Fresh Del Monte Produce Inc. (NYSE: FDP), ("Fresh Del Monte" or the "Company") today reported financial results for the third quarter ended September 30, 2022.

Financial highlights for the third quarter 2022:

"We delivered solid performance across our business generating strong net sales and profitability despite continued macroeconomic headwinds," said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer.

"We continue to make investments to grow our business focused on technology, product innovation, and diversification, including new higher-margin product offerings in the ready-to-eat and convenience category and an investment in blockchain-driven traceability technology."

Mr. Abu-Ghazaleh added, "Our team’s efforts enabled us to thrive this quarter in the face of wide-range challenges, including persistent inflation, geopolitical risks, and volatility in the fuel market. I remain confident in our growth path grounded on profitable sales, disciplined expense management, digital transformation, and sustainability — all while remaining true to our core mission of high-quality fresh and fresh-cut fruit and vegetables.”

Net sales for the third quarter of 2022 increased $48.7 million, or 5%, compared with the prior-year period. Net sales primarily benefited from inflation-justified price increases. The increase in net sales was partially offset by the negative impact of fluctuations in exchange rates, primarily versus the euro, Japanese yen, Korean won and British pound compared with the prior-year period. The negative impact of fluctuations in exchange rates was partially mitigated by our foreign currency hedges.

Gross profit for the third quarter of 2022 was $88.0 million compared with $48.9 million in the prior-year period driven by increases across all our segments. The increase in gross profit primarily relates to higher consolidated net sales and product mix in our fresh and value-added products segment. The increase was partially offset by higher per unit production and distribution costs, including packaging material, fertilizer, ocean and inland freight, fuel and labor.

Operating income for the third quarter of 2022 was $51.0 million compared with $1.3 million in the prior-year period, and Adjusted operating income⁽³⁾ was $41.2 million compared with $0.3 million in the prior-year period. The increase in operating income was primarily due to higher gross profit, a $9.9 million one-time benefit related to a reduction in a North America environmental reserve and lower advertising expenses. Adjusted operating income⁽³⁾ excludes the above-mentioned one-time benefit.

Other expense, net for the third quarter of 2022 was $9.1 million compared with $1.8 million in the prior-year period. The increase in other expense, net is mainly due to higher foreign currency related losses.

FDP net income⁽¹⁾ for the third quarter of 2022 was $33.3 million compared with $1.3 million in the prior-year period and Adjusted FDP net income⁽³⁾ was $25.9 million compared with $0.7 million in the prior-year period.

Adjusted EBITDA⁽³⁾ for the third quarter of 2022 was $57.8 million compared with $26.2 million in the prior-year period, and corresponding Adjusted EBITDA margin⁽³⁾ was 5.5% compared with 2.6% in the prior-year period.

Third Quarter 2022 Business Segment Performance and Selected Financial Data

(As reported in business segment data)

Third Quarter 2022 Business Segment Performance

Fresh and Value-Added Products

Net sales for the third quarter of 2022 remained relatively in line when compared with the prior-year period at $599.8 million. The segment realized higher net sales across key product categories, including pineapple and fresh-cut fruits, related to inflation-justified price increases. The increase was predominantly offset by lower net sales of avocados and fresh-cut vegetables as a result of lower sales volume. Net sales were also negatively impacted by fluctuations in exchange rates in Europe and Asia.

Gross profit for the third quarter of 2022 was $55.1 million compared with $41.6 million in the prior-year period. Segment gross profit benefited from product mix of higher-margin categories, including pineapples and prepared foods. The increase in gross profit was partially offset by higher costs across the board. Specifically, higher costs of packaging materials, fertilizers, ocean and inland freight, fuel and labor impacted per unit production and distribution costs. As a result of these factors, gross margin increased to 9.2% compared with 6.9% in the prior-year period.

Banana

Net sales for the third quarter of 2022 increased by $23.1 million compared with the prior-year period. The increase in net sales relates to higher per unit sales prices due to a combination of (1) inflation-justified price increases, (2) contractually indexed fuel and freight surcharges within certain of our contracts, (3) our strategic sourcing decisions in response to market conditions and (4) atypical seasonally low industry supply in certain markets in the third quarter of 2022. Conversely, in the third quarter of 2021 the banana segment was impacted by excess industry supply in the marketplace. The increase was partially offset by the negative impact of fluctuations in exchange rates in Europe and Asia.

Gross profit for the third quarter of 2022 was $22.6 million compared with $3.7 million in the prior-year period. The increase in gross profit was primarily driven by higher net sales, partially offset by higher per unit distribution costs, including ocean and inland freight, and higher per unit production costs. As a result of these factors, gross margin increased to 5.8% compared with 1.0% in the prior-year period.

Other Products and Services

Net sales for the third quarter of 2022 increased by $27.0 million, or 70%, compared with the prior-year period, mainly due to higher net sales of third-party freight services. Our fleet of vessels has enabled the expansion of commercial cargo services, which benefited from elevated shipping rates and demand due to market logistical conditions.

Gross profit for the third quarter of 2022 increased by $6.7 million compared with the prior-year period driven by higher net sales of third-party freight services. Gross margin increased to 15.7% from 9.4% in the prior-year period.

Cash Flows

Net cash provided by operating activities for the first nine months of 2022 was $105.7 million compared with $151.6 million in the prior-year period. The decrease was primarily attributable to higher working capital and lower net income compared with the first nine months of 2021.

Total Long Term Debt

Total long-term debt increased to $486.1 million at the end of the third quarter of 2022 from $476.9 million at the end of the third quarter of 2021.

Quarterly Cash Dividend

On November 1, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.15 per share, payable on December 9, 2022 to shareholders of record on November 16, 2022.

Non-GAAP Measures

The Company's results are determined in accordance with U.S. generally accepted accounting principles (GAAP). Certain information presented in this press release reflects adjustments to GAAP measures such as amounts related to restructuring, asset impairment and other (credits) charges, net, gain (loss) on disposal of property, plant and equipment, net, other product-related charges and certain other non-recurring items, if any. These adjustments result in non-GAAP financial measures and are referred to in this press release as Adjusted Gross profit, Adjusted Gross margin, Adjusted Operating income, Adjusted FDP Net income, and Adjusted Diluted EPS. Management believes these adjustments provide a more comparable analysis of the underlying operating performance of the business.

This press release also includes non-GAAP measures such as EBITDA, Adjusted EBITDA, EBITDA margin, and Adjusted EBITDA margin. EBITDA is defined as net income attributable to Fresh Del Monte Produce Inc. excluding interest expense, net, provision (benefit) for income taxes, depreciation and amortization, and share-based compensation expense. Adjusted EBITDA represents EBITDA with additional adjustments for non-recurring items. EBITDA margin represents EBITDA as a percentage of net sales, and Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of net sales.

Adjusted Gross profit, Adjusted Operating income, Adjusted FDP Net income, and Adjusted EBITDA provide the Company with an understanding of the results from the primary operations of its business. The Company uses these metrics because management believes they provide more comparable measures to evaluate period-over-period operating performance since they exclude special items that are not indicative of the Company's core business or operations. These measures may be useful to an investor in evaluating the underlying operating performance of the Company's business because these measures:

1. Are used by investors to measure a company's comparable operating performance;
2. Are financial measurements that are used by lenders and other parties to evaluate creditworthiness; and
3. Are used by the Company's management for various purposes, including as measures of performance of its operating entities, as a basis of strategic planning and forecasting, and in certain cases as a basis for incentive compensation.

Because all companies do not use identical calculations, the Company's presentation of these non-GAAP financial measures may not be comparable to similarly titled measures used by other companies. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the financial tables that accompany this release.

Conference Call and Webcast Data

Fresh Del Monte will host a conference call and simultaneous webcast at 10:00 a.m. Eastern Time today to discuss the third quarter 2022 financial results and to review the Company’s progress and outlook. The webcast can be accessed on the Company’s Investor Relations home page at https://investorrelations.freshdelmonte.com. The call will be available for re-broadcast on the Company’s website approximately two hours after the conclusion of the call for a period of one year.

About Fresh Del Monte Produce Inc.

Fresh Del Monte Produce Inc. is one of the world's leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and distributor of prepared food in Europe, Africa and the Middle East. Fresh Del Monte markets its products worldwide under the Del Monte^® brand (under license from Del Monte Foods, Inc.), a symbol of product innovation, quality, freshness and reliability for over 135 years. The Company also markets its products under the Mann™ brand and other related trademarks. Fresh Del Monte Produce Inc. is not affiliated with certain other Del Monte companies around the world, including Del Monte Foods, Inc., the U.S. subsidiary of Del Monte Pacific Limited, Del Monte Canada, or Del Monte Asia Pte. Ltd. Fresh Del Monte is the first global marketer of fruits and vegetables to commit to the “Science Based Targets” initiative. In 2022, Fresh Del Monte Produce was ranked as one of "America's Most Trusted Companies" by Newsweek based on an independent survey rating companies on three different touchpoints, including customer trust, investor trust, and employee trust. Fresh Del Monte Produce is traded on the NYSE under the symbol FDP.

Forward-looking Information

This press release and the earnings call contain certain forward-looking statements regarding the intent, beliefs or current expectations of the Company. These statements include statements that are preceded by, followed by or include the words “believes”, “expects”, “anticipates”, “may” or similar expressions with respect to various matters. Specifically, this press release and the earnings call contain forward-looking statements regarding the Company’s plans and expectations for future performance, including (a) the Company’s confidence in its growth path and that it will be able to continue to deliver profitable sales, disciplined expense management, digital transformation, and sustainability, (b) the Company’s intent to continue to focus its investments in technology, product innovation, and diversification, and its expectations regarding the impact of such investments on growth, (c) the Company's intent to focus on delivering against the key elements of its sustainable growth strategy, (d) the Company’s expectations regarding broad based cost pressures in the fourth quarter and in 2023 and the impact of such cost pressures on its results of operations, (e) the Company’s expectations regarding exchange rates and its impact on the Company’s financial results, and (f) the Company’s expectations regarding progress towards achieving its target of $100 million in cash proceeds from the Optimization Program. It is important to note that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Fresh Del Monte’s actual plans and performance may differ materially from those in the forward-looking statements as a result of various factors, including (i) the impact of the ongoing pandemic and the war in Ukraine on our business, suppliers, customers, consumers, employees, and communities, including the inflationary impact on fuel, petroleum-based products such as fertilizer and packaging materials, (ii) our ability to successfully execute our plan to stabilize our core business, diversify our business and transform our business to a value-added business, (iii) the impact of governmental trade restrictions, including adverse governmental regulation that may impact our ability to access certain markets, (iv) our ability to meet our anticipated cash needs, (v) the continued ability of our distributors and suppliers to have access to sufficient liquidity to fund their operations, (vi) trends and other factors affecting our financial condition or results of operations from period to period, including changes in product mix, consumer preferences or consumer demand for branded products such as ours; anticipated price and expense levels; the impact of crop disease, such as vascular diseases, one of which is known as Tropical Race 4, or TR4 (also known as Panama Disease), severe weather conditions, such as flooding, or natural disasters, such as earthquakes, on crop quality and yields and on our ability to grow, procure or export our products; disruptions or issues that impact our production facilities or complex logistics network; and the availability of sufficient labor during peak growing and harvesting seasons, (vii) competitive pressures and our ability to realize the full benefits of the inflation driven price increases implemented, (viii) the impact of inflation and foreign currency fluctuations, including the effectiveness of our hedging activities, (ix) the continued shortage of qualified labor, (x) our plans for expansion of our business, including our ability to successfully integrate acquisitions into our operations, and cost savings, (xi) the impact of impairment or other charges associated with exit activities, crop or facility damage or otherwise, (xii) the timing and cost of resolution of pending and future legal and environmental proceedings or investigations, (xiii) the impact of claims and adjustments proposed by the IRS or other foreign taxing authorities in connection with our current or future tax audits and our ability to successfully contest such tax claims and pursue necessary remedies, (xiv) the cost and other implications of changes in regulations applicable to our business, including potential legislative or regulatory initiatives in the United States or elsewhere directed at mitigating the effects of climate change, (xv) damage to our reputation or brand names or negative publicity about our products, (xvi) exposure to product liability claims and associated regulatory and legal actions, product recalls, or other legal proceedings relating to our business, (xvii) our ability to identify potential buyers for the remaining assets in the Optimization Program and to successfully negotiate and close such sales, and (xviii) our ability to successfully manage the risks associated with international operations. All forward-looking statements in this press release are based on information available to us on the date hereof, and we assume no obligation to update such statements. These statements and our future plans and performance may also be affected by the factors described in our Annual Report on Form 10-K for the year ended December 31, 2021, along with other reports that we have filed with the Securities and Exchange Commission.

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