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Fresh Del Monte Produce Inc. Reports Strong Third Quarter 2022 Results Despite Continued Macroeconomic Headwinds

CORAL GABLES, Fla., November 02, 2022--(BUSINESS WIRE)--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:

Fresh Del Monte Produce Inc. and Subsidiaries

(U.S. dollars in millions, except per share data) - (Unaudited)

Quarter Ended

September 30, 2022

October 1, 2021

Net sales

$1,053.5

$1,004.8

Gross profit

$88.0

$48.9

FDP net income(1)

$33.3

$1.3

Diluted EPS(2)

$0.69

$0.03

Adjusted diluted EPS(3)

$0.54

$0.01

Adjusted EBITDA(3)

$57.8

$26.2

Adjusted EBITDA margin(3)

5.5%

2.6%

Dividend payout

$0.15/per share

$0.15/per share

"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.

(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."

Third Quarter 2022 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

September 30, 2022

October 1, 2021

Segment Data:

Net Sales

Gross Profit

Gross
Margin

Net Sales

Gross Profit

Gross
Margin

Fresh and value-added products

$

599.8

57

%

$

55.1

62

%

9.2

%

$

601.2

60

%

$

41.6

85

%

6.9

%

Banana

388.4

37

%

22.6

26

%

5.8

%

365.3

36

%

3.7

8

%

1.0

%

Other products and services

65.3

6

%

10.3

12

%

15.7

%

38.3

4

%

3.6

7

%

9.4

%

$

1,053.5

100

%

$

88.0

100

%

8.3

%

$

1,004.8

100

%

$

48.9

100

%

4.9

%

Nine months ended

September 30, 2022

October 1, 2021

Net Sales

Gross Profit

Gross
Margin

Net Sales

Gross Profit

Gross
Margin

Fresh and value-added products

$

2,004.9

59

%

$

148.9

58

%

7.4

%

$

1,906.0

59

%

$

152.1

58

%

8.0

%

Banana

1,216.1

36

%

82.6

32

%

6.8

%

1,210.2

37

%

101.8

38

%

8.4

%

Other products and services

181.4

5

%

27.0

10

%

14.9

%

118.4

4

%

10.1

4

%

8.5

%

$

3,402.4

100

%

$

258.5

100

%

7.6

%

$

3,234.6

100

%

$

264.0

100

%

8.2

%

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.

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

Nine months ended

Statement of Operations:

September 30,
2022

October 1,
2021

September 30,
2022

October 1,
2021

Net sales

$

1,053.5

$

1,004.8

$

3,402.4

$

3,234.6

Cost of products sold

965.5

955.9

3,143.9

2,967.1

Other product-related charges

3.5

Gross profit

88.0

48.9

258.5

264.0

Selling, general and administrative expenses

46.8

48.0

139.3

148.3

Gain (loss) on disposal of property, plant and equipment, net

0.5

(2.2

)

4.2

Asset impairment and other (credits) charges, net

(9.8

)

0.1

(8.1

)

(0.3

)

Operating income

51.0

1.3

125.1

120.2

Interest expense, net

6.0

4.6

17.1

14.9

Other expense, net

9.1

1.8

15.7

5.6

Income before income taxes

35.9

(5.1

)

92.3

99.7

Income tax provision (benefit)

3.3

(6.6

)

13.9

9.1

Net income

$

32.6

$

1.5

$

78.4

$

90.6

Less: Net (loss) income attributable to redeemable and noncontrolling interests

(0.7

)

0.2

(1.9

)

(0.6

)

Net income attributable to Fresh Del Monte Produce Inc.

$

33.3

$

1.3

$

80.3

$

91.2

Earnings per share(1):

Basic

$

0.70

$

0.03

$

1.68

$

1.92

Diluted

$

0.69

$

0.03

$

1.68

$

1.91

Dividends declared per ordinary share

$

0.15

$

0.15

$

0.45

$

0.35

Weighted average number of ordinary shares:

Basic

47,835,057

47,535,873

47,775,312

47,494,168

Diluted

47,984,075

47,743,758

47,909,161

47,661,055

(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)

September 30,
2022

December 31,
2021

Assets

Current assets:

Cash and cash equivalents

$

27.9

$

16.1

Trade and other accounts receivable, net

442.0

437.3

Inventories, net

621.5

602.8

Other current assets

101.8

40.2

Total current assets

1,193.2

1,096.4

Investment in and advances to unconsolidated companies

17.9

8.7

Property, plant and equipment, net

1,321.2

1,415.8

Operating lease right-of-use assets

187.1

199.0

Goodwill

422.2

423.7

Intangible assets, net

136.9

142.8

Other noncurrent assets

117.0

111.7

Total assets

$

3,395.5

$

3,398.1

Liabilities and shareholders' equity

Current liabilities:

Accounts payable and accrued expenses

$

581.9

$

580.1

Current maturities of debt and finance leases

1.3

1.3

Current maturities of operating leases

38.4

37.0

Other current liabilities

13.1

10.8

Total current liabilities

634.7

629.2

Long-term debt and finance leases

493.7

527.7

Operating leases, less current maturities

121.5

136.0

Other noncurrent liabilities

188.5

231.7

Total liabilities

1,438.4

1,524.6

Redeemable noncontrolling interest

48.4

49.5

Total Fresh Del Monte Produce Inc. shareholders' equity

1,887.8

1,802.3

Noncontrolling interests

20.9

21.7

Total shareholders' equity

1,908.7

1,824.0

Total liabilities, redeemable noncontrolling interest and shareholders' equity

$

3,395.5

$

3,398.1

Fresh Del Monte Produce Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(U.S. dollars in millions) - (Unaudited)

Nine months ended

September 30,
2022

October 1,
2021

Operating activities:

Net income

$

78.4

$

90.6

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

70.2

72.5

Amortization of debt issuance costs

0.5

0.4

Asset impairments

0.2

0.3

Share-based compensation expense

4.9

5.8

Deferred income taxes

0.8

(6.0

)

Loss (gain) on disposal of property, plant and equipment, net

2.2

(4.2

)

Adjustment of Kunia Well Site accrual

(9.9

)

Other, net

1.1

(5.4

)

Changes in operating assets and liabilities:

Receivables

(24.1

)

(13.7

)

Inventories

(32.5

)

(36.7

)

Prepaid expenses and other current assets

(2.2

)

4.8

Accounts payable and accrued expenses

16.7

42.8

Other assets and liabilities

(0.6

)

0.4

Net cash provided by operating activities

105.7

151.6

Investing activities:

Capital expenditures

(35.8

)

(83.4

)

Proceeds from sales of property, plant and equipment

7.6

12.5

Cash (paid) received from derivatives not designated as hedges

(0.2

)

4.6

Investments in unconsolidated companies

(9.3

)

(1.9

)

Other investing activities

0.1

1.0

Net cash used in investing activities

(37.6

)

(67.2