Title

Presentation

Fresh Del Monte Produce Inc. misses on earnings expectations. Reported EPS is $0.644 EPS, expectations were $1.

Operator: Good day, everyone. And welcome to Fresh Del Monte Produce’s 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 speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] 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-Ghazaleh, Chairman and Chief Executive Officer; and Ms. Monica Vicente, Senior Vice President and Chief Financial Officer. I hope that you 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 investorrelations.freshdelmonte.com to access today’s earnings materials and to register for future distribution. 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 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. 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, April 30th, 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 first quarter 2025 financial results, followed by a question-and-answer session.

With that, I will turn today’s call over to Mr. Mohammad Abu-Ghazaleh. Please go ahead.

Mohammad Abu-Ghazaleh: Thank you, Christine. And thanks, everybody, on this call for joining us for our first quarter of 2025 earnings call. We began the year with continued momentum, building on the progress we made throughout 2024. Our results this quarter reflect strong starts driven by solid demand in key categories, a more optimized product mix and continued focus on operational efficiency. We saw meaningful year-over-year improvements in both gross profit and gross margin, particularly within our Fresh and Value-Added segment, affirming the effectiveness of our strategy and the discipline behind its execution. Pineapples continued to perform well, with demand once again exceeding supply, a clear reflection of our leadership in this cornerstone category.

Leveraging that leadership, we are closely tracking global production conditions and actively managing the ongoing imbalance between supply and demand. As consumption continues to grow across markets, we have taken strategic steps to strengthen supply continuity and secure consistent availability for our customers, allowing us to stay ahead of the curve and better anticipate future demand. At the same time, we continue to see strong consumer interest in avocados and fresh-cut fruit, two categories that are central to our long-term growth strategy. These products play an increasingly important role in how consumers engage with fresh produce, and they are a critical part of our expansion plans, which we look forward to sharing in more detail in the months ahead.

This quarter further demonstrated the operational resilience provided by our vertically integrated supply chain, particularly amidst persistent global shipping disruptions marked by container equipment scarcity, constrained vessel capacity and escalating port congestion. To-date, we have been able to move products with minimal to no delays, giving our customers a level of service continuity that few can match. On the topic of agility, it is important to address the current conversation around tariffs. The situation is evolving quickly and we are monitoring it closely. As of now, none of our major growing countries have been hit with additional tariffs beyond the existing 10% baseline. I would like to highlight a key strategic move from this past quarter.

In March, we announced our acquisition of a majority stake in Avolio, one of Uganda’s leading avocado oil producers. This is more than a supply chain investment. It is a clear example of our strategy in action. We believe that this investment will allow us to take avocados that may not meet fresh market standards and convert them into premium avocado oil. That means less waste, more value and a stronger foothold in a fast-growing, higher-margin category. This investment ties directly to our vision for 2025 through 2027, maximizing fruit residues, creating Value-Added solutions, and advancing sustainability across every part of our business. Now that we have closed out a strong first quarter, I think this is a good moment to share how we are thinking about the future and what we see as our north star.

As we look ahead through 2027, our vision is to lead the industry in Fresh and Value-Added Products, anchored in our commitment to quality, innovation and sustainability. It’s about doing more with what we grow, turning waste into opportunity and making sure every resource is used with purpose. Our mission is to deliver products our customers can trust through ethical farming, advanced operations and sustainable practices. And at the core of it all is our strength in pineapple, which continues to set the standard for everything we do. To bring this vision to life, we have focused on five key positions. Innovating and diversifying our product portfolio, using resources more efficiently and reducing waste, driving operational excellence through automation and integration, expanding globally while reducing reliance on any one market, and investing in our people and building lasting trust.

That’s the future we are building towards, focused, purpose-driven and designed to create long-term value for everyone we serve, from our customers, consumers and business partners to our shareholders, and the environment we all depend on. With that, I will turn it over to Monica to discuss our first quarter 2025 results in detail. Thank you.

Monica Vicente: Thank you, Mr. Abu-Ghazaleh, and good morning, everyone, and thank you for joining us on today’s call. I will begin with our financial results for the first quarter of 2025 and then I will share our outlook for the remainder of the year. As Christine mentioned, 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. Now let’s move on to our financial results for the first quarter of 2025. Net sales were $1,098 million, compared with $1,108 million in the prior year. 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, driven by higher per unit selling prices.

Gross profit for the first quarter of 2025 was $92 million, compared with $82 million in the prior year. 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. Gross margin for the first quarter was 8.4%, compared with 7.4% in the prior year. This also includes — this also reflects a sequential increase from 6.8% in the fourth quarter of 2024. Adjusted gross profit for the first quarter was $92 million, compared with $81 million last year. Operating income for the first quarter of 2025 was $45 million, compared with $44 million last year. The increase in operating income was driven by higher gross profit, partially offset by lower gain on disposal of property, plant and equipment net.

Adjusted operating income was $44 million, compared with $31 million in the prior year. 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. Net income attributable to Fresh Del Monte for the first quarter of 2025 was $31 million, compared with $26 million in the prior year. And adjusted FDP net income was $30 million, compared with $16 million last year. Our diluted EPS for the first quarter was $0.64 per share, compared with $0.55 in the prior year. Adjusted diluted EPS was $0.63, compared with $0.34 per share last year. 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.

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 Product segment. Net sales for the first quarter of 2025 were $683 million, compared with $677 million in the prior year. The increase in net sales was primarily a result of higher per unit selling prices in our avocado product line and higher sales volume and per unit selling prices in our fresh-cut fruit product line in North America due to strong market demand. The increase was partially offset by lower net sales in our fresh-cut vegetable and vegetable product lines due to our strategic operational reductions in the fourth quarter of 2024, which also included the sale of certain assets of Fresh Leaf Farms.

Gross profit was $69 million, compared with $56 million in the prior year. The increase in gross profit was primarily driven by higher per unit selling prices in our pineapple and melon product lines, partially offset by higher per unit production, procurement and distribution costs. Gross margin increased to 10.1% in the first quarter, compared with 8.3% in the prior year. This also reflects an improvement from 7.5% in the fourth quarter of 2024 and 9.3% for the full year 2024. We’re making solid progress toward our goal of delivering double-digit gross margins in the low-teens for this segment as we continue to improve our product mix. Moving to our Banana segment, net sales were $364 million, compared with $380 million in the prior year.

The decrease in net sales was primarily a result of lower sales volume and per unit selling prices in Asia due to a combination of lower market demand and excess industry supply, along with lower sales volume in North America due to lower industry supply and weather-related logistic disruptions. Additionally, net sales were negatively impacted by fluctuations in exchange rates due to a weaker euro and Korean won. The decrease was partially offset by higher per unit selling prices in North America. Gross profit was $17 million, compared with $22 million in the prior year. The decrease in gross profit was driven by lower net sales and higher per unit production and procurement costs. Gross margin decreased to 4.6%, compared to 5.7% in the prior year.

Lastly, our Other Products and Services segment. Net sales were $51 million in line with the prior year. Gross profit was $6 million, compared with $5 million last year. The increase in gross profit was primarily due to higher per unit selling prices in our poultry and meats business. Gross margin increased to 11.9%, compared with 8.9% last year. Now moving to selected financial results for the first quarter of 2025. Our income tax provision was $7 million, compared with $5 million in the same period last year. The increase in income tax was primarily due to increased earnings in certain higher tax jurisdictions. Our effective tax rate for the first quarter was 18%. Net cash provided by operating activities for the first quarter of 2025 was $46 million, compared with $19 million in the prior year.

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. The increase was partially offset by higher levels of inventory when compared to the prior year period. We ended the first quarter of 2025 with $233 million of long-term debt, an $11 million or 5% reduction from $244 million at fiscal year-end 2024, and also a decrease of 42% compared with the prior year period. Our adjusted leverage ratio is less than 1 times EBITDA. Our CapEx investment for the first three months of 2025 was $10 million, compared with $13 million in the prior year. As announced in our press release, we declared a quarterly cash dividend of $0.30 per share, payable on June 6, 2025, to shareholders of record on May 14, 2025.

On an annualized basis, this equates to $1.20 per share, representing a dividend yield of 3.5% based on our current share price. Also, during the first quarter of 2025, we repurchased $7.6 million or 254,000 shares of our common stock at an average price of $29.97 as part of our $150 million share repurchase program. These actions reflect our commitment to a strong, sustainable dividend and a balanced capital allocation strategy that includes opportunistic share repurchases. 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 year-end earnings call in February, which reflects our confidence in our strategic initiatives and current visibility into our business.

That said, we continue to closely monitor developments related to the evolving tariff situation or other geopolitical developments that remain fluid at this time. We reiterate our expectations for the full year of 2025. We expect to see net sales grow 2% year-over-year. And as far as gross margins by business segment, in our Fresh and Value-Added segment, gross margin is expected to be in the range of 10% to 11%. In our Banana segment, gross margin is expected to be in the historical range of 5% to 7%. For our Other Products and Services segment, gross margin is expected to be in the range of 12% to 14%. As far as our selling, general and administrative expenses, we expect that to be in the range of $205 million to $210 million. Our projected CapEx are expected to be in the range of $80 million to $90 million.

And we expect net cash provided by operating activities to be in the range of $180 million to $190 million. We recognize that the current environment marked by tariffs, global tensions and possible logistical uncertainties continues to evolve. 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. The fundamentals of our business have not changed. This concludes our financial review. We can now turn the call over to Regina. Regina?

Operator: [Operator Instructions] Our first question will come from the line of Mitch Pinheiro with Sturdivant & Co. Please go ahead.

Mitch Pinheiro: Yeah. Hi. Good morning. Can you hear me?

Mohammad Abu-Ghazaleh: Good morning, Mitch. Yes. We can hear you.

Monica Vicente: Good morning.

Mitch Pinheiro: Yeah. Great. Good morning. So, Mohammad, I was wondering if you could talk a little bit about the produce category and your categories within that, what you’re seeing in terms of demand. We — obviously, the consumer is under pressure, but what are you seeing in your categories relative to that and what you expect here in the next quarter or so?

Mohammad Abu-Ghazaleh: What we see is a very continuous solid demand in our sector, which is the fresh produce, be it fruits or vegetables. We don’t see any kind of reductions in demand or consumption. I believe this will continue as we are very kind of basic, reasonably priced segment in terms of cost. So I’m confident that this is not going to change. As a matter of fact, disruptions that is happening right now in the market sometimes opens opportunities for us, which we are looking at and maybe a good time for probably picking up some good opportunities there.

Mitch Pinheiro: So, I mean, it’s interesting. What are you seeing significant players in the industry having sort of logistic issues that you’re going to take advantage of or is it more broadly just some of the weaker players, sort of more broadly having issues?

Mohammad Abu-Ghazaleh: You definitely named it, Mitch. Actually, with this kind of environment that we are going through, the disruptions, be it on the logistic side, on all fronts, really, have put — I would say put small-, medium-sized companies or operators at a disadvantage because of the hardships that is being created by these disruptions. So, in our case, yes, we are very flexible. We are very, very agile. We can adapt to the situation. Our logistical full integration from the supply chain gives us a very big leverage in terms of being able to move forward without any disruptions or interruptions in our operations. And that’s the most important thing is that your customers’ demands or your customer requirements are fulfilled on time without any interruptions.

And that’s really the big element here in this situation is between somebody that can deliver on time and in full and someone that cannot do that. So, you are right. What you just mentioned is very true.

Mitch Pinheiro: Let me ask. So, with regard to the 10% baseline tariffs, what’s happening in the market? Are we seeing producers such as yourself and retailers passing it through to the consumer? Is there any part of the sales processes seeing any particular group eating some of the tariffs to keep prices low? Are you going to pass it all through?

Mohammad Abu-Ghazaleh: Well, we have been mitigating this in a very friendly and cooperative way with our buyers. And in order not really to negatively impact the consumers in a way. So, we are working very closely with our buyers to mitigate this tariff increase, which I believe for the best — for the good of buyers and sellers as well. So, yes, we are mitigating this with our buyers.

Mitch Pinheiro: Okay. And then, you mentioned in the prepared remarks or on the slides that part of the margin driver in Fresh and Value-Added was pineapple, I guess, and melons. I was curious how you were doing in avocado?

Mohammad Abu-Ghazaleh: Avocado is doing very well, as Christine mentioned and this category is growing and we are diversifying as well our sourcing from Peru, from Colombia and other places. So this — I believe that this segment of the business is to keep growing going forward. But it’s not only pineapple and avocados and fresh-cut. We do have other items right now that are maybe small, not to mention them, in any significant manner, but they are starting to be becoming very important also part of our portfolio. I mean, on the logistics side, this is one side on all new businesses that we are just in the infancy stage on the residues, on other, as we go forward, quarter-after-quarter and year-after-year, this will be very meaningful going forward.

And we cannot just say right now what we are doing, but everything that will happen in the next few quarters will be announced and will be kind of highlighted to the market. Because there are many things in the pipeline that is already started, probably, in one way or the other that are ramping up and some of it probably a little, like on the biofertilizers, like even on conventional fertilizers that we started working on production and distribution. We are talking here about margins in the high 20s and things like that. So, these businesses as they grow and they are growing will have a significant and very impactful results going forward in the future.

Mitch Pinheiro: And then, are we at point in fresh-cut where you have absorbed a lot of the newer capacity you added and that we should see more stable and increasing sort of margins as you leverage those fixed costs here? Are we at that point where you’re beyond even some volume disruptions that you can still maintain pretty strong margins in that area?

Mohammad Abu-Ghazaleh: Yeah. I think we do. I believe that our fresh-cut fruit operation is getting stronger year-after-year and with our rationalization and increased efficiency and better sourcing that gives us a leverage to continue performing similarly or even better going forward in the future, Mitch. So, I’m not very concerned about the fresh-cut. I think, just to give you an example with our fresh guacamole, which we started, let’s say, less than a year ago, we are having double-digit growth every quarter-over-quarter, I mean, we cannot cope even with demand.

Mitch Pinheiro: And then last question was on the pineapple business. Obviously, it’s your core business and what drives everything at your firm — at your company. But why — could you just go back, obviously, pineapples have been in sort of short supply for a little bit, but what was driving that? And how long does it take for supplies to normalize from this point?

Mohammad Abu-Ghazaleh: 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, the supply is a little bit shorter than the demand. I’m not saying drastically shorter, but a little bit shorter than demand. I think the major factor here is that the demand and consumption is increasing. If you look at the price of pineapples compared to any other fruit on the shelf, be it apple, be it grapes, be it berries or any other fruit, you will realize that the cost of pineapple compared to the rest is quite favorable. It’s very still inexpensive to, I mean, as a family, as a household, I would take a pineapple that can feed the whole family, maybe for two days rather than having £2 [ph] of apples or oranges that would cost me 3 times as much.

So I believe, I mean, this is one of the factors why we see more consumption of pineapple. Aside from the young generation realizing that the health benefits of pineapple as well is extremely high compared to other fruits. So I think there are several factors playing here. One is the price compared to others, as well as all the health and wellness benefits coming from pineapple rather than other fruits.

Mitch Pinheiro: I also think your Honeyglow is a fantastic pineapple variety and I think that in and of itself, getting that kind of quality of pineapple would also induce demand continued purchasing of that product. So…

Mohammad Abu-Ghazaleh: Absolutely. Absolutely.

Mitch Pinheiro: … kudos to you. Yeah. Kudos to you for the innovation in that and your other Pinkglow and Rubyglow and other innovations. That’s all I have here. Thank you for your time and the answers.

Mohammad Abu-Ghazaleh: Thank you, Mitch. I appreciate it. Thank you very much for your comments.

Monica Vicente: Thank you, Mitch.

Operator: [Operator Instructions] That will conclude our question-and-answer session. And I will now hand the call back over to Mr. Mohammad Abu-Ghazaleh for closing remarks.

Mohammad Abu-Ghazaleh: Thank you so much. I would like to thank everyone today for having to be with us here and hope to talk to you on better news on our next quarter. Thank you. Have a good day.

Operator: Ladies and gentlemen, that will conclude today’s meeting. Thank you all for joining. You may now disconnect.