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Fresh Del Monte Produce (FDP) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income per diluted share of $0.38 for Q2 2020, down from $0.78 in Q2 2019 [10] - Adjusted net income per diluted share was $0.54 compared to $0.72 in the prior year [11] - Net sales decreased to $1.092 billion from $1.239 billion in the same quarter last year, impacted by unfavorable exchange rates [13] - Adjusted gross profit was $89 million, down from $98 million in 2019 [13] - Cash flow from operating activities was $111 million, with long-term debt reduced by $52 million since the end of 2019 [12][24] Business Segment Performance Changes - Fresh and value-added products saw net sales decrease by $128 million to $636 million, primarily due to lower sales in fresh-cut food and vegetables, avocado, pineapple, and prepared food lines [14] - Pineapple product line net sales were $114 million, down from $126 million, affected by lower selling prices and sales volume [15] - Fresh-cut food product line net sales decreased to $110 million from $146 million, with a 26% drop in volume [16] - Fresh-cut vegetable product line net sales fell to $86 million from $119 million, with a 32% decrease in volume [17] - Avocado product line net sales decreased to $94 million from $125 million, with a 7% drop in volume [18] - Banana segment net sales decreased to $413 million from $440 million, with a 1% drop in volume [21] Market Data and Key Metrics Changes - The company experienced reduced demand in North America, particularly in the restaurant and foodservice sectors, which were down by 50% to 60% [6][33] - The COVID-19 pandemic impacted various markets differently, with some regions experiencing gradual re-openings [6] - The company noted a significant recovery in pineapple prices, although the sustainability of this trend remains uncertain [34] Company Strategy and Development Direction - The company is focused on a business transformation plan to enhance efficiency and asset utilization, including consolidating operations in California and Arizona [7][8] - A new avocado processing facility in Mexico was ramped up four months ahead of schedule, contributing to improved margins [7][31] - The company is expanding its e-commerce strategy, launching a pilot in Dallas, Texas, to enhance direct consumer marketing [9] Management Comments on Operating Environment and Future Outlook - Management emphasized resilience in navigating challenges posed by the COVID-19 pandemic, with a focus on maintaining business continuity [5] - The company expects to see improvements in the fresh-cut area as foodservice begins to recover, although challenges remain [32] - Management remains confident in the company's ability to emerge stronger from the pandemic, focusing on cost management and operational efficiencies [12][34] Other Important Information - The company repurchased approximately 549,836 shares for about $13 million during the quarter [26] - An interim cash dividend of $0.05 per share was declared, payable on September 4, 2020 [26] Q&A Session Summary Question: Were there any unusual costs in the quarter? - Management indicated that the main unusual cost was related to the write-off of $10 million in unsalable fruit due to COVID-19 disruptions [28][29] Question: What caused the decline in the avocado business? - The decline was attributed to lower prices and not primarily due to foodservice sales, with prices dropping significantly compared to the previous year [30] Question: What is the outlook for the third quarter? - Management noted that foodservice remains heavily impacted, with only slight improvements expected in retail [32][33] Question: How much stock remains on the repurchase authorization? - There is still over $200 million available for stock repurchases [37] Question: Can you comment on the disconnect between tangible book value and stock price? - Management acknowledged the disconnect and expressed aspirations for the stock price to rise significantly in the future [39]