Fresh Del Monte Produce Inc. Reports First Quarter 2021 Financial Results

Rhea-AI Summary

Fresh Del Monte Produce (NYSE: FDP) reported a strong first quarter for 2021, achieving a 53% increase in gross profit to $105.0 million. Net income surged 228% to $42.7 million, with diluted EPS rising to $0.90. Despite a $29.7 million decline in net sales attributed to COVID-19 impacts and hurricane-related supply issues, adjusted EBITDA increased 61% to $82.3 million. The company also reduced total debt to $534.3 million and declared a quarterly cash dividend of $0.10 per share.

Positive

• Gross profit increased by $36.5 million, or 53% YoY.
• Net income rose 228% to $42.7 million.
• Diluted EPS improved to $0.90 from $0.27 YoY.
• Adjusted EBITDA increased by 61% to $82.3 million.
• Total debt decreased from $542.0 million to $534.3 million.
• Declared a quarterly cash dividend of $0.10 per share.

Negative

• Net sales decreased by $29.7 million compared to the prior year.
• COVID-19 impacted foodservice customers, reducing sales by an estimated $19.4 million.
• Lower sales in the fresh and value-added products segment due to pandemic effects.

Fresh Del Monte Produce Inc. (NYSE: FDP), ("Fresh Del Monte" or the "Company") today reported financial results for the first quarter ended April 2, 2021.

Financial highlights for the first quarter of 2021:

• Gross profit was $105.0 million for the first quarter of 2021, which represents an increase of 53%, compared with the prior year period, and gross profit margin increased to 10% in the first quarter of 2021, compared with 6% in the prior year period;
• FDP net income⁽¹⁾ for the first quarter of 2021 was $42.7 million, compared with $13.0 million in the prior year period, and Diluted EPS⁽²⁾ was $0.90 for the first quarter of 2021, compared with $0.27 in the prior year period;
• Adjusted Diluted EPS⁽³⁾ was $0.88 for the first quarter of 2021, compared with $0.34 in the prior year period; and
• Adjusted EBITDA⁽³⁾ was $82.3 million for the first quarter of 2021, compared with $51.0 million in the prior year period.

“Despite slightly lower net sales resulting from the continued impact of COVID-19 restrictions on our foodservice customers, and the reduced supply of fruit due to the two hurricanes in Guatemala in the fourth quarter of 2020, we generated strong results,” said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer. “We remained focused on creating greater efficiencies and controlling costs throughout our operations.”

Net sales for the first quarter of 2021 decreased $29.7 million, compared with the prior year period which was primarily due to lower net sales in the Company's fresh and value-added and banana business segments, partially offset by higher sales in the Company's other products and services business segment. The overall decrease in net sales was driven by:

• The continued negative effect of the COVID-19 pandemic on the Company's foodservice distribution channel which the Company estimates reduced net sales by $19.4 million in the first quarter of 2021.
• The negative impact on fruit supply due to hurricanes Eta and Iota which drastically impacted the Company's production areas in Guatemala in the fourth quarter of 2020.

Gross profit for the first quarter of 2021 increased $36.5 million, or 53% and Adjusted Gross profit⁽³⁾, which primarily excludes the impact of inclement weather in South America, increased $30.1 million or 39%, compared with the prior year period. The increase was driven by higher gross profit in all of the Company's business segments.

Operating income for the first quarter of 2021 increased $41.9 million and Adjusted Operating income⁽³⁾ increased $33.7 million, compared with the prior year period. The increase in operating income was primarily due to higher gross profit and lower selling, general and administrative expenses.

FDP net income for the first quarter of 2021 increased 228% and Adjusted FDP Net income⁽³⁾ increased 154%, compared with the prior year period. The increase was primarily the result of higher operating income.

Adjusted EBITDA⁽³⁾ for the first quarter of 2021 increased 61%, and the Adjusted EBITDA margin⁽³⁾ increased 300 basis points, compared with the prior year period.

(1)	FDP net income as referenced throughout this release is defined as Net income attributable to Fresh Del Monte Produce Inc.
(2)	Diluted EPS represents diluted earnings per share and is calculated as FDP net income divided by diluted weighted average shares.
(3)	Non-GAAP financial measure. Reconciliations and other information required by Regulation G can be found below under "Non-GAAP Measures."

First Quarter 2021 Business Segment Performance and Selected Financial Data (As reported in business segment data)
	Fresh Del Monte Produce Inc. and Subsidiaries
	Business Segment Data
	(U.S. dollars in millions) - (Unaudited)
	Quarter ended
	April 2, 2021														March 27, 2020
Segment Data:
	Net Sales							Gross Profit							Net Sales							Gross Profit
Fresh and value-added products	$	631.0			58	%		$	51.6			49	%		$	660.9			59	%		$	42.5			62	%
Banana	418.2				38	%		49.2				47	%		427.0				38	%		24.5				36	%
Other products and services	39.1				4	%		4.2				4	%		30.1				3	%		1.5				2	%
	$	1,088.3			100	%		$	105.0			100	%		$	1,118.0			100	%		$	68.5			100	%

Fresh and Value-Added Products

Net sales for the first quarter of 2021 decreased 5%, compared with the prior year period. The Company has estimated the COVID-19 pandemic impacted net sales in the fresh and value-added products segment by $19.4 million in the first quarter of 2021. The primary drivers of the variance in net sales were:

• Lower net sales in the Company's melon product line, primarily the result of lower volumes from production areas in Guatemala due to the hurricanes in the fourth quarter of 2020.
• Lower net sales in its fresh-cut vegetable and vegetable product lines, mainly as a result of lower demand in the Company's foodservice distribution channel driven by the COVID-19 pandemic.
• Lower net sales in the Company's avocado product line, primarily due to lower per unit sales prices, as a result of normalized industry supplies in the market, offset by a 12% increase in sales volume.
• Higher net sales in its pineapple product line, primarily due to a 22% increase in sales volume. Sales volumes in the first quarter of 2020 were negatively impacted by adverse weather conditions and the COVID-19 pandemic.
• Higher net sales in its prepared food products line, primarily due to higher per unit sales prices.

Gross profit for the first quarter of 2021 increased 21%, compared with the prior year period. The primary drivers of the variance in gross profit were:

• Increased gross profit in the Company's melon product line, primarily in North America due to higher per unit sales prices and lower ocean freight costs, partially offset by higher per unit product costs as a result of lower volumes due to the two hurricanes in the fourth quarter of 2020.
• Increased gross profit in its prepared food products line, primarily due to higher net sales.
• Increased gross profit in the Company's avocado product line, primarily from lower per unit procurement and production costs from its Mexico packing plant.
• Increased gross profit in its pineapple product line, primarily due to higher sales volumes.
• Decreased gross profit in the Company's fresh-cut vegetable and vegetable product lines, primarily in its Mann Packing business driven by higher per unit product costs as a result of lower sales volume.
• Decreased gross profit in the Company's non-tropical fruit product line, primarily due to severe rainstorms in Chile, resulting in $3.1 million in inventory write-offs.

Adjusted Gross profit⁽³⁾ in the fresh and value-add products segment for the first quarter of 2021 increased 9%, compared with the prior year period.

Banana

Net sales for the first quarter of 2021 decreased 2%, compared with the prior year period, principally due to lower net sales in North America and the Middle East, partially offset by higher net sales in Asia. Worldwide banana sales volume decreased 8% while pricing increased 7%.

Gross profit for the first quarter of 2021 increased 101%, compared with the prior year period, the primary drivers of the variance were:

• Higher per unit sales prices in North America and Europe and lower per unit ocean freight costs.
• Insurance recoveries of an additional $2.5 million associated with the storms in Guatemala.

Adjusted Gross profit⁽³⁾ in the banana business segment for the first quarter of 2021 increased 93%, compared with the prior year period.

Cash Flows

Net cash provided by operating activities for the first quarter of 2021 was $46.8 million, compared with net cash provided by operating activities of $2.2 million in the prior year period, an increase of $44.6 million. The increase was primarily attributable to higher net income and higher balances of accounts payable and accrued expenses, principally due to the Company's optimization efforts associated with working capital.

Total Debt

Total debt decreased from $542.0 million at the end of 2020 to $534.3 million at the end of the first quarter of 2021.

Quarterly Cash Dividend

The Company's Board of Directors declared a quarterly cash dividend of ten cents $(0.10) per share, payable on June 11, 2021 to shareholders of record on May 19, 2021.

Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(U.S. dollars in millions, except share and per share data) - (Unaudited)
		Quarter ended
Statement of Operations:		April 2, 2021				March 27, 2020
Net sales		$	1,088.3			$	1,118.0
Cost of products sold		981.7				1,041.5
Other product-related charges		1.6				8.0
Gross profit		105.0				68.5
Selling, general and administrative expenses		48.9				52.7
Gain on disposal of property, plant and equipment, net		2.7				0.2
Asset impairment and other (credits) charges, net		(0.9		)		(1.8		)
Operating income		59.7				17.8
Interest expense, net		5.2				5.3
Other expense (income), net		2.1				(0.8		)
Income before income taxes		52.4				13.3
Provision for income taxes		11.0				0.3
Net income		$	41.4			$	13.0
Less: Net loss attributable to redeemable and noncontrolling interests		(1.3		)		—
Net income attributable to Fresh Del Monte Produce Inc.		$	42.7			$	13.0
Earnings per share(1):
Basic		$	0.90			$	0.27
Diluted		$	0.90			$	0.27
Dividends declared per ordinary share		$	0.10			$	0.10
Weighted average number of ordinary shares:
Basic		47,427,962				48,011,398
Diluted		47,539,871				48,152,965

(1)	Earnings per share ("EPS") is calculated based on Net income attributable to Fresh Del Monte Produce Inc.

Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(U.S. dollars in millions) - (Unaudited)
		April 2, 2021			January 1, 2021
Assets
Current assets:
Cash and cash equivalents		$	26.4		$	16.5
Trade and other accounts receivable, net		502.6			435.2
Inventories, net		513.4			507.7
Other current assets		57.0			52.9
Total current assets		1,099.4			1,012.3
Investment in and advances to unconsolidated companies		1.9			1.9
Property, plant and equipment, net		1,419.1			1,420.3
Operating lease right-of-use assets		168.6			170.5
Goodwill		424.0			424.0
Intangible assets, net		148.4			150.4
Other noncurrent assets		162.0			163.9
Total assets		$	3,423.4		$	3,343.3
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses		$	554.1		$	511.8
Current maturities of debt and finance leases		0.2			0.2
Current maturities of operating leases		26.7			28.8
Other current liabilities		17.7			14.0
Total current liabilities		598.7			554.8
Long-term debt and finance leases		534.1			541.8
Operating leases, less current maturities		115.1			114.4
Other noncurrent liabilities		317.1			332.4
Total liabilities		1,565.0			1,543.4
Redeemable noncontrolling interest		49.5			50.2
Total Fresh Del Monte Produce Inc. shareholders' equity		1,787.8			1,728.0
Noncontrolling interests		21.1			21.7
Total shareholders' equity		1,808.9			1,749.7
Total liabilities, redeemable noncontrolling interest and shareholders' equity		$	3,423.4		$	3,343.3

Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(U.S. dollars in millions) - (Unaudited)
		Quarter ended
		April 2, 2021				March 27, 2020
Operating activities:
Net income		$	41.4			$	13.0
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23.8				23.6
Amortization of debt issuance costs		0.1				0.1
Asset impairments		—				0.9
Share-based compensation expense		1.6				2.6
Deferred income taxes		(0.5		)		(0.2		)
Gain on disposal of property, plant and equipment, net		(2.7		)		(0.2		)
Foreign currency translation adjustment		0.7				(0.8		)
Other		0.8				0.1
Changes in operating assets and liabilities:
Receivables		(69.6		)		(46.8		)
Inventories		(6.7		)		(12.3		)
Prepaid expenses and other current assets		4.2				(2.0		)
Accounts payable and accrued expenses		57.5				25.9
Other noncurrent assets and liabilities		(3.8		)		(1.7		)
Net cash provided by operating activities		46.8				2.2
Investing activities:
Capital expenditures		(33.6		)		(16.6		)
Proceeds from sales of property, plant and equipment		2.9				0.4
Cash received from derivatives not designated as hedges		4.6				—
Other investing activities		0.2				0.1
Net cash used in investing activities		(25.9		)		(16.1		)
Financing activities:
Net (repayments) borrowings on debt		(7.7		)		11.7
Distributions to noncontrolling interests, net		(0.9		)		(0.8		)
Net payments related to share-based awards		(0.3		)		(0.4		)
Dividends paid		(4.7		)		(4.8		)
Repurchase and retirement of ordinary shares		—				(7.8		)
Other financing activities		0.9				2.3
Net cash (used in) provided by financing activities		(12.7		)		0.2
Effect of exchange rate changes on cash		1.7				1.1

FAQ

What were Fresh Del Monte's first quarter 2021 earnings results?

Fresh Del Monte reported a net income of $42.7 million, or $0.90 diluted EPS, for Q1 2021.

How did the COVID-19 pandemic affect Fresh Del Monte's sales?

The pandemic is estimated to have reduced net sales by $19.4 million, particularly impacting the foodservice distribution channel.

What is Fresh Del Monte's future outlook after the Q1 2021 results?

The company aims to maintain operational efficiencies and control costs, despite challenges in net sales.

What was the status of Fresh Del Monte's total debt in Q1 2021?

Total debt decreased to $534.3 million by the end of Q1 2021.