CORAL GABLES, Fla.–(BUSINESS WIRE)– Fresh Del Monte Produce Inc. BB #:111187 today reported financial results for the third quarter ended September 30, 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.
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.
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.
