Q1 2025 Fresh Del Monte Produce Inc Earnings Call
Good day, everyone and welcome to fresh del Monte produce its first quarter 2025 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. After the speakers' remarks, there will be a question.
And the answer session. If you would like to ask a question during that time simply press Star then the number one on your telephone keypad to withdraw your question Press Star one again for.
Speaker Change: For opening remarks, and introductions I would like to turn today's call over to the Vice President Investor Relations with fresh del Monte produce Ms. Christine Cannella. Please go ahead Ms Cannella.
Christine Cannella: Thank you Regina good afternoon, everyone and thank you for joining our first quarter 2025 conference call. Joining me in today's discussion are Mr. Mohammad Abu <unk>, Chairman and Chief Executive Officer, and MS. Monica Mu, Sanjay Senior Vice President and Chief Financial Officer.
Christine Cannella: I hope that you've had a chance to review the press release that was issued earlier via business wire. You May also visit the company's IR website at Investor Relations, Dr. Fresh del Monte Dot Com to access today's earnings materials and to register for future distributions. This conference call is being webcast live.
Christine Cannella: Live on our website and will be available for replay after this call. Please.
Christine Cannella: Please note that our press release and our call. Today include non-GAAP measures reconciliation of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website.
Christine Cannella: I would like to remind you that much of the information we will be speaking to today, including the answers we give a response to your questions may include forward looking statements within the Safe Harbor provisions of the Federal Securities laws in today's press release and in our SEC filings, we detail risks.
Christine Cannella: That may cause our future results to differ materially from these forward looking statements are statements are as of today April 30th and we have no obligation to update any forward looking statement, we may make.
Christine Cannella: During the call we will provide a business update along with an overview of our first quarter 2025 financial results followed by a question and answer session.
Speaker Change: With that I will turn today's call over to Mr. Mohammad Abu Ghezali. Please go ahead.
Thank you Christine.
Speaker Change: And thanks, everybody on this call for joining us for our first quarter of 2025.
Speaker Change: Next call.
Speaker Change: We began the year with continued momentum.
Speaker Change: Building on the progress we made throughout 2024.
Speaker Change: Our results this quarter reflect a strong start driven by solid demand in key categories.
Speaker Change: A more optimized product mix.
Speaker Change: Our continued focus on operational efficiency.
Speaker Change: We saw meaningful year over year improvements in both gross profit and gross margin.
Speaker Change: Particularly within our fresh and value added segments.
Speaker Change: The effectiveness of our strategy and discipline.
Hi, its execution.
Speaker Change: <unk> continued to perform well.
Speaker Change: With demand once again exceeding supply.
Speaker Change: A clear reflection of our leadership this cordless store category.
Speaker Change: Leveraging that leadership, we are closely tracking global production conditions and actively managing the ongoing imbalance between supply and demand.
Speaker Change: As consumption continues to grow across markets, we have taken strategic steps to strengthen our supply continuity.
Speaker Change: And secure consistent availability for our customers, allowing us to stay ahead of the curve.
Speaker Change: Yes.
Speaker Change: <unk> future my bet.
Speaker Change: At the same time.
Speaker Change: We continue to see strong consumer.
Speaker Change: Because those are fresh cut throat.
Speaker Change: Two categories.
Speaker Change: Turning to our long term growth strategy.
Speaker Change: These products play an increasingly important role and how consumers engage with fresh fresh fresh produce.
Speaker Change: And they are a critical part of our expansion plans, which we look forward to sharing in more detail in the months ahead.
Speaker Change: This quarter further demonstrated the operational resilience provided by our vertically integrated supply chain.
Speaker Change: Particularly.
Speaker Change: The assistant global shipping disruptions marked by quotes data equipment scarcity.
Speaker Change: Constraints vessel capacity add escalating port of gestures.
Speaker Change: Today.
Speaker Change: To date, we have been able to launch products with minimal to no delays.
Speaker Change: Giving our customers 11 of service continue with you that few can match.
On the topic of agility. It is important to address the current conversation around tariffs.
Speaker Change: The situation is evolving quickly.
Speaker Change: Monitoring it closely.
Speaker Change: Now none of our major growing countries have been hit with additional tariffs beyond the existing debt.
Speaker Change: Baseline.
Speaker Change: I would like to highlight a key strategic more from this past quarter.
Speaker Change: In March we announced our acquisition of a majority stake in our volume.
Speaker Change: Why don't orgasm does lead zinc avocado oil producers. This is more of that supply chain investment. It is a clear example of our strategy strategy in action.
Speaker Change: We believe that this investment will allow us take avocados that they've not made fresh market standards and convert them into premium avocado oil.
Speaker Change: That means less waste more value add a stronger foothold in our fast growing higher margin categories.
Speaker Change: This investment ties directly to our vision for 2005 through 2007.
Speaker Change: Maximizing through transduce, creating value added solutions.
Speaker Change: Advancing sustainability across every part of our business.
Speaker Change: Now that we have closed out a strong first quarter.
Speaker Change: I think this is a good moment to share how we're thinking about the future and what we see as our North star.
Speaker Change: As we look ahead through 2007.
Speaker Change: Our vision is to lead the industry in fresh and value added products.
Speaker Change: Thank God.
Speaker Change: Our commitment to quality innovation and sustainability.
Speaker Change: It's about doing more with what we grow turning waste into opportunity and making sure every resource is yours with purpose.
Speaker Change: Our mission is to deliver products our customers can trust.
Speaker Change: So I think youll farming advanced operations and sustainable practices.
Speaker Change: At the core of all of it all is our stated plan update.
Speaker Change: Which continues to set the standard for everything we do.
Speaker Change: To bring this vision to life through our focus on five key positions.
Speaker Change: Innovating.
Speaker Change: And diversify our product portfolio.
Speaker Change: Using resources more efficiently and reducing waste.
Speaker Change: Driving operational excellence through automation and integration.
Speaker Change: Expanding globally, while reducing our reliance on <unk>.
Speaker Change: Any one market.
Speaker Change: And investing in our people and building lasting trust.
Speaker Change: That's the future building towards focused purpose, driven and designed to create long term value for everywhere for everyone. We sense from our customers consumers and business partners to our shareholders and the environment, we all depend upon.
Speaker Change: With that I will turn over to Monica to discuss our first quarter 'twenty five results ended Dave. Thank you. Thank you Mr. Lucas that Lee and good morning, everyone and thank you for joining us on today's call.
Monica: We'll begin with our financial results for the first quarter of 2025, and then I will share our outlook for the remainder of the year.
Christine Cannella: Christine mentioned, our press release and our call today includes 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.
Monica: Now, let's move on to our financial results for the first quarter of 2025.
Monica: Net sales were $1.098 billion compared with $1 billion $108 million in the prior year.
Monica: The decrease was driven by lower net sales in our banana segment, primarily a result of lower sales volume and the negative impact of fluctuations in exchange rates, partially offset by higher net sales in our fresh and value added product segment.
Monica: Driven by higher per unit selling prices.
Monica: Gross profit for the first quarter of 2025 with $92 million compared with $82 million in the prior year.
Monica: The increase in gross profit for the quarter was driven by higher net sales in our fresh and value added product segment, partially offset by higher per unit production procurement and distribution costs.
Monica: Gross margin for the first quarter was eight 4% compared with seven 4% in the prior year.
Monica: This also includes this also reflects a sequential increase from six 8% in the fourth quarter of 2024.
Monica: Adjusted gross profit for the first quarter was $92 million compared with $81 million last year.
Monica: Operating income for the first quarter of 2025 was $45 million compared with $44 million last year.
Monica: The increase in operating income was driven by higher gross profit, partially offset by lower gains on disposal of property plant and equipment net.
Monica: Adjusted operating income was $44 million compared with $31 million in the prior year.
Monica: Other expense net for the first quarter was $3 million compared with $8 million in the prior year.
The decrease was primarily due to lower foreign currency losses.
Monica: Net income attributable to fresh del Monte for the first quarter of 2025 was $31 million compared with $26 million in the prior year.
Monica: And adjusted <unk> net income was $30 million compared with $16 million last year.
Monica: Our diluted EPS for the first quarter was <unk> 64 per share compared with 55 cents in the prior year.
Monica: Adjusted diluted EPS was <unk> 63, compared with 34 per share last year.
Monica: Adjusted EBITDA for the first quarter of 2025 was $61 million or 6% of net sales compared with $44 million or 4% in the prior year.
Monica: I will now go into more detail on our first quarter 2025 performance for each of our segments, beginning with our fresh and value added products segment.
Monica: Net sales for the first quarter of 2025 were $683 million compared with 677 million in the prior year.
Monica: The increase in net sales was primarily a result of higher per unit selling prices in our avocado product line.
Monica: And higher sales volume and per unit selling prices in our fresh cut fruit product line in North America.
Monica: Strong market demand.
Monica: The increase was partially offset by lower net sales in our fresh cut vegetable and vegetable product lines due to our strategic operation and reductions in the fourth quarter of 2024, which also included the sale of certain assets of freshly farms.
Monica: Gross profit was $69 million compared with 56 million in the prior year.
Monica: The increase in gross profit was primarily driven by higher per unit selling prices in our pineapple and Maryland product lines, partially offset by higher per unit production procurement and distribution costs.
Monica: Gross margin increased to 10, 1% in the first quarter compared with eight 3% in the prior year.
Monica: This also reflects an improvement from seven 5% in the fourth quarter of 2024 and.
Monica: Nine 3% for the full year 2024.
Monica: We're making solid progress towards our goal of delivering double digit gross margins in the low teens for this segment as we continue to improve our product mix.
Monica: Moving to our banana segment net sales were $364 million compared with $380 million in the prior year.
Monica: The decrease in net sales was primarily a result of lower sales volume and per unit selling prices in Asia.
Monica: Due to a combination of lower market demand and excess industry supply.
Monica: Along with lower leg lower sales volume in North America, due to lower industry supply and weather related logistic disruptions.
Monica: Additionally, net sales were negatively impacted by fluctuations in exchange rates due to a weaker euro and Korean won the.
Monica: The decrease was partially offset by higher per unit selling prices in North America.
Monica: Gross profit was $17 million compared with $22 million in the prior year.
Monica: The decrease in gross profit was driven by lower net sales and higher per unit production and procurement costs.
Monica: Gross margin decreased to four 6% compared to five 7% in the prior year.
Monica: Lastly, our other products and services segment.
Monica: Net sales were $51 million in line with the prior year.
Monica: Gross profit was $6 million compared with $5 million last year.
Monica: The increase in gross profit was primarily due to higher per unit selling prices in our poultry and meat business.
Monica: Gross margin increased to 11, 9% compared with eight 9% last year.
Monica: Now moving to selected financial results for the first quarter 2025.
Monica: Our income tax provision was $7 million compared with $5 million in the same period last year.
Monica: The increase in income tax was primarily due to increased earnings and certain higher tax jurisdictions.
Monica: Our effective tax rate for the first quarter was 18%.
Monica: Net cash provided by operating activities for the first quarter of 2025 was $46 million compared with $19 million in the prior year.
Monica: The increase in net cash provided by operating activities was primarily due to working capital fluctuations, mainly driven by higher levels of accounts payable and accrued expenses lower levels of accounts receivable and higher net income.
Monica: The increase was partially offset by higher levels of inventory when compared to the prior year period.
Monica: We ended the first quarter of 2025 with $233 million of long term debt and $11 million or 5% reduction from $244 million at fiscal year end 2024.
Monica: And also a decrease of 42% compared with the prior year period.
Monica: Our adjusted leverage ratio is less than one times EBIT.
Monica: Our capex investment for the first three months of 2025 was $10 million compared with $13 million in the prior year.
Monica: As announced in our press release, we declared a quarterly cash dividend of <unk> 30 per share payable on June six 2025 to shareholders of record on May 14, 2025.
Monica: On an annualized basis. This equates to $1 20 per share representing a dividend yield of three 5% based on our current share price.
Monica: Also during the first quarter of 2025, we repurchased seven $6 million or 254000 shares of our common stock at an average price of $29 97.
Monica: As part of our $150 million share repurchase program.
Monica: These actions reflect our commitment to a strong sustainable dividend and a balanced capital allocation strategy that includes opportunistic share repurchases.
Monica: As we look ahead, excluding the impact of tariffs and recent macroeconomic developments. We continue to expect full year 2025 results to be in line with the outlook. We shared during our yearend earnings call in February.
Monica: Which reflects our confidence in our strategic initiatives and current visibility into our business.
Monica: That said, we continue to closely monitor developments related to the evolving tariff situation or other geopolitical developments that remains fluid at this time.
Monica: We reiterate our expectations for the full year of 2025, we.
Monica: We expect to see net sales grow 2% year over year and as far as gross margins by business segment.
Monica: In our fresh and value added segment gross margin is expected to be in the range of 10% to 11% in.
Monica: In our banana segment gross margin is expected to be in the historical range of 5% to 7%.
Monica: For our other products and services segment gross margin is expected to be in the range of 12% to 14%.
Monica: As far as our selling general and administrative expenses, we expect that to be in the range of $205 million to $210 million.
Monica: Our projected capex are expected to be in the range of $80 million to $90 million.
Monica: And we expect next net cash provided by operating activities to be in the range of $180 million to $190 million.
Monica: We recognize that the current environment marked by carriage global tensions and possible logistical uncertainties continues to evolve.
Monica: We have weathered external disruptions before and our diversified sourcing strategy is designed for resilience our product mix remains in demand and we're focused on long term value creation.
Monica: The fundamentals of our business have not changed.
Regina: This concludes our financial review, we can now turn the call over to Regina.
Speaker Change: We will now begin the question and answer session. Our first question will come from the line of Mitch Pinheiro with <unk> capital. Please go ahead.
Regina: Okay.
Mitch Pinheiro: Yes, Hi, good morning can you hear me.
Regina: Good morning, Mitch, Yes, we can hear you good.
Speaker Change: Good morning.
Regina: Great Good morning so.
Regina: Yes.
Speaker Change: But I was wondering if you could talk a little bit about.
Regina: The produce category in your categories within that.
Regina: What youre seeing in terms of demand.
Regina: We've obviously the consumers under pressure.
Regina: But what are you seeing in your categories relative to that.
And what you expect here in the next quarter or so.
Regina: What we see is a very well.
Regina: But getting a solid.
Regina: Demand in the in our sector, which is the fresh produce fruits or vegetables.
Regina: We don't see any kind of reductions.
Regina: Demand or consumption.
Regina: I believe this will continue as we are very kind of basic.
Regina: Reasonably priced.
Regina: Segment in terms of.
Regina: Cost so I'm confident that this is not going to change as a matter of fact you at all.
Regina: Disruption that is happening right now in the market, sometimes opens opportunities for us which.
Regina: We are looking at.
Regina: Maybe.
Regina: A good time for us.
Regina: Rob.
Regina: Picking up some some good.
Regina: Opportunities there.
Regina: So yes.
Regina: It's interesting what are you are.
Regina: Are you seeing.
Regina: <unk>.
Regina: Significant players.
Regina: In the industry having.
Regina: Sort of.
Regina: Logistic issues that youre going to take advantage of or.
Regina: Is it you know.
Regina: More broadly just.
Regina: Some of the weaker players sort of more broadly having issues.
Regina: Hi.
Regina: And it remains that Mitch actually at all.
Regina: With this kind of environment that we are going through the disruption based on the logistics side.
Regina: On all fronts, clearly has put general I would say put small medium sized companies.
Operators at a disadvantage because of the Ah <unk>.
Regina: Hardships that is being created by these disruptions. So in our case, yes, we are very flexible where they're very very agile.
Regina: We can adapt to the situation our logistical.
Regina: Full integration from the supply chain gives us a very big leverage in terms of.
Regina: Being able to move forward without any disruptions or interruptions in our operations and that's most important thing is that your.
Regina: All.
Regina: Your customers' demands audio customer requirements are fulfilled on time.
Regina: Without disruptions and that's that.
Regina: Really the big.
Regina: Element here.
Regina: This situation is between somebody that can deliver it on time in full and someone that getting up to that so.
Regina: All right. What you just mentioned is very true.
Regina: Let me ask.
Regina: So with regard to the 10% baseline tariffs.
Regina: What.
Regina: What's happening in the market are we seeing.
Speaker Change: Producers, such as yourself and retailers passing it through to the consumer is there any.
Regina: Any part of the <unk>.
Speaker Change: Sales processes seeing any particular.
Speaker Change: Group eating some of the tariffs to keep prices low are you going to pass it all through.
Speaker Change: We have been mitigating this.
Speaker Change: And a very friendly.
Speaker Change: Cooperative way with our.
Speaker Change: Buyers you at all.
Speaker Change: Not really to negatively.
Speaker Change: Negatively impact the consumers.
Speaker Change: So we are working very closely with our bias to mitigate this.
Speaker Change: Increase which I believe.
Speaker Change: For the best for the good of buyers.
Speaker Change: As well so yes, we are mitigating this with our buyers.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change:
Speaker Change: You mentioned in the prepared remarks are on the slides that.
Speaker Change: Part of the margin driver in the fresh and value added was pineapple.
Speaker Change: And I guess in melons.
Speaker Change: I was curious how you were doing in <unk>.
Speaker Change: Avocado.
Speaker Change: Avocado was doing very well.
Speaker Change: As Steve mentioned.
Speaker Change: This category is growing and we are diversifying as well.
Speaker Change: Sourcing from Peru, Colombia, and other places so this yes.
Speaker Change: Believe that this segment.
Speaker Change: Segment of the business is.
Speaker Change: Keep growing.
Speaker Change: Going forward.
Speaker Change: But it's not only by the hour.
Speaker Change: <unk> and fresh cut we do have other items right now.
Speaker Change: Maybe small not to mention that we are not any significant manner, but they are started to be becoming very important also.
Speaker Change: Part of our portfolio IBM.
Speaker Change: The logistics side. This is one side.
Speaker Change: All.
Speaker Change: New business is that we are just in the infancy.
Speaker Change: Page at all on the residues.
Speaker Change: As we go forward you know quarter after quarter year after year this will be very meaningful.
Speaker Change: Going forward we.
Speaker Change: Cannot just say right now what we are doing but everything that will happen in the next few quarters will be announced.
Speaker Change: We'll be kind of.
Speaker Change: Highlighted to the market.
Speaker Change: Because there are many things in the pipeline that is already.
Speaker Change: Started at all.
Speaker Change: Rob.
Speaker Change: One way or the other step dropping.
Speaker Change: And some of it.
Speaker Change: In lithium.
Speaker Change: Like on the Biocryst analyzers like.
Speaker Change: Even on convention of fertilizers that we started at all.
Speaker Change: Working on.
Speaker Change: Chip.
Speaker Change: Distribution.
Speaker Change: We are talking here about.
Speaker Change: Margins in the high.
<unk>.
Speaker Change: And things like that so this business as they grow and they are growing.
Speaker Change: We'll have as significant.
Speaker Change: In fact, we'll get it all.
Results going forward to the future.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And then we appoint your fresh cut.
Speaker Change: Where.
Speaker Change: You absorbed a lot of that.
Speaker Change: The Newark capacity you added.
Speaker Change: We should see more stable and increasing sort of margins as you leverage those fixed costs.
Speaker Change: At that point, where.
Speaker Change: Where you are beyond.
Speaker Change: Even some volume disruptions that you can still maintain.
Speaker Change: Pretty strong margins in that area.
Speaker Change: Yes, I think we do I believe that our fresh cut fruit operation is getting stronger year. After year you at all and.
Speaker Change: With our rationalization and increased efficiency and better sourcing that.
Speaker Change: That gives us the leverage to continue performing.
Mitch Pinheiro: Similarly, or even better going forward the future Mitch so I'm not very concerned about the fresh cut I think.
Mitch Pinheiro: Just to give you an example, with our fresh guacamole, which we started let's say less than a year ago.
Mitch Pinheiro: Having double digit growth quarter over quarter.
Mitch Pinheiro: We'll get up Corp, even with demand.
Mitch Pinheiro: Okay.
Mitch Pinheiro: And then last question was on the Pineapple business, obviously, it's your core business.
Mitch Pinheiro: What drives everything at your firm at your company, but.
Mitch Pinheiro: Why.
Mitch Pinheiro: You just go back.
Mitch Pinheiro:
Mitch Pinheiro: Obviously pineapples had been in short supply for a little bit, but what what what was driving that.
Mitch Pinheiro: And how.
Mitch Pinheiro: How long does it take for supplies to normalize.
Mitch Pinheiro: From this point.
Mitch Pinheiro: Let's put it in another way maybe consumption is increasing and demand is increasing and that's why we see now more or less.
Mitch Pinheiro: Supply is a little bit shorter than the demand.
Mitch Pinheiro: Saying drastically shorter, but little bit short of that demand.
Mitch Pinheiro: I think the major factor here is that the demand and consumption is increasing if you look at the price of pileup as compared to any other fruit on.
Mitch Pinheiro: On the shelf be apparel grapes.
Mitch Pinheiro: Berries or for any other through it you will realize that the cost of buying apple compared to address is quite favorable.
Mitch Pinheiro: Hi.
Mitch Pinheiro: Still inexpensive to I mean, as a family as a household I would take a pint up and that can feed the whole 70 at all maybe for two days.
Mitch Pinheiro: Rather than having two pounds of apples or oranges that will close with three times as much so I believe.
Mitch Pinheiro: This is one of the factors why we see more consumption plan update.
Mitch Pinheiro: <unk> from the <unk>.
Mitch Pinheiro: The young generation realizing that the hedge.
Mitch Pinheiro: <unk> of pileup as well is extremely high.
Mitch Pinheiro: Compared to other fruits.
Mitch Pinheiro: Several factors playing here.
Mitch Pinheiro: One is the.
Mitch Pinheiro: Is price compared to others as well as the.
Mitch Pinheiro: All of the has a wellness benefits coming from putting up as well, but that other fruits.
Mitch Pinheiro: And I also think your honey glow.
Mitch Pinheiro: As you know are fantastic.
Mitch Pinheiro: Pineapple variety and I think that in and of itself getting that kind of a quality of pineapple.
Mitch Pinheiro: I would also induce.
Mitch Pinheiro: Demand.
Mitch Pinheiro: Continued purchasing of that of that product so.
Mitch Pinheiro: Kudos.
Mitch Pinheiro: To you.
Mitch Pinheiro: Kudos to you for the innovation in that in your other.
Mitch Pinheiro: Your other.
Speaker Change: Pink glow and Ruby glow and others innovations.
Mitch Pinheiro: Thats all I have here.
Mitch Pinheiro: Thank you for your time and the answers. Thank you Mitch I appreciate it. Thank you very much for your comments.
Speaker Change: Again, Brian a question simply press Star one on your telephone keypad.
That will conclude our question and answer session and I will now hand, the call back over to Mr. Mohammad Abu <unk> for closing remarks.
Mohammad Abu: Thank you so much I would like to thank everyone today for how big this.
Mohammad Abu: It will be with us here and hope to talk to you or it's better news on our next quarter. Thank you have a good day.
Mohammad Abu: Ladies and gentlemen that will conclude today's meeting. Thank you all for joining you may now disconnect.
Mohammad Abu: Please wait the conference will begin shortly.
Mohammad Abu: Sure.
Mohammad Abu: Yes.
Mohammad Abu: [music].
Mohammad Abu: Yeah.
Mohammad Abu: Yes.
Mohammad Abu:
Mohammad Abu: Yes.
Mohammad Abu: [music].