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Fresh Del Monte Produce Announces Strong Second Quarter 2009 Financial Results

Source: Fresh Del Monte Produce Inc.
28/07/2009

Coral Gables, Fla. Jul. 28, 2009 - Fresh Del Monte Produce Inc. today reported financial results for the second quarter ended June 26, 2009.

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Excluding asset impairment and other charges, net, the Company reported earnings per diluted share of $1.11 for the second quarter of 2009, compared with earnings per diluted share of $0.87 in the second quarter of 2008. Earnings per diluted share for the first six months of 2009, excluding asset impairment and other charges, net, were $1.66, compared with earnings per diluted share of $1.94 for the prior year’s first six month period, excluding asset impairment and other charges, net.

“We are pleased with our second quarter performance, given the extremely challenging economic environment,” said Fresh Del Monte’s Chairman and Chief Executive Officer, Mohammad Abu-Ghazaleh. “Our impressive performance in the quarter validates the advantages of our strategy and business model. Our continued focus on improvements in operating efficiencies and cost control initiatives, along with our commitment to sustain one of the strongest balance sheets in the industry, delivered significant benefits during the quarter. We are extremely gratified with the solid performance of our core products. We saw strong results in our banana business, primarily due to the benefit of higher worldwide banana selling prices, combined with continued industry-wide supply shortages. Our premium gold pineapple category continued to grow; we achieved significant efficiencies in our fresh-cut category; and importantly, we began to see signs of improvement in our melon product category during the quarter.”

Mr. Abu-Ghazaleh added, “During the quarter we made the decision to stop planting gold pineapple in Brazil as a result of quality issues, lower production and increased costs. We will continue to harvest the gold pineapple already in the ground as long as it is economically and commercially feasible.”

Mr. Abu-Ghazaleh further commented, “We recently completed the refinancing of our credit facility. Our new credit facility has no debt maturities until January 2013. We are confident that our strategic plan and ongoing operational improvements, combined with our strong cash flow and financial stability, positions Fresh Del Monte for continued long-term success and growth.”

 
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(U.S. dollars in millions, except share and per share data) - (Unaudited)
       
Quarter ended Six months ended
Income Statement: June 26, June 27, June 26, June 27,

2009

2008

2009

2008

Net sales $ 978.4 $ 972.2 $ 1,858.1 $ 1,867.1
Cost of products sold 870.3 870.5 1,666.2 1,668.5
Other charges (1)   17.1     2.1   17.1     2.1  
Gross profit 91.0 99.6 174.8 196.5
 
Selling, general and administrative expenses 42.4 42.8 79.3 82.2
Asset impairment and other charges, net (2)   1.1     11.6   1.5     16.2  
Operating income 47.5 45.2 94.0 98.1
 
Interest expense, net 3.2 2.0 5.7 5.1
Other income (expense), net   5.0     2.7   (0.9 )   14.3  
 
Income before income taxes 49.3 45.9 87.4 107.3
 
Provision for (benefit from) income taxes   (3.6 )   3.7   (1.0 )   2.4  
Net income $ 52.9   $ 42.2 $ 88.4   $ 104.9  
 
Less: Net income (loss) attributable to noncontrolling interests   0.7     0.3   1.3     (0.6 )
Net income attributable to Fresh Del Monte Produce Inc. $ 52.2   $ 41.9 $ 87.1   $ 105.5  
 
 
Net income per ordinary share attributable to

Fresh Del Monte Produce Inc. - Basic

$ 0.82   $ 0.66 $ 1.37   $ 1.67  
 
Net income per ordinary share attributable to

Fresh Del Monte Produce Inc. - Diluted

$ 0.82   $ 0.66 $ 1.37   $ 1.66  
 
Weighted average number of ordinary shares:
Basic   63,553,211     63,455,713   63,553,211     63,157,388  
Diluted   63,559,309     63,804,052   63,603,524     63,581,121  
 
Selected Income Statement Data:
Depreciation and amortization $ 21.4   $ 20.7 $ 42.1   $ 40.9  
 
Non-GAAP Measures:
Reported net income per share - Diluted $ 0.82 $ 0.66 $ 1.37 $ 1.66
Other charges (1) 0.27 0.03 0.27 0.03
Asset impairment and other charges, net (2)   0.02     0.18   0.02     0.25  
Adjusted net income per share - Diluted (3) $ 1.11   $ 0.87 $ 1.66   $ 1.94  
 
Reported gross profit $ 91.0 $ 99.6 $ 174.8 $ 196.5
Other charges (1)   17.1     2.1 $ 17.1     2.1  
Adjusted gross profit (3) $ 108.1   $ 101.7 $ 191.9   $ 198.6  
 
 

(1) Other charges recorded during the second quarter of 2009 are related to the write-down of growing crop inventory resulting from our decision to discontinue pineapple planting in Brazil. Other charges recorded during the second quarter of 2008 are related to wages paid to idle workers and write-offs of packaging material inventory incurred as a result of extensive flood damage in our banana farms in Brazil.

 

(2) Asset impairment and other charges, net, for the second quarter of 2009 relates principally to asset impairment charges resulting from our decision to discontinue pineapple planting in Brazil.  Asset impairment and other charges, net, for the six months ended June 26, 2009 relates principally to asset impairment charges resulting from our decision to discontinue pineapple planting in Brazil, an impairment charge of the Del Monte ® perpetual, royalty-free brand name license due to lower than expected volumes and pricing related to the United Kingdom beverage products and the reversal of contract termination costs related to the previously announced closing of our Hawaii pineapple operations.  Asset impairment and other charges, net for the second quarter of 2008 relates principally to the flood damage at our banana farms in Brazil and the closure of under-utilized distribution centers in the United Kingdom.  Asset impairment and other charges, net, for the six months ended June 27, 2008 relates principally to the flood damage at our banana farms in Brazil and the closure of under-utilized distribution centers and a beverage production facility in the United Kingdom.

 

(3) Management reviews adjusted net income, adjusted net income per share and adjusted gross profit and considers these measures relevant to investors because management believes it better represents the underlying business trends and performance of the Company.

 
 
Fresh Del Monte Produce Inc. and Subsidiaries
Business Segment Data
(U.S. dollars in millions) - (Unaudited)
             
 
Quarter ended
June 26, 2009 June 27, 2008
Segment Data:
Net Sales Gross Profit (Loss) Net Sales Gross Profit
 
Banana $ 413.1 42 % $ 47.4 52 % $ 381.5 39 % $ 41.7 (2 ) 42 %
Other Fresh Produce 445.9 46 % 27.3 (1 ) 30 % 444.5 46 % 40.9 41 %
Prepared Food 85.7 9 % 16.9 19 % 114.5 12 % 15.3 15 %
Other Products and Services   33.7 3 %   (0.6 ) -1 %   31.7 3 %   1.7 2 %
Total $ 978.4 100 % $ 91.0   100 % $ 972.2 100 % $ 99.6 100 %
 
 
 
Six months ended
June 26, 2009 June 27, 2008
Segment Data:
Net Sales Gross Profit Net Sales Gross Profit
 
Banana $ 774.6 42 % $ 91.0 52 % $ 721.6 39 % $ 71.8 (2 ) 36 %
Other Fresh Produce 865.1 46 % 54.9 (1 ) 31 % 863.5 46 % 94.0 48 %
Prepared Food 162.5 9 % 27.9 16 % 216.4 12 % 25.3 13 %
Other Products and Services   55.9 3 %   1.0   1 %   65.6 3 %   5.4 3 %
Total $ 1,858.1 100 % $ 174.8   100 % $ 1,867.1 100 % $ 196.5 100 %
 
 
Quarter ended Six months ended
June 26, June 27, June 26, June 27,
Net Sales by Geographic Region: 2009 2008 2009 2008
 
North America $ 464.5 48 % $ 443.2 46 % $ 913.4 49 % $ 854.1 46 %
Europe 283.2 29 % 299.4 31 % 518.3 28 % 599.2 32 %
Asia 135.3 14 % 126.2 13 % 240.2 13 % 217.6 12 %
Middle East 72.6 7 % 75.6 8 % 133.8 7 % 134.8 7 %
Other   22.8 2 %   27.8   2 %   52.4 3 %   61.4 3 %
Total $ 978.4 100 % $ 972.2   100 % $ 1,858.1 100 % $ 1,867.1 100 %
 
(1) Other fresh produce gross profit includes charges of $17.1 million recorded during the second quarter of 2009 related to the write-down of growing crop inventory resulting from our decision to discontinue pineapple planting in Brazil.
 
(2) Banana gross profit includes charges of $2.1 million recorded during the second quarter of 2008 related to wages paid to idle workers and write-offs of packaging material inventory incurred as a result of extensive flood damage in our banana farms in Brazil.
   
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(U.S. dollars in millions) - (Unaudited)
 
Six months ended
June 26, June 27,
2009 2008
Operating activities:
Net income $ 88.4 $ 104.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42.1 40.9
Amortization of debt issuance costs 2.1 0.9
Asset impairment charges 2.8 12.6
Gain on sales of assets (1.9 ) (5.7 )
Foreign currency translation adjustment 4.9 (1.9 )
Other (0.5 ) 4.5
Changes in operating assets and liabilities:
Receivables 24.0 (21.6 )
Inventories 47.2 29.4
Other current assets 0.4 (10.6 )
Accounts payable and accrued expenses (2.4 ) 60.7
Other noncurrent assets and liabilities   15.2     (1.8 )
Net cash provided by operating activities   222.3     212.3  
 
Investing activities:
Capital expenditures (44.1 ) (43.3 )
Proceeds from sales of assets 7.3 8.6
Purchase of subsidiaries, net of cash acquired   -     (400.6 )
Net cash used in investing activities   (36.8 )   (435.3 )
 
Financing activities:
Net (payments) proceeds on long-term debt (186.0 ) 209.8
Proceeds from stock options exercised - 21.3
Payments for additional interest in noncontrolling interest   (2.4 )   (3.4 )
Net cash (used in) provided by financing activities   (188.4 )   227.7  
 
Effect of exchange rate changes on cash   2.0     (1.3 )
 
Net (decrease) increase in cash and cash equivalents (0.9 ) 3.4
Cash and cash equivalents, beginning   27.6     30.2  
Cash and cash equivalents, ending $ 26.7   $ 33.6  
   
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(U.S. dollars in millions)
 
June 26, December 26,
2009 2008
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 26.7 $ 27.6
Trade accounts receivable 348.0 348.0
Other accounts receivables 41.7 62.0
Inventories 408.3 459.8
Other current assets   60.3   77.2
Total current assets   885.0   974.6
 
Investment in and advances to unconsolidated companies 8.6 8.0
Property, plant and equipment, net 1,083.0 1,085.2
Goodwill 410.3 401.1
Other noncurrent assets   178.6   182.1
Total assets $ 2,565.5 $ 2,651.0
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 362.5 $ 379.6
Current portion of long-term debt and capital lease obligations 6.4 358.0
Other current liabilities   35.0   36.8
Total current liabilities   403.9   774.4
 
Long-term debt and capital lease obligations 328.7 154.8
Other noncurrent liabilities   207.5   207.9
Total liabilities   940.1   1,137.1
 
Total Fresh Del Monte Produce Inc. shareholders' equity 1,604.9 1,496.9
Noncontrolling interests   20.5   17.0
Total shareholders' equity   1,625.4   1,513.9
Total liabilities and shareholders' equity $ 2,565.5 $ 2,651.0
 
 
Selected Balance Sheet Data:
Working capital $ 481.1 $ 200.2
Total Debt $ 335.1 $ 512.8

Second Quarter 2009 Results

The Company incurred asset impairment and other charges, net, for the second quarter ended June 26, 2009 of $18.2 million, primarily related to the Company’s decision to cease gold pineapple planting in Brazil. Asset impairment and other charges, net, for the second quarter ended June 27, 2008, related to flood damage at the Company’s banana production areas in Brazil and the closure of under-utilized distribution centers in the U.K.

Net sales for the quarter increased $6.2 million to $978.4 million, compared with $972.2 million in the prior year period. The increase in net sales was led by strong performance in the Company’s banana business segment, primarily driven by higher worldwide banana selling prices, along with higher sales in the Company’s melon and gold pineapple product categories.

Gross profit for the quarter was $108.1 million, compared with gross profit of $101.7 million for the same period last year, excluding asset impairment and other charges, net, for both periods. The increase in gross profit was primarily the result of higher worldwide selling prices of bananas. Ongoing operational efficiencies and improvements in the Company’s North America fresh-cut operations and a decline in fuel costs also contributed to the increase in gross profit. These gains were partly offset by higher costs related to bananas sourced from Latin America.

Net income for the quarter was $70.4 million, compared with net income of $55.6 million in the second quarter of 2008, excluding asset impairment and other charges, net, for both periods. The increase in net income reflects higher gross profit, excluding asset impairment and other charges, net, and the effect of foreign exchange gains and tax benefits.

Second Quarter Business Segment Performance

(As reported in business segment data)

Banana

Net sales increased 8% to $413.1 million for the quarter. Worldwide pricing increased 7% to $15.14 per unit. Volume was in line with the prior year period. The increase in selling prices was partially offset by a 6% increase in unit cost. Gross profit increased 14% to $47.4 million, primarily due to higher selling prices in Europe, Asia and the Middle East regions.

Other Fresh Produce

Net sales were $445.9 million in the quarter. The increase over the prior year period was attributable to higher net sales in the Company’s melon and gold pineapple product categories. Volume increased 16%. Pricing decreased 13%, and costs decreased 10% on a per unit basis. Gross profit increased 9% to $44.4 million, excluding $17.1 million of charges associated with the Company’s decision to discontinue planting pineapple in Brazil.

  • Gold pineapple – Net sales increased 7% to $127.6 million, the result of strong sales in Europe. Volume increased 16%, a result of the Company’s Caribana acquisition, offset by an 8% decrease in selling price. Unit cost decreased by 7%, excluding the $17.1 million write down of growing crop inventory in Brazil.
  • Melons – Net sales increased 23% to $71.1 million. Volume was 31% higher due to increased production in the off-shore season. Pricing was 6% lower. Unit cost decreased by 3%.
  • Fresh-cut – Net sales decreased 3% to $89.4 million. Volume increased 4%. Pricing decreased 6%, primarily in the U.K., principally due to unfavorable foreign exchange rates. Unit cost decreased 16%.
  • Non-tropical fruit – Net sales decreased 3% to $96.1 million. Volume increased 9%. Pricing decreased 11%. Unit cost decreased 7%.
  • Tomatoes – Net sales decreased 12% to $33.9 million. Volume decreased 8%. Pricing decreased 5% with unit cost down 9%.

Prepared Food

Net sales decreased 25% to $85.7 million in the quarter. Pricing decreased 7%. Unit cost was 25% lower. Gross profit increased 11% to $16.9 million. The decrease in net sales was due to lower volume and pricing, a direct result of the current economic environment.

Other Products and Services

Net sales increased 6% to $33.7 million for the quarter. Gross profit decreased by $2.3 million, primarily due to lower sales in the Company’s Argentine grain business.

Cash Flow for the Six Months

Cash flow from operations for the first six months of 2009 was $222.3 million, compared with $212.3 million in the same period of 2008.

Total Debt

Total debt decreased from $512.8 million at the end of 2008 to $335.1 million at the end of the second quarter of 2009. On July 20, 2009 the Company announced that it had refinanced its existing credit facility with a new $500.0 million senior secured revolving credit facility scheduled to mature in January 2013.

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, a symbol of product innovation, quality, freshness and reliability for more than 100 years.



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