CORAL GABLES, Fla.–(BUSINESS WIRE)–Fresh Del Monte Produce Inc. BB #:111187 today reported financial results for the fourth quarter and the full fiscal year ended December 30, 2022.
“The fourth quarter of 2022 has been our best-performing fourth quarter in recent history, led by strong net sales and strong margins,” said Mohammad Abu-Ghazaleh, Fresh Del Monte’s Chairman and Chief Executive Officer.
“Overall we closed out 2022 in a much stronger position than 2021 driven by our commitment to remaining flexible and agile, controlling our costs, leveraging our assets, and optimizing customer relationships. 2022 was a notable year for us as we made progress on several fronts including innovation, sustainability, and strengthening our relationships with customers to work toward profitable incremental sales to expand our product line.”
Net sales for the fourth quarter of 2022 increased $22.7 million, or 2%, compared with the prior-year period. For the full fiscal year, net sales increased $190.3 million, or 4%, compared with the prior-year period. In both periods, the increase in net sales was driven by inflation-justified per unit price increases.
The increase was partially offset by lower sales volume, primarily in our banana and fresh and value-added products segments, and the negative impact of fluctuations in exchange rates primarily versus the euro, Japanese yen, British pound, and Korean won 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 fourth quarter of 2022 was $81.7 million compared with $39.8 million in the prior-year period. The increase in gross profit was a result of the higher per unit selling prices, across all segments. The increase in selling prices partially offset the continuing inflationary and other cost pressures, which resulted in higher per unit production and distribution costs, including packaging materials, fertilizers, inland and ocean freight, labor and fuel.
For the full fiscal year 2022, gross profit was $340.2 million compared with $303.8 million in the prior-year period. The increase in gross profit was primarily driven by higher gross profit in our other products and services segment as a result of higher net sales of third-party ocean freight services, and the favorable impact of higher per unit sales prices, across all segments.
Partially offsetting the higher gross profit was the negative impact of fluctuations in exchange rates and higher per unit production and distribution cost, including costs of packaging materials, fertilizers, ocean and inland freight, fuel and labor resulting from global supply chain, logistics and inflationary cost pressures.
There were no adjustments to gross profit in 2022. In comparison, Adjusted gross profit(3) for full fiscal year 2021 was $307.3 million. Adjusted gross profit excludes a $3.4 million non-tropical fruit inventory write-off due to inclement weather in Chile and $1.3 million inventory write-off incurred in the Middle East, partially offset by a net insurance recovery of $1.2 million associated with hurricane damage to the Company’s Guatemala banana operations in the fourth quarter of 2020.
Operating income for the fourth quarter of 2022 was $31.2 million compared with the operating loss of $9.2 million in the prior-year period. The improvement in operating income was due to an increase of $41.9 million in gross profit, slightly offset by higher selling, general and administrative expenses. Adjusted operating income(3) for the fourth quarter of 2022 was $34.2 million compared with the Adjusted operating loss of $7.1 million in the prior-year period.
For the fourth quarter of 2022, Adjusted operating income excludes a $3.3 million asset impairment, primarily due to flooding in our Philippines banana operations and a gain on asset sale of $0.3 million. In the prior-year period, Adjusted operating loss excludes a $4.8 million asset impairment, primarily due to the exit from low-yield banana farms in the Philippines, and a gain on asset sale of $2.7 million.
For the full fiscal year 2022, operating income was $156.3 million compared with $111.0 million in the prior-year period. The increase was primarily driven by higher gross profit, a one-time benefit related to a reduction in a North America environmental reserve and lower selling, general and administrative expenses partially offset by a slight net loss on disposals of property, plant and equipment in 2022 when compared to the net gain in 2021. For the full fiscal year 2022, Adjusted operating income was $149.2 million compared with $111.5 million in the prior-year period. The increase was primarily driven by higher gross profit and lower selling, general and administrative expenses.
FDP net income for the fourth quarter of 2022 was $18.3 million compared with the FDP net loss of $11.2 million in the prior-year period and Adjusted FDP net income(3) was $21.5 million compared with the Adjusted FDP net loss of $8.5 million in the prior-year period. For the full fiscal year 2022, FDP net income was $98.6 million compared with $80.0 million in the prior-year period and Adjusted FDP net income was $94.3 million compared with $80.6 million in the prior-year period.
Fourth Quarter 2022 Business Segment Performance
Fresh and Value-Added Products
Net sales for the fourth quarter of 2022 decreased by $21.8 million, or 4%, when compared with the prior-year period primarily driven by lower net sales of avocados, as a result of lower selling price, and non-tropical fruit, a result of lower selling price and lower sales volume. The decrease was partially offset by higher net sales of prepared food, driven by higher sales volume and higher net sales of pineapple, driven by higher selling price.
Gross profit for the fourth quarter of 2022 increased $6.0 million, or 21%, when compared with the prior-year period. The increase was primarily driven by higher per unit selling prices and product mix of higher-margin categories. The increase in gross profit was partially offset by higher cost of packaging materials, fertilizers, and ocean freight which negatively impacted per unit production and distribution costs. As result of these factors, gross margin increased to 5.9% from 4.7%. There were no other product-related charges during both periods.
Banana
Net sales for the fourth quarter of 2022 increased by $32.9 million, or 9%, compared with the prior-year period primarily driven by Europe and North America. The increase in net sales was predominantly from higher per unit selling prices resulting from inflation-justified price increases, and the absence of excess volume as a result of our strategic sourcing in response to market conditions. The increase was partially offset by fluctuations in exchanges rates in Europe and Asia.
Gross profit for the fourth quarter of 2022 increased $29.0 million, or 319%, compared with the prior-year period primarily driven by higher net sales, which partially offset the higher cost of packaging materials, fertilizers, and distribution costs, including ocean and inland freight. As a result of the higher gross profit, gross margin increased to 9.4% from 2.5% in the prior-year period.
Other products and services
Net sales for the fourth quarter of 2022 increased by $11.6 million, or 24%, when compared with the prior-year period mainly due to higher net sales of third-party ocean freight services. Our fleet of vessels has enabled the expansion of these services, which benefited from elevated shipping rates and demand due to market logistical conditions.
Gross profit for the fourth quarter of 2022 increased by $6.9 million when compared with the prior-year period primarily due to higher volume and shipping rates.
Full Fiscal Year 2022 Business Segment Performance and Selected Financial Data
(As reported in business segment data)
Fresh and Value-Added Products
Net sales for full fiscal year 2022 increased by $77.0 million, or 3%, when compared with 2021, primarily as a result of higher per unit sales prices across all product categories, mainly due to inflation-justified price increases. The increase in net sales was partially offset by the negative impact of fluctuations in exchange rates in Europe and Asia, and lower net sales of fresh-cut vegetables and avocados as a result of lower sales volume.
Gross profit for full fiscal year 2022 increased $2.8 million, or 2%. Despite higher net sales, gross profit was negatively impacted by higher per unit production and distribution costs, including packaging materials, fertilizers, and ocean and inland freight, across most product categories as a result of ongoing cost pressures. In addition, lack of availability of third-party shipping capacity for certain shipping routes negatively impacted non-tropical fruit gross profit. Year-over-year gross profit was impacted by $4.7 million of other product-related charges in 2021. There were no adjustments in 2022. As a result of these factors, gross margin slightly decreased to 7.1% in 2022 from 7.2% in 2021.
For full fiscal year 2022, Adjusted gross profit in the fresh and value-add products segment was $183.0 million compared with $184.9 million in the prior-year period. Adjusted gross profit excludes the above-mentioned $4.7 million of other product-related charges in the first half of 2021 mainly related to severe rainstorms in Chile.
Banana
Net sales for full fiscal year 2022 increased by $38.7 million, or 2% when compared with 2021. 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) strategic sourcing decisions in response to market conditions which reduced excess volume, and (4) atypical seasonally low industry supply in certain markets in the second half of 2022. The increase in net sales was partially offset by lower sales volume and the negative impact of fluctuations in exchange rates in Europe and Asia.
Gross profit for full fiscal year 2022 increased $9.8 million, or 9%, primarily due to higher per unit sales prices and the absence of excess volume, partially offset by higher per unit production and distribution costs, including packaging materials, fertilizers, and ocean and inland freight impacted by inflationary cost pressures. Included in full fiscal year 2021 is a $1.2 million other product-related charge attributable to our banana segment comprised of a net insurance recovery associated with hurricane damage in Central America in the fourth quarter of 2020. As a result of these factors, gross margin increased to 7.5% in 2022 from 7.0% in 2021.
For full fiscal year 2022, Adjusted gross profit in the banana segment was $120.7 million compared with $109.7 million in the prior-year period. Adjusted gross profit excludes the above-mentioned $1.2 million net insurance recovery in full fiscal year 2021. There were no other product-related charges in 2022.
Other products and services
Net sales for full fiscal year 2022 increased by $74.6 million, or 45%, when compared with full fiscal year 2021 mainly due to higher net sales of third-party ocean freight services. Our fleet of vessels has enabled the expansion of these services, which benefited from elevated shipping rates and demand due to market logistical conditions.
Gross profit for full fiscal year 2022 increased by $23.8 million, or 187%, when compared with full fiscal year 2021 due to higher net sales of third-party ocean freight services. As a result, gross margin increased to 15.2% from 7.6% in 2021.
Cash Flows
Net cash provided by operating activities for full fiscal year 2022 was $61.8 million. Net cash provided by operating activities was impacted by an increase in inventory during the current year period, largely due to inflationary cost increases and a strategic increase in levels of key raw materials and packaging supplies in order to secure costs and availability. Additionally, higher levels of accounts receivable as a result of higher net sales impacted net cash provided by operating activities.
Long Term Debt
Long term debt as of the end of 2022 increased to $539.8 million compared with $519.1 million as of the prior-year end.
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.
