on the ground today and how you expect these conditions to evolve over the coming months.
Yes.
You are seeing in <unk>.
Those are the areas of impact sort of the potential impact of said most in Ecuador is huge but out of the producing countries.
<unk> seen unusual rains there youre right you have seeing drive.
And the areas around Panama, there are restrictions on the use of the Panama Canal.
That hasn't had a material impact your house types, even in a material impact on safety even to the banana business, we don't tend to cross.
Panama Canal.
<unk> in Chile, and a little bit of volatility unusual range as.
That is why I would touch Gino can affect either great. So cherries in particular over the next couple of months. So we're keeping a close eye on that.
Fossil groups with our diverse source sourcing base across the different countries and geographies, we're managing all white Jewish got it quickly.
But it is something we will just keep our eyes on I think also over the next six months.
Got it that's helpful. And then I just wanted to follow up on the fresh vegetables transaction.
I appreciate the updated language in your filing and in your prepared remarks.
Maybe could you just offer some perspective around.
What shape the alternatives you mentioned might take to the extent you can close the transaction with direct express.
It looks like the business is still under some pressure based on the step back in revenue this quarter.
So maybe could you just talk about what what drove that softness and maybe how EBITDA is like.
EBITDA, excluding the cyber incident is trending year to date, just as we contemplate potential alternatives for that business. Thanks.
Maybe you could make some comments on the on the trading side and I'll start small business. Please.
Yeah. So we're when we look at the trading we have a much better performance. This year compared to 2022, it's mainly driven by better performance in the fresh back out with commodity business whole head and but we're also doing better in our fresh and.
Packaged salads side of the business. So overall, we're doing much better, but we could do even better. So we're not pleased with the performance, but we are moving in the right direction. We feel we are supplying our customers well.
So we believe we are in a good position also too.
Recapture some of the market share that we have lost.
Got it thanks.
Your next.
Yeah.
People will take that.
Hi.
Hi, good morning, everyone.
Uh huh.
Yes.
Yeah.
Jim do you have a question.
Hi can you hear me.
We can hear you yes.
Okay great.
So I guess just thinking about the updated guidance.
Well 365.
Yeah.
Last year was to diversify and go back over $7 million.
Adjusted EBITDA in the fourth.
Quarter.
So just help me think about it.
How youre thinking.
Turning to capital markets.
For Q.
<unk> three how should we think about that.
Talking about.
Right.
Yeah.
Sure.
Yes.
Yes.
Maybe just me Adam but the line is not practice, but I I think I caught the question, but it was just some clarity around the guidance for the full year.
The fourth quarter.
I suppose the question of guidance is not an exact science and it is true to say that we had a very very strong finished quarter four last year and really what we're doing is we're getting a good strong message with the greater than 365 expected for the full year. So trading is fine at the moment.
Yeah.
English summary explore Volvo.
My position on guidance.
Yeah.
Okay, and then you talked about more competition and fresh food and in North America, how should we think about that kind of marketplace dynamic relative to what seems to be a tight supply environment.
As we move into <unk>.
Sure.
Yes, I think it'll be an interesting dynamic.
We operation a competitive world cyber I guess over the last year. So it does seem that volatility a bit more competitive shifts unusual.
There are there is the backdrop of those supply dynamics and we do expect a shorter amount of fruit.
But normally goes to price so.
We see but again now you know we have an experienced team and we've been dealing with these kind of challenges forever continue should GE LM hopefully in a successful way going forward over the course of 'twenty four and into the future.
Okay I appreciate all that context.
Thanks, Adam.
Again, if you would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Gary Martin of Davy. Your line is open.
Hi, Laurie.
Just congrats on a good set of results just to start things off.
So just two questions from my side, just first just on the input cost backdrop, I mean I. Appreciate there's been some softening of key input costs, but I think just general kind of procurement costs have gone up is that just the impact of we'll say.
Higher.
Costa Rican colon or higher.
Colombian peso was is it just currency based inflation that youre seeing there.
And then just secondly, just on the the kind of pipeline of asset sales that you have into the fourth quarter. I mean I. Appreciate you just have to give good color.
Preferred remarks.
Give us a bit of an update as to kind of what youre seeing there and what you expect in the fourth quarter in terms of off itself. Thanks.
Maybe just Johan you take the first of those and just anything you could comment on the second one perhaps.
Okay. So if you look at the cost pressure that we are having they are coming a little bit from.
All over the place, but you're right to point out it's coming from the currency is the Costa Rican colon has been very strong. So that is impacting cost. We also see the growers are having pressures when it comes down for the independent growers that were having that pressure when it comes to salary increases on the field. So we.
See them asking for higher pricing and you can see that in the official price coming out of Ecuador that that is coming up so we're gonna have to pay some more for the fruit, but on the other hand, we see some other input costs moderating we see paper moderating. We believe there is something to be done in shipping. So we see cost pressure, but we believe that we.
We're in a good pressure in a good position to handle them.
And then just sent the circumstances, yes.
Hi, Good morning, Gary and yeah, So just to recap and so in the quarter, we delivered and sales are at 45 million and year to date, we've achieved $64 million.
So we have a pipeline if you like of $24 million, which sits on our balance sheet and we're working through sales in the air force for for the fourth quarter, but it's really very difficult to predict the timing on playing sales sales to close obviously Q3 was very strong and we wouldn't expect anything like that.
Level going into Q4, but I'm hopeful for some small incremental asset sales before before the end of the year, but again timing is difficult to predict.
Excellent color I'll pass it on.
There are no further questions at this time I will now turn the call over to Rory for some closing remarks.
Okay. Thank you all for joining us today, and obviously, we're very pleased with our third quarter around a year to date numbers.
Quarter represents another strong quarter in the sequence now consistent good quarterly performance.
However, plenty of challenges out there plenty of opportunities, but we do look forward to the future with great enthusiasm confidence and optimism. So thank you all very much for joining us today.
This concludes today's conference call you may now disconnect.
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