Fresh Del Monte Produce (FDP) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gross profit for Q2 2021 increased by 40% year-over-year, with gross margin rising from 7.2% to 9.6% [6] - Net sales increased by $49 million or 5% to $1.142 billion, driven primarily by fresh and value-added business segments [12] - Adjusted net income rose by $21 million or 82% to $47 million, with diluted earnings per share increasing to $0.99 from $0.38 [14] - Adjusted EBITDA increased by 32%, with adjusted EBITDA margin rising from 5.8% to 7.3% [15] Business Segment Data and Key Metrics Changes - Fresh and value-added products segment saw net sales increase by $38 million or 6%, driven by higher demand for pineapple, fresh-cut fruit, and vegetables [16] - Adjusted gross profit in the fresh and value-added products segment increased by 28% to $59 million, supported by higher sales volumes and prices [18] - Banana segment net sales decreased by $3 million to $427 million, but adjusted gross profit increased by 16% or $7 million due to higher per unit sales prices [20] Market Data and Key Metrics Changes - The foreign currency impact at the gross profit level was favorable by $11 million, compared to an unfavorable effect of $1 million in the prior year [22] - Cash flow from operating activities increased to $140 million from $111 million in the prior year, attributed to higher net income [24] Company Strategy and Development Direction - The company is focusing on transforming into a value-added global food company, with strategic initiatives in Europe leading to increased efficiencies and cost savings [7][9] - A licensing agreement with a UK retailer for frozen fruit and chili juices presents new revenue opportunities in Europe, with potential expansion to the Middle East and Africa [9] - The company plans to publish its annual corporate responsibility and sustainability report, highlighting its guiding principles and progress [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged facing unprecedented disruptions in global supply chains and labor shortages, leading to significant cost increases [7] - Inflationary pressures are expected to persist in the near term, prompting a comprehensive review of pricing strategies [8] - The second half of the year is historically tougher for the industry, with management cautious about ongoing inflation and cost pressures [10] Other Important Information - The Board of Directors approved an increase in the quarterly cash dividend to $0.15 per share, reflecting a strong cash position [10][28] - Total debt decreased from $542 million at the end of 2020 to $474 million at the end of Q2 2021, with total debt standing below two times adjusted EBITDA [27] Q&A Session Summary Question: Outlook on banana supply for the second half of the year - Management indicated that supply is constant and available, with no shortage in the market, but pricing pressures exist due to retailer leverage [31][32] Question: Impact of supply chain pressures on pricing across the industry - Management noted that cost pressures affect all segments, and they have implemented price increases to offset some of these costs [33][34] Question: Changes in the retail environment post-COVID - Management stated that the retail environment remains unchanged, despite efforts to maintain consistent supply, and highlighted past challenges with excess inventory [38][39]