Fresh Del Monte Produce (US:FDP)2022-05-04 16:44Financial Data and Key Metrics Changes - Net sales increased by $49 million, or approximately 5%, compared to the prior-year period, primarily due to inflation-justified pricing actions [4][8] - Adjusted gross profit for Q1 2022 was $90 million, down from $107 million in the prior-year period, impacted by inflationary pressures [8][9] - Adjusted operating income decreased to $40 million from $58 million in the prior-year period [9] - Adjusted EBITDA for Q1 was $63 million, compared to $82 million in the prior-year period, with an adjusted EBITDA margin of 5.5% compared to 7.6% [10][11] Business Line Data and Key Metrics Changes - Fresh and Value-Added Products segment net sales increased by $42 million, or approximately 7%, driven by higher pricing [11] - Banana segment net sales decreased by $12 million due to lower sales volume in North America, with gross profit dropping to $38 million from $50 million [12] - Other Products and Services segment saw a net sales increase of $19 million, or 49%, mainly due to higher net sales of third-party freight services [12] Market Data and Key Metrics Changes - Sales were negatively impacted by fluctuations in exchange rates, particularly against the Euro and Japanese Yen [8] - The war in Ukraine has exacerbated macroeconomic challenges, including increased costs for fertilizers, fuel, and shipping disruptions [6][7] Company Strategy and Development Direction - The company is focused on long-term operational investments in data-driven technology and smart farming, alongside strategic investments and higher dividends [5] - Vertical integration is viewed as a key differentiator, providing relative protection from elevated shipping rates [7] - The company aims to drive organic growth and new product expansion while implementing pricing actions to minimize margin erosion [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the team's ability to drive growth despite ongoing supply chain constraints and inflationary pressures [7] - The company does not foresee a normalization of gross margins in the near future, but remains optimistic about future performance [7] - The food service segment is still lagging behind pre-COVID levels, indicating potential for future growth [34] Other Important Information - The company declared a quarterly cash dividend of $0.50 per share, up from $0.10 in the prior-year period [15] - Capital expenditures in Q1 2022 were $11 million, significantly lower than $34 million in the prior-year period, with expectations to return to normal levels under $100 million for the year [15] Q&A Session Summary Question: How much control does the company have over pricing? - Management explained that pricing adjustments are based on market conditions and include fuel surcharges that are reviewed quarterly [17] Question: What is the outlook for banana supply and demand? - Management noted that Ecuador's supply has been severely impacted by the war in Ukraine, affecting pricing and availability [21][22] Question: Can the company quantify the revenue or profit impact from sales lost due to supply shortages? - Management acknowledged significant volume losses due to shipping constraints but did not provide specific figures during the call [25][27] Question: How is the company progressing with joint ventures and value-added products? - Management indicated that they are in the initial stages of developing value-added products and optimizing assets for future growth [36]