Full Year 2023 Fresh Del Monte Produce Inc Earnings Call
Operator: Good day everyone, and welcome to Fresh Del Monte Produce's fourth quarter and full fiscal year 2023 conference call. Today's conference call is being broadcast live over the internet and is also being recorded for playback purposes. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number 1 on your telephone keypad.
Good day, everyone and welcome to fresh del Monte produce this fourth quarter and full fiscal year 2023 Conference call. Today's conference call is being broadcast live over the Internet and is also being recorded for playback purposes. After the Speakers' remarks, there will be a question and answer session.
I'd like to ask a question during that time simply press star followed by the number one on your telephone keypad.
Operator: To withdraw your question, press star 1 again. For opening remarks and introductions, I would like to turn today's call over to the Vice President, Corporate Communications with Fresh Del Monte Produce, Claudia Poe. Please go ahead, Ms. Poe.
Withdraw your question Press Star one again.
For opening remarks, and introductions I would like to turn today's call over to the Vice President corporate communications with fresh del Monte produce Claudia Po. Please go ahead Ms. Pope.
Claudia Poe: Thank you, Regina. Good morning, everyone, and thank you for joining us for our fourth quarter and full fiscal year 2023 conference. As Regina mentioned, I'm Claudia Poe, Vice President of Corporate Communications with Fresh Del Monte Produce. Joining me in today's discussion are Mohammad Abu Ghazali, Chairman and Chief Executive Officer, and Monica Vicente, 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 IR website, at investorrelations.freshdelmonte.com, to access today's earnings material and to register for future distributions. This conference call is being webcast live on our website and will be available for replay after the call. Please note that our press release and our calls today include non-GAAP measures.
Thank you Regina good morning, everyone and thank you for joining our fourth quarter and full fiscal year 2023 conference calls as we can.
You had mentioned I'm quite opposed vice President corporate communications with fresh del Monte produce joining.
Joining me in today's discussion are Mohammad Abu <unk>, Chairman and Chief Executive Officer, and Montgomery sent this 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.
You May also visit the company's IR website at Investor Relations professional I'll say dot com to access today's earnings materials and to 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 includes non-GAAP measures reconciliations of these non-GAAP financial measures and the other required disclosures are set forth in the press release and earnings presentation, which is available on our website.
Claudia Poe: Reconciliations of these non-GAAP financial measures and the other required disclosures are set forth in the press release and earnings presentation, which is available on our website. I would like to remind you that much of the information we will be speaking about today, including the answers we give in response to your questions, will be available on our website and may include forward-looking statements within the provisions of the Federal Securities Law's safe harbor.
I would like to remind you that not as much of the information we will be speaking to today, including the answers. We gave in response to your questions May include forward looking statements within the provisions of the federal Securities laws Safe Harbor.
Claudia Poe: In today's press release and in our SEC filings, we detail risks that may cause our future results to differ materially from these forward-looking statements. Our statements are as of today, February 26th, and we have no obligation to update any forward-looking statement we may make. During the call, we will provide a business update along with an overview of our fourth quarter and full year 2023 financial results, followed by a question and answer session. With that, I am pleased to turn today's call over to Mr. Buber. Thank you, Claudine.
Today's press release and in our SEC filings, we detail risks that may cause our future results to differ materially from these four.
<unk> looking statements are statements are as of today February 26, and we have no obligation to update any forward looking statements you name it.
During the call we will provide a business update along with an overview of our fourth quarter and full year 2023 results financial results followed by a question and answer session with that I am pleased to turn today's call over to Mr. Cooper.
Thank you Claudia and good morning, everyone.
Mohammad Abu: Good morning, everyone. As you have read in our press release, Our strong gross margins and cash flow enabled us to have strong, adjusted earnings. It allowed us to reduce our loan debt by $140 million and end the year with an adjusted leverage ratio of 1.7. It allowed us to continue returning value to shareholders and increased our quarterly dividend by 25% for the second year in a row. In the fall of 2023, we conducted a strategic review and assessed our operational priorities for our North America operations, including MANPAD. Preliminary findings of this review were finalized in the fourth quarter, as a result of this strategic review and other factors. We recorded a non-cash experiment of $131.2 million, and the Quorum, related to our map packing operation.
As you have read in our press release.
Our strong gross margins and cash flow.
Enabled us to have a strong adjusted earnings per share.
Sure.
It allows us to reduce our long debt.
$140 million.
And the year with an adjusted leverage ratio one seven times.
And allowed us to continue returning value to shareholders and increased our quarterly dividend.
By 25% for the second year.
Yes.
Okay.
'twenty two.
2023.
This strategic review.
Our exploration of the priorities of our North America operations, including manufacturing.
Preliminary findings of this review were finalized in the fourth quarter.
As a result of this strategic review and other factors.
Recorded a noncash impairment of $51 2 million in the quarter.
Related to our manufacturing operations.
Mohammad Abu: We are exploring strategic alternatives for this business, always continuing to focus on our long-term... Drivers for Enhancing Shareholder Value for 2024. Fresh Del Monte has been leading pineapple innovation since the 1990s, with the debut of the Del Monte Gold Extra Sweet Pineapple, the first of its kind at that time. Since then, our robust pineapple program has released the pink glow. Bye.
We are exploring strategic alternatives for this business all the while continuing to focus on our long term.
Drivers for enhancing.
Shareholder value for 2012.
Fresh del Monte has been leading fine up an innovation since the 19 nineties.
We did that deal.
I don't think bold expressway.
The first of its guidance at that time.
Since then our world. Despite our fit program has rebased <unk> growth.
Mohammad Abu: The Honey Glow Pineapple, The Del Monte Zero pineapple, and just a few weeks ago, the Ruby Glow pineapple, a new premium hybrid pineapple. In 2023, we saw continued strong demand for our Honey Glow and Pink Glow pineapples, with sales growing by approximately 25% for these varieties in the year 23 compared with 22. In 2024, we will continue to focus on our pineapple program by working to expand the reach of our existing variety and our new RubyGlue operation. During 2023, we made significant progress on our asset optimization program and sold underutilized and non-strategic assets, which generated cash proceeds of $120 million. This included two distribution centers and related assets in Saudi Arabia, an idle production facility in North America, our plastics business subsidiary in South America, idle land assets in South and Central America, and two carrier vessels.
On April five.
Zero.
And just a few weeks ago, there will be growth by number of new premium hybrid lineup.
In 2023.
We saw continued strong demand for our honey girls and painful pineapples with sales growing by approximately 25%.
All of these varieties.
<unk> 2003, compared with 22.
In 2000, and 2024, we will continue to focus on our final bid program by working to expand the reach of our existing biases as our new it will be growth.
During 2023, we made significant progress on our asset optimization program.
Also utilized.
July's and non strategic assets, which generated cash proceeds of 120 million bottles.
This included two distribution centers, the centers and related assets in Saudi Arabia.
I did production facility in North America, our plastic business subsidiary in South America.
Assets in South and Central America to carrier vessels.
Yeah.
Mohammad Abu: This, combined with our strong operating cash flow, fed into our ability to reduce our long-term debt to $400 million at the end of 2023 compared to $450 million at the end of 2022. We also raised our quarterly dividends. Sorry, $500 million at the end of 2022. We also raised our quarterly dividend to $0.25 per share, a 25% increase from the previous quarter. Fresh cut fruit is a strength that we are leaning into this year.
This combined with our strong operating cash flow fed into our ability to reduce our long term debt to $400 million.
23, compared to $450 million at the end of 'twenty two.
We also raised our quarterly dividend.
Sorry.
At the end of 'twenty two.
Also raised our quarterly dividend to <unk> 25 cents per share.
One 5% increase from the previous quarter.
Fresh cut through.
Strength that we are leaning into this year, our fresh cut fruit topline has grown more than 50% in the past three years.
Mohammad Abu: Our fresh cut fruit top line has grown more than 50% in the past three years. We attribute this to innovating around products, packaging, and forming strategic partnerships with customers and brands. We will focus on further expanding this category in North America, Europe, and Asia and also by focusing on increasing the mix from the higher-margin value-added products in our portfolio. In 2023, we achieved the highest adjusted gross margin since 2016, coming in at 8.2%, which was driven by our ability to control costs, optimize our assets, and focus. Unprofitable Group
We attribute this to innovating.
Packaging is forming.
<unk> partnerships with customers address.
We will focus on further expanding this category in North America, Europe and Asia.
And also by focusing on increasing the mix from the higher margin value added products in our portfolio.
And 2023, we achieved the highest adjusted gross margins since 2016 coming in at.
Eight, 2%, which was driven by our ability to control costs optimize.
It's a focus.
Profitable growth.
Mohammad Abu: We are laser-focused on our vision and strategy, which is rooted in enhancing shareholder value. While our bananas play an important part in generating strong cash flow to fuel our innovation, we believe we will get there by focusing on our strengths. All final.
We are laser focused on our vision and strategy, which is rooted in enhancing shareholder value.
Our bananas play an important.
Generating strong cash flow.
Our intervention, we believe when we get there by 4%.
Our strength.
On slide.
Monica Vicente: Fresh cut and residues area, where we have the capability to evade and believe. We see tremendous opportunities for our company to drive growth through innovation. With that, I would like to turn the call over to Monica Vicente, our Chief Financial Officer, who will give you the results. Marika. Thank you, Mohammad.
Fresh cut and visit us areas.
Where we have the capability.
And we.
We see tremendous opportunities for our company to drive growth through innovation.
With that I would like to turn the call over to many companies have dealt with chief financial Officer.
Before we get to distributors.
Thank you Mohammad and good morning, and thank you for joining us on today's call.
Monica Vicente: Good morning, and thank you for joining us on today's call. As a reminder, there is seasonality in the cadence of our earnings. The first and second quarters are seasonally our strongest quarters, while our third and fourth quarters are seasonally softer. Our 2023 results are consistent with historical trends as we realized a greater portion of our net sales and gross profit during the first half of the year. Please keep in mind when looking at the year-over-year results that our results in 2022 did not follow that same seasonality due to the high inflationary environment and a lag in price increases leading to an unusually soft first half and stronger second half. As Mohammad mentioned, and you will also see in our 10K filing later today, in the fourth quarter, we took an impairment charge of $131 million, of which $110 million relates to customer list and These impairments were related to our manpacking business acquired in 2018. We are currently exploring strategic alternatives for this business, and we will provide updates as they become available. With that in mind, I will now turn to our results.
As a reminder, there is a seasonality indicators of our earnings the first and second quarters are seasonally our stronger quarters, while our third and fourth quarter.
Sure.
Seasonally softer.
Our 2023 results are consistent with historical trends as we realized a greater portion of our net sales and gross profit during the first half of the year. Please.
Please keep in mind when looking at the year over year results that our result in 2022 did not follow that same seasonality due to the high inflationary environment and a lag in price increases leading to an unusually soft first half and a stronger second half as Mohammad mentioned and you will also see.
In our 10-K filing later today in the fourth quarter, we took an impairment charge of $131 million of which $110 million relates to customer list and trade name intangibles as well as building land and land improvement assets related to the fresh and value added products segment in North America.
And also a $22 million related to goodwill in our prepared foods reporting unit.
These impairments were related to our manpack in business acquired in 2018.
We're currently exploring strategic alternatives for this business and we will provide updates as they become available.
With that I will.
I'll now turn to our results.
Monica Vicente: Net sales for the fourth quarter were $1.9 billion, compared with $1.4 billion in the prior year. The decrease in net sales in the fourth quarter was driven by lower net sales of bananas and lower global demand for our third-party ocean freight business. Partially offset by higher net sales in the fresh and value-added product segment in Europe and Asia. For the full year, net sales were $4.3 billion, compared with $4.4 billion in 2022. Lower net sales for the year were driven by lower overall sales volumes combined with lower demand for our third-party ocean freight business, partially offset by higher per unit sale prices of bananas and fresh and value-added products in Europe and Asia, despite a weaker Japanese Yen, Korean Won, and British Pound. Gross profit for the fourth quarter of 2023 was $63 million compared with $82 million in the prior year. The decrease in gross profit was driven by lower net sales coupled with higher per unit production costs, partly due to the negative impact of a stronger Costa Rican cologne.
Net sales for the fourth quarter were $1 billion nine compared with $1 40 in the prior year the.
The decrease in net sales in the fourth quarter were driven by lower net sales of bananas, and lower global demand for our third party Ocean freight business, partially offset by higher net sales in the fresh and value added products segment in Europe and Asia.
For the full year net sales were $4 3 billion compared with $4 4 billion in 2022.
Lower net sales for the year for the year were driven by lower overall sales volumes combined with lower demand of our third party ocean freight business.
Partially offset by higher per unit sale prices in banana and fresh and value added products in Europe and Asia.
Despite a weaker Japanese yen Korean won and British pound.
Gross profit for the fourth quarter of 2023 was $63 million compared with $82 million in the prior year.
The decrease in gross profit was driven by lower net sales coupled with higher per unit production costs, partly due to the negative impact of a stronger Costa Rica colon.
Monica Vicente: Gross profit benefited from lower per unit per distribution and ocean freight costs. Gross margin for the fourth quarter of 2023 was 6.2% compared to 7.9% in the prior year. For the full year, gross profit increased 3% to $351 million from $340 million in the prior year.
Gross profit benefited by lower per unit for distribution and ocean freight costs.
Gross margin for the fourth quarter of 2023 was six 2% compared to seven 9% in the prior year.
For the full year gross profit increased 3% to $351 million from $340 million in the prior year.
Monica Vicente: The increase was primarily driven by higher selling prices of bananas and fresh and value-added products combined with lower distribution costs partially offset by higher product per unit production costs partly driven by the negative impact of a stronger Costa Rican currency where we source the majority of our pineapple. Gross margins increased to 8.1% for 2023 compared to 7.7% in the prior year. Adjusted gross profit for the full year of 23 was $355 million, compared with $340 million in the prior year. Adjusted gross profit for the full year of 23 excludes $4 million of other product-related charges primarily related to $1.5 million of inventory write-offs due to the sale of two distribution centers in Saudi Arabia in the first quarter and $1.4 million of inventory write-offs and cleanup costs, net of insurance recoveries tied to the flooding of There were no other product-related charges in 22.
The increase was primarily driven by higher selling prices of banana and fresh and value added products combined with lower distribution costs, partially offset by higher per unit production costs, partly driven by the negative impact of a stronger Costa Rica, colon, where we source the majority of our pineapple.
Gross margins increased to eight 1% for 2023 compared to seven 7% in the prior year.
Adjusted gross profit for the full year of <unk>, 23 was $355 million compared with $340 million in the prior year adjusted.
Adjusted gross profit for full year 'twenty, three excludes $4 million of other product related charges, primarily related to $1 5 million of inventory write offs due to the sale of two distribution centers in Saudi Arabia in the first quarter and $1 4 million of inventory write offs and cleanup costs.
Net of insurance recoveries tied to the flooding of our seasonal production facility in Greece in the third quarter.
There were no other product related charges in 2002.
Monica Vicente: Operating loss for the fourth quarter of 23 was $113 million compared with operating income of $31 million in the prior year. The loss was driven by the $134 million asset impairment charge already discussed. As adjusted operating income for the fourth quarter of 2023 was $12 million compared with $34 million in the prior year. Adjusted operating income excludes the above-mentioned asset impairment and six million of other product-related credits due to the floods in Greece in the third quarter, as well as a gain on asset sale of two million related to the sale of a vessel. In the fourth quarter of 2022, adjusted operating income excludes 3 million of asset impairment charges, principally due to banana-related fixed assets in the Philippines due to flooding.
Operating loss for the fourth quarter of 'twenty, three with $113 million compared with operating income of $31 million in the prior year.
The loss was driven by the 134 million asset impairment charge already discussed.
Adjusted operating income for the fourth quarter of 'twenty, three was $12 million compared with $34 million in the prior year adjusted.
Operating income excludes the above mentioned asset impairment.
$6 million of other product related credits due to the floods in Greece in the third quarter.
As well as a gain on asset sale of $2 million related to the sale of a vessel.
In the first quarter fourth quarter of 22, adjusted operating income excludes $3 million of asset impairment charges, principally due to banana related fixed assets in the Philippines due to flooding.
Monica Vicente: For the fiscal full year, 23, operating income was $59 million, compared with $156 million in the prior year. Adjusted operating income, which excludes product-related charges, asset impairment, and gain on asset sales, was $165 million, compared with $149 million in the prior year. The year-over-year Adjusted Upwarding Income increase was primarily driven by higher gross profit. FTP's net loss for the fourth quarter of 2023 was $106 million compared with FTP net income of $18 million in the prior year. Adjusted FTP net income for the fourth quarter was $12 million compared with $22 million in 2022. For the full year, FTP's net loss was $11 million compared with FTP net income of $99 million.
For the fiscal full year 'twenty, three operating income was $59 million compared with $156 million in the prior year.
Adjusted operating income, which excludes product related charges asset impairment and gains on asset sales with $165 million compared with $149 million in the prior year.
The year over year adjusted operating income increase was primarily driven by higher gross profit.
SDP net loss for the fourth quarter of 2023, with a $106 million compared with STP net income of $18 million in the prior year adjust.
Adjusted FTP net income for the fourth quarter was $12 million compared with $22 million in 'twenty two.
For the full year FTP net loss was $11 million compared with FTP net income of $99 million.
Adjusted FTP net income was $102 million compared with $94 million in the prior year.
Monica Vicente: Adjusted FTP net income was $102 million compared with $94 million in the prior year. Our diluted earnings per share in the fourth quarter of 23 was a loss of $2.22 compared with $0.38 in the prior year. Adjusted diluted earnings per share was $0.25 compared with $0.45 in Q4 2022. For the full year, diluted earnings per share was a loss of $0.24 compared to $2.06 per share in the prior year. Adjusted earnings per share were $2.12, compared to $1.97 per share in the prior year.
Our diluted earnings per share in the fourth quarter of <unk> 23 was a loss of $2, 22% compared with 38 in the prior year adjusted.
Diluted earnings per share was 25.
Compared with 45 in Q4 2022.
For the full year diluted earnings per share was a loss of 24.
Compared to $2 <unk> per share in the prior year.
Adjusted earnings per share was $2 12.
Compared to $1 97 per share in the prior year.
Adjusted EBITDA for the fourth quarter was $38 million compared with $559 million in 2022.
For the full year, adjusted EBITDA increased to 239 million compared to $235 million in the prior year.
I will now go into more detail on the full year performance for each of our segments, beginning with our fresh and value added products segment.
Monica Vicente: Adjusted EBITDA for the fourth quarter was $38 million, compared with $59 million in 2022. For the full year, adjusted EBITDA increased to $239 million, compared to $235 million in the prior year. I will now go into more detail on the full year performance for each of our segments, beginning with our fresh and value-added product segment. Net sales for the fiscal year 2023 were down approximately 4% to $2.5 billion, compared to $2.6 billion in the prior year, due to lower sales volume across most products in this category, except for pineapples and avocados, combined with lower sell prices of avocados due to prior year volatility and lower sell prices in our prepared and As Mohammad mentioned, over the past few years, we have successfully released several new pineapple varieties.
Net sales for the fiscal year 2023 were down approximately 4% to $2 5 billion compared to $2 6 billion in the prior year due to lower sales volume across across most products in this category, except for pineapples and avocado.
Combined with lower sales prices of avocados due to prior year volatility and lower sales prices in our prepared and vegetable product categories.
Partially offset by higher per unit selling prices across all other products in this segment.
Mohammad mentioned over the past few years, we have successfully released several new pineapple variety.
During 2023, we saw a 25% year over year volume growth in our higher margin plenty slow and painful pineapples.
We grew our avocado program this past year by expanding our customer base increased increasing sales volume by 16%.
And also further diversifying our sourcing origins to include Colombia, Dominican Republic and Peru.
As well as continuing to refine our pricing and sourcing strategy.
Gross profit for fiscal year, 2023, with $167 million compared with 183 million in the prior year.
Monica Vicente: During 2023, we saw a 25% year-over-year volume growth in our higher-margin Honey Glow and Pink Glow pineapples. We grew our avocado program this past year by expanding our customer base, increasing sales volume by 16%, and also further diversifying our sourcing origins to include Colombia, the Dominican Republic, and Peru, as well as continuing to refine our pricing and sourcing strategies. Gross profit for fiscal year 2023 was $167 million compared with $183 million in the prior year. The decrease was primarily due to lower sales volume and higher product costs due partially to the impact of the strengthening of the Costa Rican cologne and the Mexican peso, somewhat offset by lower distribution, ocean, and inland freight costs. As a result, gross margin was 6.8% in 2023 compared to 7.1% in 2022. Adjusted gross profit for fiscal year 23 was $171 million compared to $183 million in the prior year.
The decrease was primarily due to lower sales volume and higher product cost due partially to the impact of the strengthening of our Costa Rica colon and the Mexican peso.
Somewhat offset by lower distribution ocean and inbound freight costs.
As a result gross margin was six 8% in 2023 compared to seven 1% in 2022.
Adjusted gross profit for fiscal year, 'twenty, three with $171 million compared to $183 million in the prior year.
Adjusted gross profit excludes $4 million of other product related charges due to inventory write offs from the sale of two distribution centers in Saudi Arabia and.
And inventory write offs and cleanup costs net of insurance recovery tied to the flood of our seasonal production facility increased.
For 2024, we expect higher margins in this segment driven by favorable product mix.
Moving to our banana segment.
Net sales for fiscal year, 'twenty, three increased 1% to $1 billion $638 million compared to $1 billion $620 million in the prior year the.
The increase was driven by higher per unit selling prices in Europe.
Partially offset by lower sales in North America, due to lower volume and a slight decrease in sales prices.
Monica Vicente: Adjusted gross profit excludes $4 million of other product-related charges due to inventory write-offs from the sale of two distribution centers in Saudi Arabia and inventory write-offs and cleanup costs net of insurance recovery tied to the flood of our seasonal production facility in Greece. For 2024, we expect higher margins in this segment driven by a favorable product mix. Moving to our banana segment, net sales for fiscal year 23 increased 1% to $1,638,000,000 compared to $1,620,000,000 in the prior year. The increase was driven by higher per-unit selling prices in Europe, partially offset by lower sales in North America due to lower volume and a slight decrease in sale prices. Banana gross profit for fiscal year 23 increased 35% to $163 million compared to $121 million in the prior year.
Banana gross profit for fiscal year, 'twenty, three increased 35% to $163 million compared to $121 million in the prior year the.
The increase in gross profit was due to higher net sales and lower distribution costs, including ocean and inland freight.
Partially offsetting the increase was higher per unit production costs, mainly due to negative fluctuation in the exchange rates in Costa Rica.
As a result gross margin increased to 10% in 2023 from seven 5% in 2022.
The increase in gross margin in the Banana segment reflects our continuing efforts to match supply and demand more rationally.
In 2024, we expect to have similar volumes as compared to 2023 and as you know sale prices are difficult to predict for this segment due to supply and demand volatility and other factors.
Lastly, our full year results for the other products and services segment.
Net sales for fiscal year, 'twenty, three were $205 million compared to $241 million in the prior year.
Monica Vicente: The increase in gross profit was due to higher net sales and lower distribution costs, including ocean and inland freight, partially offsetting the increase with higher per unit production costs, mainly due to negative fluctuations in the exchange rates in Costa Rica. As a result, gross margin increased to 10% in 2023 from 7.5% in 2022. The increase in gross margin in the banana segment reflects our continuing efforts to match supply and demand more rationally. In 2024, we expect to have similar volumes as compared to 2023. And, as you know, sale prices are difficult to predict for this segment due to supply and demand volatility and other factors. Lastly, our full-year results for the other products and service segments. Net sales for fiscal year 23 were $205 million, compared to $241 million in the prior year, mainly due to lower net sales of third-party ocean freight services as a result of lower rates and volumes driven by softened global demand. Gross profit was $20 million compared with $37 million in the prior year due to lower net sales.
Mainly due to lower net sales of third party Ocean freight services as a result of lower rates and volumes driven by softening global demand.
Gross profit was $20 million compared with $37 million in the prior year due to lower net sales gross margin was nine 8% compared to 15, 2% in the prior year.
As a reminder, ocean freight rates were elevated last year because of the supply constraints.
And we saw an increase in availability of over the course of 2023, which cause pricing to come back to more normalized levels.
For 2024, we expect to see a more balanced ocean freight market in the Americas, which is where we provide these services.
Now moving to selected financial data for the full year.
Net interest expense was flat compared to 2022 due to higher interest rates, partially offset by the impact of lower average debt balances.
Income tax provision was $18 million compared to $20 million in 2022. The decrease in income tax provision is primarily due to decreased earnings and certain higher tax jurisdictions, partially offset by the tax effect related to asset sales throughout the year.
Now turning to our financial position.
For the year, we generated $178 million in cash from operating activities compared to $62 million in 2022.
Monica Vicente: Gross margin was 9.8% compared to 15.2% in the prior year. As a reminder, ocean fray rates were elevated last year because of the supply constraints, and we saw an increase in availability over the course of 2023, which caused pricing to come back to more normalized levels. For 2024, we expect to see a more balanced ocean freight market in the Americas, which is where we provide these services. Now, moving to selected financial data for the full year. Net interest expense was flat compared to 2022 due to higher interest rates, partially offset by the impact of lower average debt balances.
In 2023, we reduced our inventory balances, which were impacted in the prior year by the inflationary cost pressures.
Also in 2022, we strategically increased our levels of key raw materials and packaging supplies in order to secure cost and availability.
As Mohamad mentioned, we ended the year with about $400 million of long term debt, a $140 million or 26% reduction from.
$540 million at the end of fiscal year 'twenty two.
And also a 23% reduction from the end of fiscal year 2021.
By lower by lowering our debt our adjusted leverage ratio now stands at one seven times adjusted EBITDA compared to two two times in the prior year.
Monica Vicente: Income tax provision was $18 million compared to $20 million in 2022. The decrease in income tax provision is primarily due to decreased earnings in certain higher tax jurisdictions, partially offset by the tax effect related to asset sales throughout the year. Now turning to our financial positions. For the year, we generated $178 million in cash from operating activity compared to $62 million in 2022. In 2023, we reduced our inventory balances, which were impacted in the prior year by inflationary cost pressures. Also, in 2022, we strategically increased our levels of key raw materials and packaging supplies in order to secure costs and availability. As Mohammad mentioned, we ended the year with about $400 million of long-term debt, a $140 million or 26% reduction from $540 million at the end of fiscal year 22, and also a 23% reduction from the end of fiscal year 2021. By lowering our debt, our adjusted leverage ratio now stands at 1.7 times adjusted EBITDA compared to 2.2 times in the prior year. Our full-year CapEx investment was $58 million compared with $48 million invested in 2022.
Our full year Capex investment was $58 million compared with $48 million invested in 2022.
For 2024, we expect capex to be slightly higher.
At a range between 65 and $75 million due to our continued efforts and focus on expanding production in certain key global operations, such as fresh cut production facility in the UK.
During Q4, we announced and completed a $500000 share buyback.
And as previously announced we declared in Q4, we recently declared an increase in our quarterly dividend from 20 to 25 per share as we stay committed to returning cash to our shareholders.
Finally, our credit facility was due to expire later this year and therefore, we recently refinanced our facility for a five year term with a borrowing capacity of $750 million.
Our strong free cash flow projections allowed us to decrease our facility from the previous borrowing capacity of $900 million.
This concludes our financial review, we can now turn the call over to Q&A Regina.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad. Our first question will come from the line of Mitch Pinheiro with Sturtevant <unk> Company. Please go ahead.
Yes, hi, good morning.
<unk>.
Monica Vicente: For 2024, we expect CAPEX to be slightly higher at a range between $65 and $75 million due to our continued efforts and focus on expanding production in certain key global operations such as Fresh Fed Production Facility in the UK. In Q4, we announced and completed a $500,000 share buyback. And as previously announced, we declared in Q4, we recently declared an increase in our quarterly dividend from 20 cents to 25 cents per share as we stay committed to returning cash to our shareholders. Finally, our credit facility was due to expire later this year, and therefore, we recently refinanced our facility for a five-year term with a borrowing capacity of $750 million. Our strong free cash flow projections allowed us to decrease our facility from the previous borrowing capacity of $900 million.
So a question first on.
On bananas.
For the year, the 10% gross margin.
Is the best I've seen going back.
The 2012.
And I heard some of the reasons in your in your.
Script.
But.
What else is driving the.
This margin this margin.
As a higher level.
Banana margin sustainable.
What's your outlook here in the near term and what.
What have you been doing internally to improve the margin as opposed to just pricing.
Good morning, Mitch.
There is four separate entities is one of them was Europe.
Strong market last year.
Identical assumption was higher than normal volumes were more in line with the demand.
Number one number two.
Operator: This concludes our financial review. We can now turn the call over to Q&A. Regina?
Our management of supply and demand was more.
And the way that we did not have to have very high inventories at times, when we don't need that.
Mitchell Brad Pinheiro: At this time, I'd like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. Our first question will come from the line of Mitch Pinheiro with Sturdivant & Company. Please go ahead.
And that's in my opinion it has helped a lot.
Rolling all of them.
Let's put it that way.
Sure.
We are focusing on a more.
Mohammad Abu: Good morning, www.FreshDelMonte.com. So a question first on bananas: for the year, the 10% gross margin was the best I've seen going back to 2012. Um, And, you know, I heard some of the reasons in your script, you know, but what else is driving this margin? This margin is a higher level of Banana Margarine Sustainable. What's your outlook here in the near-term and, What have you been doing internally to improve the margin as opposed to just price? Good morning, Mitch. There's a reason for it, several reasons.
Let's say of the cost structure of our <unk>.
Yes.
That's where we are working very hard in order to really keep.
Our plantations, which are with them.
Zero.
Yeah.
All of them at a cost structure I would just say, we're going to shut down our flotation cells.
Case, but we are going to be looking at every fall in every presentation and make sure that we have.
Most efficient plants.
Operations and production.
Mohammad Abu: One of them was Europe last year. Banana consumption was higher than normal, and volumes were more in line with demand. That was number one.
All of these actually factors together have helped to improve the gross margins as you have seen.
And then ultimately and this is something that we will continue to do Mitch hopefully at all.
Mohammad Abu: Number two, our management of supply and demand was more synchronized in a way that we did not have to have very high inventories at times when we didn't need them. And that, in my opinion, has helped a lot in... controlling our course. Let's put it that way. And thirdly, we are focusing on more, let's say, the core structure of our banana farm. That's where we are working very hard in order to really keep our plantations, which are within the normal cost structure. I wouldn't say we're going to shut down our plantations; that's not the case, but we are going to be looking at every farm and every plantation and make sure that we're having the best, most efficient farms in operation and production, and that all these actual factors together have helped, you know, to improve the cross-margin, as you have seen.
Yes.
And despite all of the other.
The negative impacts that we have with the market.
Paul.
Competition.
For <unk> in Europe, or North America.
To reduce prices selling prices, but all in all we are very much.
Yes.
With what we're doing.
Laurie.
But as Blake.
I wanted to mention is like our cash flow generation.
Really our focus would be of more value added products on more value added.
Operations.
Really.
Put the company in a much.
Different.
Platform.
Yeah, and I mentioned as I, just mentioned the banana pricing is difficult to predict because there's a lot of variables, including supply and demand.
Mohammad Abu: And this is something that we will continue to do, Mitch, hopefully, you know, despite all the other, you know, negative impacts that we have in the market, competition and retail force influence, be it in Europe or North America, to reduce prices, selling prices. But all in all, we are very much in agreement, you know, kind of pleased with what we are doing and where we are going. But bananas, like Monica mentioned, are like our cash flow generation in terms of... Really, our focus would be on more value-added products and more value-added operations that will put the company on a much different platform. As I just mentioned, banana pricing is difficult to predict because there's a lot of variables, including supply and demand. So just keep that in mind.
So just keep that in mind.
Sure.
So I mean, most of your North American volume is contracted.
No.
How does that look.
Contracted prices relative to.
For 2023.
The the perspective of this on the supply side.
The selling side.
On the selling side.
<unk> size is a little bit in North America is tough because competition is very tough as we speak.
And.
Players are trying to.
<unk>.
As for market.
Market share additional market share, but we haven't really focused on.
Our module.
Mohammad Abu: So, I mean, most of your North American volume is contracted. So, how does that look, the current contracted prices relative to 2023? Are they contracted on the supply side or on the selling side? On the selling side. Selling side is a little bit, North America is tough because competition is very tough as we speak.
Mitch I don't know.
Such refinancing some volume.
Florida, but the module level.
Just going for volume.
Good.
The low very low margin.
Yes.
Okay and then.
In terms of pineapples, you've been you've done very well innovating and pineapples.
And you talked about 25% growth in your I guess, its your pink loan Honey Guo.
Mitchell Brad Pinheiro: You know, and players are trying to position themselves for market share, additional market share. But we really focus on margins, which, you know, I don't mind sacrificing some volume for a better margin rather than just going for volume and selling at a low, very low margin. Okay, and then. In terms of pineapples, you've done very well innovating in pineapples, and you talked about 25% growth in your, I guess it's your, Pink Glow and the Honey Glow. How big are these two, and I guess you're going to start Ruby Glow?
How big.
Are these too and I guess youre going to start Ruby glow.
How big is that.
As a percentage of your overall pineapple sales.
And.
And then.
We're just distribution stand I know when I when I look for the honey grow it's not in every supermarket, so that looks like an opportunity for you and I'm curious what your ACD is on on these products.
Mohammad Abu: How big is that as a percentage of your overall pineapple sales? And And then, you know, where does distribution stand? I know when I look for Honey Glow, it's not in every supermarket. So that looks like an opportunity for you. And I'm curious what your ACV is on these products.
Yes.
That tonnage will come up.
Which will cover 100% of our production is heading Google because this is very selective Ips that we have to work very diligently in the field.
Yes.
To create this hanmi growing segment, which is the percentage of pulp production I will not disclose publicly.
Mohammad Abu: Yeah, I do know that Honey Glow cannot be, we cannot have 100% of our production be Honey Glow because this is a very selective item that we have to work very diligently in the fields to create this Honey Glow segment, which is a certain percentage of our production. I would not disclose it publicly, but... We are working in a way to increase our ratio of honey glow compared to the total production as well as increase our production in general to create more volumes in this segment, Mitch. So it's something that is an operation and ongoing as we speak. Hopefully, going forward, we will see continuous improvement in terms of volume and growth of this segment. Of course, we are at the very early stages for the ruby red, which is just being announced, and there will only be a few thousand pieces.
Publicly.
Yes.
Yes.
We are working in a way that.
To increase our.
The ratio of high growth compared to the total production as well as increasing our production in general to create more volume on this in this segment.
So it's.
It's.
Something that.
Operation ongoing as we speak so.
Hopefully at all going forward, we would see continuous improvement in terms of volume.
The growth of this.
Certain material was very very soft.
Gross.
Early stages for their albeit it which is just allow Seattle and there will be only few pieces. This would it be a limited edition, let's say, but that we are going to produce a big volumes, but to set the limited volume, but with very high prices are very high volume.
Mohammad Abu: This will be a limited edition, let's say, variety that we are not going to produce in big volumes, but a certain limited volume, but with very high prices and very high volumes. Okay. And then, you know, looking at man packaging.
Yes.
Okay.
And then.
Looking at Mann packing.
Hi.
Mohammad Abu: You bought it a couple of years ago, maybe five years ago, in the pre-pandemic, and it really hasn't regained its footing since then. I'm just curious what changed in your thinking about man as you did your strategic review. Well, I mean, I was very clear we are going to look at the best ways to, first of all, minimize or eliminate any losses coming from that operation. Secondly, we will look at what's best for the company. And thirdly, you know, this segment of vegetables and leaves, in particular, has been extremely competitive with very low margins in the last couple of years. Weather hasn't been helping as well.
You bought it a couple of years ago, but maybe five years ago.
Pre pandemic and it really hasn't it really hasn't.
Regains its footing since then.
I'm just curious what changed in your thinking.
Ma'am.
Did your strategic review.
Well I mean.
I was very clear we are going to look at the best ways to first of all we'd like to minimize or eliminate any losses coming from that operation. Secondly, we will look at what's best for the company at all.
Thirdly at all this.
Segment of vegetables.
Leaps in particular has been extremely competitive with very low margins that the last couple of years, whether it hasnt been as big as well so it's a combination of.
Mohammad Abu: So it's a combination of reasons and factors that have led to this situation. But as I said earlier, we are going to take some, you know, strategic decisions in order to improve our business in general. And I hope that in the next few months, we can announce them and tell you where we go. Um, what, um, what are the sales of? We don't disclose that, Mitch.
Yes.
Factors that have.
Add to this situation.
As I said I had mentioned earlier, we are going to take some.
For the future decisions in order to improve our business.
And I hope that in the next few months, we got announced.
February was where we grow.
Yes.
What are the sales of man.
We don't disclose that niche.
Okay.
Mitchell Brad Pinheiro: And then, I guess this final question is you've done well reducing debt and especially with some asset sales. What are the plans for asset sales for the coming year? Well, as I mentioned, we are not selling for the sake of selling. We are selling land that is idle or not suitable for our purposes, you know. Secondly, facilities that have no use for us, and we can operate them, you know. By the way, these facilities that we sold in Saudi Arabia, we released part of them for our operations. So we did not get out of our operations, you know, in this country. However, what we did, we deleveraged our exposure to assets and had a better cash flow as well as a better operating model, let's say. So other assets that we sold in South America were assets that really did not fit like the plastic operation, you know; they didn't fit well in our today, let's say, world.
And then.
I guess just final question is.
<unk>.
You've done well, reducing debt and especially with some asset sales what are the plans and asset sales for the coming year.
As I mentioned, we are not finished for the sake of selling we are selling less less either.
Not suitable for our.
Purposes.
Secondly facilities that ethanol use for us.
As we can.
Great.
By the way that these facilities that we sold in Saudi Arabia.
Least part of it for our operations. So we did not get out of operations in the country. However, what we did we deleverage.
Our exposure to assets.
Cash.
Cash flow as well as better operating model, let's say Paul.
The assets that we sold.
Total net income.
That's really.
The last ship like the plastic.
<unk>.
Fifth well.
Today, let's say so.
Mohammad Abu: So that was a good opportunity to sell, and that's why we did disposal, and other lands or facilities as well were the right time to sell and to optimize our operations in certain countries. So really, what we are doing is optimizing and creating efficiencies and creating more opportunities. Okay, thank you for taking the questions. Thank you. And with that, I'll hand the call back to Mr. Mohammad Abu Ghazali with closing remarks. Well, I would like to thank everyone attending this call today. Hopefully, you know, we can give you better news next time. And I wish you a good day. Thank you. Everyone that this concludes our call for today. Thank you all for joining me. You may now disconnect. Please wait. The conference will begin shortly. Thank you for watching.
So that was good.
Opportunity.
That's why we this disposal.
A little bit.
Other less.
Facilities.
Well.
Whether to sell as well.
Optimize our operations.
Et cetera assumptions. So what we are doing really we optimize inc.
Creating efficiencies and creating more opportunities.
Okay.
Yes. Thank you for taking the questions. Thank you.
And with that I'll hand, the call back to Mr. Mohammad Abu Ghazzawi with Barcoding remarks.
I would like to thank everyone attending this call today hopefully you know we can't give you better news next time.
Good day, thank you.
Everyone that now concludes our call for today. Thank you all for joining you may now disconnect.
Please wait.
France will begin shortly.
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Yes.
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