Q1 2024 Fresh Del Monte Produce Inc Earnings Call
Please wait the conference will begin shortly.
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Operator: Good day everyone, and welcome to Fresh Del Monte Produce's first quarter 2024 earnings conference call. Today's conference call is being broadcast live over the internet and is also being recorded for playback purposes. All lines have been placed on mute to prevent any background noise.
Speaker Change: Good day, everyone and welcome to fresh del Monte produces first quarter 2024 earnings Conference call. Today's conference call is being broadcast live over the Internet and is also being recorded for playback purposes.
Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like 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 Pou. Please go ahead, Ms. Pou.
Speaker Change: 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 Po.
Claudia Pou: Thank you, Adra. Good afternoon, everyone, and thank you for joining our first quarter 2024 conference call. I am Claudia Pou, 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 via BusinessWire. You may also visit the company's investor relations website at InvestorRelations. Visit FreshDelMonte.com to access today's earnings materials and to register for future distributions.
Claudia Pou: Thank you Roger good afternoon, everyone and thank you for joining our first quarter 2024 conference call I'm <unk>, Vice President corporate communications with fresh del Monte produce.
Joining me today today's discussion are Mohammad Abu <unk>, Chairman and Chief Executive Officer, Monica, <unk>, Senior Vice President and Chief Financial Officer.
Speaker Change: I hope that you've had a chance to review the press release that was issued earlier via business wire.
May also visit the company's IR website at Investor Relations, Scott Fresh del Montes Dot com to access today's earnings materials and direct certification distributions.
Claudia Pou: This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non-GAAP measures. Reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website. I would like to remind you that much of the information we'll be speaking about today, including the answers we give in response to your questions, may include forward-looking statements within the safe harbor provisions of the Federal Securities Laws.
Speaker Change: This conference call is being webcast live on our website and will be available for replay after this call.
Speaker Change: Please note that our press that our press release and our call. Today include non-GAAP measures reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website.
Speaker Change: I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions may include forward looking statements within the safe Harbor provisions of the federal Securities laws laws.
Claudia Pou: 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, May 2nd, and we have no obligation to update any forward-looking statements we may make. During the call, we will provide a business update, along with an overview of our first quarter 2024 financial results, followed by a question and answer session. With that, I'm pleased to turn today's call over to Mr. Fugazelli.
Speaker Change: 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.
Speaker Change: Our statements are as of today may 2nd and we have no obligation to update any forward looking statements we may make.
Speaker Change: During the call.
Speaker Change: I'll provide a business update along with an overview of our first quarter 2024 financial results.
Led by a question and answer session with that increase.
Speaker Change: To turn today's call over to Mr from Gabelli.
Mohammad Abu: Thank you, Claudia, and thank you for joining us for the First Quarter 2024 Ending Results. We continue to see strong momentum in our higher margin, fresh, and value-added products, which is a key driver of our long-term growth strategy. Revenue in this segment grew by 5% year over year, fueled by strong sales of our pineapples and avocados, as well as our prepared foods. Segment-adjusted gross margins also expanded by 50 basis points as we realize production efficiencies and cost savings from our tightly integrated supply chain. Our strong cash flow allowed us to simultaneously reinvest in the West Bank, increase our dividend, and pay down our debt. During the quarter, we reduced total debt by 15% when compared to the prior year period.
Gabelli: Thank you Dan and thank you for joining us for first quarter 2024, new designs.
Speaker Change: We continued to see strong momentum in our higher margin fish.
Speaker Change: The product segment.
Speaker Change: Which is a key driver of our momentum.
Speaker Change: And growth strategy.
Speaker Change: Revenue in this segment grew by 5% year over year.
Speaker Change: By strong sales of our client outcomes at olive garden as well as our prepared towards.
Speaker Change: Segment adjusted gross margins also expanded by 50 basis points as we realized production efficiencies.
Speaker Change: Cost savings from our tightly integrated supply chain.
Speaker Change: Our strong cash flow allows us to simultaneously invest.
Speaker Change: In the business.
Speaker Change: Our dividend, while paying down our debt.
Speaker Change: During the quarter, we reduced total debt by 15%.
Speaker Change: Compared to the prior year period.
Mohammad Abu: demonstrating our commitment to maximizing shareholder value through disciplined capital allocation. We believe we will unlock further shareholder value by focusing on our strengths in pineapple, fresh cut, and value-added projects, which is exactly what we did in this first quarter. Taking a closer look at some of the drivers behind our fresh and value-added segment growth. We saw particularly strong demand for our pineapple, as a leading grower and distributor of this fruit.
Speaker Change: Further demonstrating our commitment to maximizing shareholder value.
Speaker Change: Disciplined capital allocation.
Speaker Change: We believe that will unlock further shareholder value by focusing on our strengths and pipe.
Speaker Change: Scott.
Speaker Change: These projects, which is exactly what we did in this past quarter.
Speaker Change: Taking a closer look at some of the drivers behind our fresh and value added segment growth.
Speaker Change: We saw particularly strong demand for our pineapples.
Speaker Change: As the leading grower and distributor of distraught.
Mohammad Abu: We continue to look for new and different ways to lead in the pineapple category. In the first quarter of 2024, we launched two pineapple innovations. The Ruby Glow Pineapple, our Red Shell Pineapple, which is being produced in a limited volume at a very high price point. Due to high demand and interest in North America, ruby glow pineapples are now available to consumers in the United States. Our other newly released pineapple innovation this quarter is the Precious Honey Glow Pineapple, a personal-size fresh pineapple out of our popular line of Honey Glow pineapples. Our previously launched Pin Glow and Honey Glow pineapple innovations continue to perform very well in quarter one. Net sales for the Pink Glow pineapples were up 62% compared with the same period last month. While net sales for the Honey Glow Pineapples were approximately 13%, I am concerned with the same-period loss.
Speaker Change: Continue to look for new and different ways.
Speaker Change: And despite a big category.
Speaker Change: In the first quarter of 2024, we launched two quite innovations.
Speaker Change: It will be lower by that date.
Speaker Change: Our rich.
Speaker Change: And which is being produced limited volume.
Speaker Change: At the very high price point.
Speaker Change: Due to high demand and interest.
Speaker Change: Ruby glow pipe happens are now available to consumers in the United States.
Speaker Change: Our our newly released Spike up as innovation this quarter as the precious hadn't locked by that.
Speaker Change: A person on site stretched by the build out of our popular line of highly glorified vessels.
Speaker Change: Our previously launched Pingo <unk> innovations.
Speaker Change: Continued to perform very well.
Speaker Change: Quarter one.
Speaker Change: Net changed toward the paint by numbers were up 62%.
Speaker Change: And with the same period last year.
Speaker Change: While net sales for the <unk> panel was approximately 13%.
Speaker Change: Higher compared with the same period last year.
Mohammad Abu: Pineapples represent just one growth driver within our fresh and value-added product sector. We also see tremendous opportunity in the fresh cut category, and we're pleased to share this.
Speaker Change: By not been represent just one growth driver within our fresh and value added product segments.
Speaker Change: We also see tremendous opportunity in fresh cut category.
Speaker Change: We're pleased to share base.
Speaker Change: We are pleased to share that this quarter, we further expanded our fresh cut product distribution most of America.
Mohammad Abu: We are pleased to share that this quarter we further expanded our Fresh Cut product distribution in North America, cementing our position as the market leader in Fresh Cut products for the convenience store challenge. Also on the horizon within our Fresh Cut program are new premium fruit trays, featuring specialty fruits not seen before in our program. This year, we will continue to take advantage of our robust U.S. footprints of company-owned fresh cut facilities to further grow in market share and release new value-added products to our consumers, driving shareholder value.
Speaker Change: Our position as the market leader in fresh cut products.
Speaker Change: For the convenience store channel.
Speaker Change: Also on the horizon within our fresh Cup program.
Speaker Change: Premium fruit trades, featuring speciality fluids not seen before in our program.
Speaker Change: This year, we will continue to take advantage of our robust U S footprints of company all the fresh cut facilities.
Speaker Change: Further growth and market share and released new new value added products to our consumers.
Speaker Change: Giving shareholders value.
Mohammad Abu: Our fresh cut growth strategy extends into our other regions outside of North America. In our European region, we recently completed the expansion of our primary fresh-cut production facility in the UK, which will allow us to have a significant increase in capacity. And in Asia, we saw a 36% increase in sales in quarter one from our fresh cut operations in Korea compared with the same quarter last year. Shifting to our avocado category, the category performed well this quarter, with revenue up 23% year-over-year.
Speaker Change: Our fresh cup growth strategy extends into our other regions outside of North America.
Speaker Change: Our European Division, we recently completed the expansion of our primary fresh cut production facility in the UK.
Speaker Change: Which.
Speaker Change: Which will allow us for a significant increase in capacity.
Speaker Change: And in Asia, we saw effect at best 10% to 6% increase.
Speaker Change: And sales in quarter, one from our fresh cut operations in Korea, compared with the same quarter last year.
Speaker Change: Shifting to Taiwan avocado category, the category performed well this quarter with revenue up 23% year over year.
Mohammad Abu: One of our newest innovations is our fresh guacamole product. Our fresh guacamole, made without preservatives and with Del Monte avocados, is a new product for us and is growing rapidly, and Quarter One Guacamole distribution expanded to two major retailers in the southeast and northeast regions of the U.S. We plan to continue this expansion throughout the course of the year, looking toward the remainder of 2024. We plan to continue our investments in value-added products and in expanding our pineapple and fresh cut operations, as well as maximizing our fruit residual utilization.
Speaker Change: One of our newest innovations as our fresh guacamole products, our fresh guacamole made without preservatives del Monte Carlo.
Speaker Change: Is a new product for us and is growing rapidly.
Speaker Change: In quarter, one guacamole distribution expanded to two major retailers in the southeast and northeast regions.
Speaker Change: The U S.
Speaker Change: We plan to continue this expansion throughout the course of the year.
Speaker Change: Looking towards the remainder of 2024.
Speaker Change: We plan to continue our investments in value added products and expanding our client.
Speaker Change: Our fresh cut operations as well as maximizing our fruit.
Speaker Change: <unk> utilization.
Mohammad Abu: As one of the world's largest producers of fruits, we see tremendous untapped potential in this space and have identified several profitable use cases of our residue, including biofertilizer. These ventures leverage our strengths as a business and allow us to be at the forefront of the fresh produce industry. With that, I would like to turn the call over to Monica.
Speaker Change: As one of the world's largest producers of fruits, we see tremendous.
Speaker Change: That potential in this space.
Speaker Change: Yes.
Speaker Change: Slide seven.
Speaker Change: Stable use cases of our messages.
Speaker Change: Including Biocryst devices.
Speaker Change: These ventures leverage our strength as a business and allow us to be at the forefront of the fresh produce industry.
Speaker Change: With that I would like to turn the call over to Monica.
Speaker Change: Yes.
Monica Vicente: Thank you, Mohammad. And good afternoon, everyone. And thank you for joining us on the call today. Net sales for the first quarter of 2024 were $1,108,000,000, compared with $1,129,000,000 in the prior year. The decrease in net sales in the first quarter was due to lower net sales of bananas driven by lower volume and prices, and lower rates in the third-party ocean freight business in our other products and service segments. The decrease was partially offset by higher net sales in our fresh and value-added product segment due to overall higher sales volume and price.
Monica: Thank you Mohammad and good afternoon, everyone and thank you for joining us on the call today.
Monica: Net sales for the first quarter of 2024 $1.108 billion compared with $1 billion $129 million in the prior year.
Monica: The decrease in net sales in the first quarter was due to lower net sales of bananas, driven by lower volume and pricing and lower rates in the third party Ocean freight business in our other products and service segment the.
Monica: The decrease was partially offset by higher net sales in our fresh and value added product segment due to overall higher sales volume and pricing.
Monica Vicente: Gross profit for the first quarter of 2024 was $82 million compared with $97 million in the prior year. The decrease was driven by lower overall net sales, higher per unit production, and procurement costs, including the impact of fluctuations in exchange rates, partially offset by lower distribution and ocean freight costs.
Monica: Gross profit for the first quarter of 2024 was $82 million compared with $97 million in the prior year the.
Speaker Change: The decrease was driven by lower overall net sales higher per unit production and procurement costs, including the impact of fluctuations in exchange rates partially.
Speaker Change: Offset by lower distribution and ocean freight costs.
Monica Vicente: Gross profit in the first quarter of 2024 includes $1 million net credit related to insurance recoveries associated with damages tied to the flooding of a seasonal production facility in Greece during the third quarter of 2023, partially offset by the severance charges from the outsourcing of certain functions at a fresh and value-added production operation. Gross margin for the first quarter of 2024 was 7.4% compared to 8.6% in the prior year. Excluding the impact of the other product-related charges, adjusted gross profit for the first quarter of 24 was $81 million, compared with $99 million in the prior year.
Speaker Change: Gross profit in the first quarter of 2024 includes 1 million net credit related to insurance recoveries associated with damages tied to the flooding of a seasonal production facility increased during the third quarter of 2023.
Speaker Change: Partially offset by the severance charges from the outsourcing of certain functions at our fresh and value added production operation.
Speaker Change: Gross margin for the first quarter of 2024 was seven 4% compared to eight 6% in the prior year.
Speaker Change: Excluding the impact from the other product related charges adjusted gross profit for the first quarter of 'twenty, four with $81 million compared with $99 million in the prior year.
Monica Vicente: Operating income was $44 million, compared with $75 million last year, and adjusted operating income was $31 million, compared with $51 million in the prior year. The adjusted operating income decrease was due to lower gross profit and higher SG&A expenses.
Speaker Change: Operating income was $44 million compared with $75 million last year.
Speaker Change: And adjusted operating income was 31 million compared with $51 million in the prior year.
Speaker Change: The adjusted operating income decrease was due to lower gross profit and higher SG&A expenses.
Monica Vicente: FDP net income for the first quarter of 24 was $26 million compared with $39 million in the prior year. And adjusted FDP net income was $16 million compared with $27 million last year. Our diluted earnings per share in the first quarter were $0.55 per share compared with $0.81 per share in the prior year. Adjusted diluted earnings per share was $0.34 compared with $0.55 per share in the prior year.
Speaker Change: SDP net income for the first quarter of 'twenty, four was $26 million compared with $39 million in the prior year.
Speaker Change: And adjusted FTP net income was $16 million compared with $27 million last year.
Speaker Change: Our diluted earnings per share in the first quarter was 55 per share compared with 81 per share in the prior year.
Speaker Change: Adjusted diluted earnings per share was 34 cents compared with 55 per share in the prior year.
Monica Vicente: Adjusted EBITDA for the first quarter of 2024 was $44 million compared with $65 million in the prior year, primarily driven by lower gross profit and higher SG&A. I will now go into more detail on the first quarter performance for each of the segments, beginning with our fresh and value-added product segment. Net sales for the first quarter of 2024 were up 5% to $677 million compared with $643 million in the prior year due to higher sales volume of pineapples, melons, and prepared food products, and also higher per unit selling prices of avocados.
Speaker Change: Adjusted EBITDA for the first quarter of 2024 was $44 million compared with $65 million in the prior year, primarily driven by lower gross profit and higher SG&A.
Speaker Change: I will now go into more detail on the first quarter performance for each of the segments.
Speaker Change: Beginning with our fresh and value added products segment.
Speaker Change: Net sales for the first quarter of 2024 were up 5%.
Speaker Change: 677 million.
Speaker Change: There was $643 million in the prior year due.
Speaker Change: Due to higher sales volume of pineapples, melons and prepared food products.
Speaker Change: And also higher per unit selling prices of avocados.
Monica Vicente: Gross profit for the first quarter of 2024 was $56 million compared with $47 million in the prior year. The increase was driven by overall higher net sales partially offset by higher production and procurement costs of pineapples and avocados, which were impacted by a stronger Costa Rican cologne and Mexican peso. Gross profit includes the previously mentioned other product-related charges and credit. Gross margin increased to 8.3% compared with 7.3% in the prior year. As Mohammad mentioned, this segment has been an area of intense focus for our team over the past few years.
Speaker Change: Gross profit for the first quarter of 2024 was $56 million compared with $47 million in the prior year the.
Speaker Change: The increase was driven by the overall higher net sales, partially offset by higher production and procurement cost of pineapples, and avocados, which were impacted by a stronger Costa Rica colon and Mexican peso.
Speaker Change: Gross profit includes the previously mentioned other product related charges and credits.
Monica Vicente: <unk> margin increased to eight 3% compared with seven 3% in the prior year.
Speaker Change: As Mohammad mentioned this segment has been an area of intense focus for our team over the past few years.
Monica Vicente: We have undertaken a number of strategic initiatives in this segment aimed at enhancing our product mix, improving operational efficiencies, and strengthening our distribution channels. We've continued to grow our pineapple program with the release of two new offerings this past quarter, as well as the continued growth of our popular specialty pineapples, Honey Glow and Pink Glow, which combined now represent approximately 20% of our pineapple volume. Our avocado program also delivered strong results, with revenue increasing by 23% driven by a higher sale price.
Speaker Change: We have undertaken a number of strategic initiatives in this segment aimed at enhancing our product mix, improving operational efficiencies and strengthening our distribution channels. We've continued to grow our pineapple program with the release of two new offerings, this past quarter as well as well as the.
Speaker Change: Continued growth of our popular specialty pineapples honeyed low end paint flow, which combined now represent approximately 20% of our pineapple volume.
Monica Vicente: Our avocado program also delivered strong results with revenue increasing by 23% driven by higher sales prices.
Monica Vicente: For the remainder of 2024, we continue to expect strong results in this segment.
Monica Vicente: For the remainder of 2024, we continue to expect strong results in this segment driven by favorable pineapple product mix, strong fresh cut fruit sales, and non-tropical improvements due to the current market trend. Moving to our banana segment.
Speaker Change: Driven by favorable pineapple product mix strong fresh cut fruit sales and non tropical improvements due to the current market trends.
Monica Vicente: Net sales for the first quarter were $380 million, compared with $425 million in the prior year. The decrease was driven by 5% lower volume, partially due to service level issues in the first two months, and lower selling prices due to competitive market pressures in North America and Europe. Banana gross profit in the first quarter of 2024 was $22 million, compared with $43 million in the prior year.
Speaker Change: Moving to our banana segment.
Monica Vicente: Net sales for the first quarter were $380 million compared with $425 million in the prior year.
Speaker Change: The decrease was driven by 5% lower volume, partially due to service level issues in the first two months and lower selling prices due to the competitive market pressures in North America and Europe.
Monica Vicente: Banana gross profit in the first quarter of 2024 was $22 million compared with $43 million in the prior year.
Monica Vicente: The decrease in gross profit was due to lower net sales, higher per unit production, and procurement costs, including the negative impact of a stronger Costa Rican currency, partially offset by lower distribution and ocean freight costs. Gross margin was 5.7% compared with 10.2% in the prior year. During our last earnings call, we mentioned that we expected banana volume to be similar to 2023.
Speaker Change: The decrease in gross profit was due to lower net sales higher per unit production and procurement costs, including the negative impact of a stronger Costa Rica, colon, partially offset by lower distribution and ocean freight costs.
Speaker Change: Gross margin was five 7% compared with 10, 2% in the prior year.
Speaker Change: During last earnings call, we mentioned that we expected banana volume to be similar to 2023.
Monica Vicente: However, given the competitive market pressures, we now anticipate for the full year approximately 3 to 4% lower volumes versus last year, along with softer selling prices. Lastly, net sales in our other products and services segment for the first quarter were $52 million compared with $60 million in the prior year due to lower net sales of third-party ocean freight services as a result of lower rates driven by the competitive market environment combined with the impact of the sale of our plastics subsidiary in South America in 2023.
Monica Vicente: However, given the competitive market pressures, we now anticipate for the full year to have approximately 3% to 4% lower volumes versus last year, along with softer selling prices.
Monica Vicente: Lastly, net sales in our other products and services segment for the first quarter were $52 million compared with $60 million in the prior year due to lower net sales of third party Ocean freight services as a result of lower rates driven by the competitive market environment combined with.
Speaker Change: The impact of the sale of our plastics subsidiary in South America in 2023.
Monica Vicente: Gross profit was $5 million compared with $7 million in the prior year as a result of lower net sales. Gross margin was 8.9% compared with 11.2% last year. Our expectations for the remainder of 2024 for this segment are in line with the first quarter results. Now, moving to selected financial data. Net interest expense was $5 million compared to $8 million in the first quarter of 2023 due to lower average debt balances. Income tax provision was $5 million compared to $10 million in the prior year. The decrease was due to lower earnings.
Speaker Change: Gross profit was $5 million compared with $7 million in the prior year as a result of lower net sales.
Monica Vicente: Gross margin was eight 9% compared with 11, 2% last year.
Monica Vicente: Our expectations for the remainder of 2024 for this segment are in line with the first quarter results.
Monica Vicente: Now moving to selected financial data.
Speaker Change: Net interest expense was $5 million compared to $8 million in the first quarter of 'twenty three due to lower average debt balances.
Speaker Change: Income tax provision was $5 million compared to $10 million in the prior year. The decrease was due to lower earnings.
Monica Vicente: Turning to our financial position, net cash provided by operating activities for the first three months of 2024 was $19 million compared with $16 million in the prior year. The increase was due to our efforts to optimize our networking capital, partially offset by lower net income. Long-term debt decreased by 15% to $400 million at the end of the first quarter of 2024, compared with $473 million at the end of the same quarter last year.
Speaker Change: Turning to our financial position.
Monica Vicente: Net cash provided by operating activities for activities for the first three months of 2024 with $19 million compared with $16 million in the prior year the.
Monica Vicente: The increase was due to our efforts to optimize our networking capital, partially offset by lower net income.
Monica Vicente: Long term debt decreased by 15% to $400 million at the end of the first quarter of 2024 compared with $473 million at the end of the same quarter last year.
Monica Vicente: By lowering our debt, our adjusted leverage ratio is now 1.77 times adjusted EBITDA. As it relates to capital spending, we invested $13 million in the first three months of 2024, compared with $10 million in the prior year. For the full year, we expect capital expenditures to be in the lower end of the range of 65 to 75 million.
Monica Vicente: By lowering our debt our adjusted leverage ratio is now 177 times adjusted EBITDA.
Monica Vicente: As it relates to capital spending we invested $13 million in the first three months of 2024 compared with $10 million in the prior year.
Monica Vicente: For the full year, we expect capital expenditures to be in the lower end of the range of $65 million to $75 million.
Monica Vicente: As announced in our press release, we declared a quarterly cash dividend of 25 cents per share, payable on June 7, 2024, to shareholders of record on May 16, 2024. And lastly, as it relates to manpacking and the announcement we made last quarter, we remain actively engaged in exploring strategic alternatives for this operation to determine the best path forward. We intend to make a decision by the third quarter of 2024. However, there can be no assurances that this process will result in any specific strategic outcome.
Monica Vicente: As announced in our press release, we declared a quarterly cash dividend of 25 per share payable on June seven 2024 to shareholders of record on May 16, 2024.
Monica Vicente: And lastly, as it relates to manned packing in the announcement, we made last quarter. We remain actively engaged in exploring strategic alternatives for this operation to determine the best path forward.
Monica Vicente: We intend to make a decision by the third quarter of 2024. However, there can be no assurances that this process will result in any strategic specific strategic outcome.
Monica Vicente: This concludes our financial review. We can now turn the call over to Q&A. Thank you.
Speaker Change: This concludes our financial review, we can now turn the call over to Q&A cadre.
Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. We'll take our first question from Mitch Pinheiro at Sturtevant & Company.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Operator: We will take our first question from Mitch Pinheiro at Sturtevant <unk> company.
Mitchell Brad Pinheiro: Hi, good afternoon.
Mitchell Brad Pinheiro: Yes, hi, good afternoon.
Operator: Hi Mitch, Hi Mitch,
Mitch: Hi, Mitch.
Mitchell Brad Pinheiro: And so, let me start with, Freshen Value Added had a sort of a normal, quite a nice quarter, you know, and margins look like they're advancing. Two questions. One, on the pineapple business, are the new pineapple varieties just replacing shelf space of old pineapple products or you know, regular pineapples, or are you getting is our grocery store starting to increase, you know, the shelf set for pineapple?
Operator: And so when you start with.
Mitchell Brad Pinheiro: The fresh and value added.
Mitchell Brad Pinheiro: Hi.
Mitchell Brad Pinheiro: Sort of.
Mitchell Brad Pinheiro: Normal quite a nice quarter.
Mitchell Brad Pinheiro: Margins look like they're advancing.
Mitchell Brad Pinheiro: Two.
Mitchell Brad Pinheiro: <unk>.
Mitchell Brad Pinheiro: One.
Mitchell Brad Pinheiro: On the Pineapple business is the are the new pine up over IV. So they just replacing.
Mitchell Brad Pinheiro: Self space of old pineapple.
Mitchell Brad Pinheiro: Product or regular pineapples.
Mitchell Brad Pinheiro: Or are you getting.
Mitchell Brad Pinheiro: Grocery stores starting to increase.
Mitchell Brad Pinheiro: The shelf set for pineapple.
Mohammad Abu: No, actually, Mitch, you are right. It's not replacing any of the old traditional volume that we have. Actually, it's incremental with a much higher kind of value to these new additions. So we are seeing incremental sales and incremental demand. And as a matter of fact, you know, in most cases, we are not even able to meet the demand for these special varieties.
Mitchell Brad Pinheiro: No actually met Shaw right.
Mohammad Abu: Replacing.
Mohammad Abu: All our position on volume that we have actually it's incremental with a much higher kind of value to these new additions. So we are seeing incremental sales.
Mohammad Abu: Chemical demand.
Mohammad Abu: Matter of fact in most cases, we are not even able to meet with the demand for this special varieties.
Mitchell Brad Pinheiro: And so, like, where, when, in your own fields, are these all additional acres of pineapple land? Or are you using existing land?
Mohammad Abu: And so like where when.
Mitchell Brad Pinheiro: In your own fields are these all.
Mitchell Brad Pinheiro: Additional.
Mitchell Brad Pinheiro: And how does that work from the back?
Mitchell Brad Pinheiro: Acres.
Mitchell Brad Pinheiro: Pineapple land or.
Mitchell Brad Pinheiro: Are you using existing land and how does that work from the backend.
Mohammad Abu: No, it's additional land that we already have. We have enough land to expand our production, Mitch.
Mitchell Brad Pinheiro: No.
Mitchell Brad Pinheiro: Sure.
Mohammad Abu: We already have.
Mitch: We have a plan.
Mohammad Abu: To expand our production Mitch saw.
Mohammad Abu: So any new varieties with, let's say, the honey glow, which is the high-color pineapple, are within our existing, let's say, farms. It's a different kind of management, of Agriculture Management, which gives us this advantage of producing this type of pineapple, which commands a premium over the, let's say, Del Monte Gold. But if we are talking about Pink Pineapple or Ruby Glow Pineapple, these are all additional new farmland that within our own, like, properties, you know; we have enough land to grow additional new varieties.
Mohammad Abu: And in new varieties.
Mohammad Abu: Let's say.
Mohammad Abu: They havent law, which is the high colored by that but it is within our existing.
Speaker Change: Let's say pause.
Mohammad Abu: Different kind of management.
Mohammad Abu: Agricultural management, which which which gives us this advantage of producing this type of.
Mohammad Abu: Okay.
Mohammad Abu: Which commands a premium to the.
Mohammad Abu: Let's say that a month ago.
Mohammad Abu: If we are talking about pig pineapple or.
Mohammad Abu: Ruby Global Pineapple. These are all additional new.
Mohammad Abu: Bob.
Mohammad Abu: Within our own.
Mohammad Abu: Like properties.
Mohammad Abu: We have a plan.
Mohammad Abu: To grow Additionally.
Mohammad Abu: Biases.
Mitchell Brad Pinheiro: Okay, and like by an order of magnitude. How, how, um... How much more profitable are these newer pineapple varieties compared to, you know, your regular gold pineapples?
Mohammad Abu: Okay and.
Mohammad Abu: And in order of magnitude.
Mitchell Brad Pinheiro: Hello Hello.
Mitchell Brad Pinheiro: How much more profitable are these newer pineapple varieties compared to.
Mitchell Brad Pinheiro: Your regular gold pineapple.
Mohammad Abu: By far, it's a huge, huge difference in value, I would say. I cannot tell you exactly by because, you know, it's public, it's not for public information, but it is a very significant difference in value.
Mitchell Brad Pinheiro: By far.
Mitchell Brad Pinheiro: Rich.
Mohammad Abu: <unk>.
Mohammad Abu: I would say I cannot tell you exactly Brian.
Mohammad Abu: It's public stock for public input.
Mohammad Abu: It is very significant.
Mohammad Abu: Lawrence and vet.
Mohammad Abu: Okay.
Mohammad Abu: Sure.
Mitchell Brad Pinheiro: And was that the primary, was the mix of your higher margin, higher value pineapple, more of an impact on the segment's gross margin than fresh cut, or is that contributing equally? How does that work out?
Mohammad Abu: And was that the primary is the.
Mitchell Brad Pinheiro: The mix of your higher margin higher value pineapple.
Mitchell Brad Pinheiro: Is that more of an impact on the segment's gross margin than fresh cut or are they contributing equally.
Mitchell Brad Pinheiro: That work out.
Mohammad Abu: I think they are both contributing equally, you know, they are going into tandem, you know, in terms of Marginality, both of them are commanding high margins. And this is only the beginning, you know; we are at the very beginning of our journey towards, you know, transformation, and I've been saying this for several quarters. If you remember, Mitch, we said that we were transforming the company to be much bigger and to go into much higher value added products and different avenues, which I believe as we go quarter after quarter, you will start realizing where the company is going.
Mitchell Brad Pinheiro: I think that both.
Mohammad Abu: Contributing equally in all they are going into that.
Mohammad Abu: Terms of.
Mohammad Abu: Marginality.
Mohammad Abu: Both of them are commanding a higher margins.
Mohammad Abu: This is only beginning at the very beginning of our journey towards you at all.
Mohammad Abu: Transforming and I've been saying this for several quarters, if you remember rich.
Mohammad Abu: We said that we are transforming the company to be a much and to grow into much higher value.
Mohammad Abu: AD products.
Mohammad Abu: Different.
Mohammad Abu: Which I believe as we go quarter after quarter, you will start realizing where the company is growing.
Mohammad Abu: You know, as I mentioned in my now script that we have, you know, out of our residues that we are going to have biofertilizers. This is something that we are working very seriously on, and very soon, you know, we're going to be announcing something about this new segment. So there are a lot of new, I would say, developments, avenues that we will be going into that will change the company going forward.
Speaker Change: As I mentioned in my.
Mohammad Abu: Now script that we have.
Mohammad Abu: Out of our residuals that we're going to have Biogen July as us.
Mohammad Abu: This is something that we are working very seriously at very.
Mohammad Abu: So we're going to be announcing something about this.
Mohammad Abu: New segments at all so that is there is a lot of new <unk>.
Mohammad Abu: I would say.
Mohammad Abu: Yes.
Mohammad Abu: Avenues that we would be going into that towards change the company going forward.
Mitchell Brad Pinheiro: Okay, thank you for that. And then a question on bananas. I guess, Monica, if I heard you correctly, you said that for the year you expect... lower volumes in the 3% to 4% range for bananas.
Speaker Change: Okay. Thank you for that and then.
Mitchell Brad Pinheiro: <unk> on bananas.
Mitchell Brad Pinheiro: I guess monarch, if I heard you correctly you saw.
Mitchell Brad Pinheiro: <unk> said that for the year you expect.
Mitchell Brad Pinheiro: Lower volumes in the 3% to 4% range for <unk>.
Monica Vicente: Yes. Along with lower selling prices? Yes. Yes, we expect, you know, the market is very competitive right now, and we do expect to have lower volume and softer selling prices.
Mitchell Brad Pinheiro: Yes.
Mitchell Brad Pinheiro: Lower selling prices.
Monica Vicente: Yes.
Monica Vicente: Yes, we expect the market is very competitive right now and we do expect to have the lower volume in low end softer selling prices.
Mitchell Brad Pinheiro: And there is competitiveness in both Europe and North America.
Monica Vicente: And this is the competitiveness.
Mitchell Brad Pinheiro: In both Europe.
Mitchell Brad Pinheiro: And North America North America.
Mitchell Brad Pinheiro: Yes.
Monica Vicente: Yes. Is one more competitive than... Yeah, I would like to add to this, Mitch, that the market, consumption is going down. Actually, as we have seen statistically, there is about 5% less consumption in the market in North America compared to the year before. So we are seeing a tendency for lower, let's say, volume and sales in North America and actually, as well, in Europe. We don't know why, but this is the trend that we are seeing right now.
Speaker Change: One more.
Monica Vicente: Yes, I would like to add to this mitch that the market the consumption is being grown.
Monica Vicente: Going down actually as we have seen statistics.
Monica Vicente: There is about 5% less consumption in the market in North America compared to the year before so we are seeing a tendency for lower.
Monica Vicente: Let's say.
Monica Vicente: Volume and sales in North America.
Monica Vicente: Actually as well in Europe.
Monica Vicente: Now when you think about this.
Monica Vicente: Okay.
Monica Vicente: We don't know why but this is the trend that we're seeing right now.
Mitchell Brad Pinheiro: Sounds like to me they're eating more pineapples.
Mitch: So it sounds like to me they are reading more more pineapple.
Mitchell Brad Pinheiro: Yeah. Happy to. Okay. [inaudible] So, okay, and then as far as, so as we look, you know, into the future, you don't have a lot of visibility, but if you look into the next quarter, is the second quarter more the same for bananas?
Mitchell Brad Pinheiro: Yes.
Mitchell Brad Pinheiro: Hello.
Mitchell Brad Pinheiro: How do you grow so.
Mitchell Brad Pinheiro: Okay, and then as far as.
Mitchell Brad Pinheiro: So as we look.
Mitchell Brad Pinheiro: Into the you don't have a lot of visibility, but if you look into the next quarter.
Mitchell Brad Pinheiro: Is the second quarter more of the same for bananas.
Mohammad Abu: I would say more or less the same trend; it will go on, you know. Unless there are more efficiencies, better service levels, and less headwinds that we have faced in the first quarter, you know, and especially for bananas, you know, we're always susceptible to some factors or variables that we cannot control, which happened in the first quarter this year: disruption in shipping, some quality issues, some service issues. So as we speak, as we go forward, we hope that this will stabilize. We believe it's going to be stabilized. We don't want to be too optimistic, but let's take this scenario as today's scenario as being the one for the second quarter.
Mitchell Brad Pinheiro: I would say more or less the same.
Mohammad Abu: It will go on.
Mohammad Abu: Unless there is more efficiencies better service levels and less headwinds that we have faced in the first quarter.
Mohammad Abu: Especially in bananas.
Mohammad Abu: <unk>.
Mohammad Abu: You are always.
Mohammad Abu: Susceptible to some.
Mohammad Abu: The factors or variables that we cannot control.
Mohammad Abu: Which happened in the first quarter this year of disruption in the shipping.
Mohammad Abu: Some.
Mohammad Abu: Quality assurance subsurface issues.
Mohammad Abu: As we speak as we going forward.
Mohammad Abu: We hope that this will stabilize we believe it's going to be stabilized, we don't want to be too optimistic but lets take the scenario is today's scenario as being the <unk>.
Mohammad Abu: For the second quarter and mentioned in Q1, we had a 5% decrease in volume and for the full year like I said, we expect 3% to 4%. So we do expect to recover a little bit not as sad as down as of Q1.
Monica Vicente: And Mitch, in Q1, we had a 5% decrease in volume. And for the full year, like I said, we expect 3% to 4%. So we do expect to recover a little bit, not as much as in Q1.
Mohammad Abu: One of our biggest headwinds, really, in the quarter was the exchange rate in Costa Rica has been really decimating the industry. I mean, we're talking about year-to-year differences of about 20 colonies, difference, I mean 20 points, difference between one year and the next. I mean, we were exchanging, let's say, a dollar for 520 colonies, and this year it's almost around 500. So for the last few months, since late last year, it's been really, very big headwinds for us.
Monica Vicente: Biggest headwinds if any in the quarter was the.
Mohammad Abu: The exchange rates in Costa Rica is being renamed the cementing.
Mohammad Abu: Industry I mean, we.
Mohammad Abu: We're talking about.
Mohammad Abu: Year to year.
Mohammad Abu: One <unk>.
Mohammad Abu: Carload is different I mean 20 points.
Mohammad Abu: It's between one year to the next I mean, we were exchanging let's say about four or 520 kilometers and this year. It's almost 500 sold for the last few months since the <unk>.
Mohammad Abu: Late last year.
Mohammad Abu: Really very big headwinds for us.
Mitchell Brad Pinheiro: What's the driver of the, I don't pay attention to the... The Costa Rican monetary situation, what's driving the flux, you know, the decline? Too many dollars.
Mohammad Abu: Whats the driver of the I don't pay attention to the.
Mitchell Brad Pinheiro: The Costa Rican monetary situation, what's driving.
Mitchell Brad Pinheiro: The decline.
Mohammad Abu: Too many dollars, I guess, in the market, which puts pressure on the... I mean, the local currency became very weak.
Mitchell Brad Pinheiro: Germany.
Speaker Change: Yes, the market, which which put pressure on the.
Mohammad Abu: The local currency became very very strong.
Mohammad Abu: Right right.
Mitchell Brad Pinheiro: Okay. So, and there's little you can do about it, right? There's no, that's where your primary production comes in. Difficult to hedge the cologne that there's not enough liquidity.
Mohammad Abu: Okay.
Speaker Change: And there's little you can do about it right there is no.
Mitchell Brad Pinheiro: Yes.
Speaker Change: Got it.
Mitchell Brad Pinheiro: Difficult to hedge the colon, but there's not enough liquidity.
Mitchell Brad Pinheiro: You're right, right, okay. That's all I have. Thanks for the question. Thank you very much.
Mitchell Brad Pinheiro: Alright.
Mitchell Brad Pinheiro: Okay.
Mitchell Brad Pinheiro: That's all I have thanks for the questions. Thank.
Speaker Change: Thank you Matt Thank you Mitch.
Mitchell Brad Pinheiro: Okay.
Mohammad Abu: And that concludes our Q&A session. I will now turn the conference back over to Mohammad for closing remarks.
Mitchell Brad Pinheiro: And that concludes our Q&A session I will now turn the conference back over to Muhammed for closing remarks.
Mohammad Abu: Thank you very much everyone for attending this call and hope to speak to you over the next quarter.
Mohammad Abu: With EBIT brighter news thank you.
Operator: And this concludes today's conference call. Again, thank you for your participation. You may now disconnect. Please wait; the conference will begin shortly.
Mohammad Abu: This concludes this concludes today's conference call again. Thank you for your participation you may now disconnect.
Operator: Yes.
Mohammad Abu: Thank you very much, everyone, for attending this call. I hope to speak to you in the next quarter with even brighter news. Thank you. This concludes today's conference call. Again, thank you for your participation. You may now disconnect.
Mohammad Abu: Yes.
Mohammad Abu: [music].
Operator: Copyright 2013 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.
Operator: Yeah.
Operator: Yes.
Operator: Yes.
Operator: [music].