Fresh Del Monte Posts 2% Drop in Q3 Profit
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Source: Fresh Del Monte Produce Inc.
27/10/2009
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Coral Gables, Fla., Oct. 27, 2009 - Fresh Del Monte Produce Inc. today announced financial results for the third quarter ended September 25, 2009. Excluding asset impairment and other charges, (credits), net, the Company reported earnings per diluted share of $0.61 for the third quarter of 2009, compared with earnings per diluted share of $0.46 in the third quarter of 2008.
“We are pleased with the quarter’s strength of earnings, in what is seasonally a weaker quarter,” said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer at Fresh Del Monte Produce. “Our solid performance is characterized by our team’s ability to balance operational improvements and cost savings, while investing in our future. Although we anticipate weak global market conditions to continue in the near term, we are very optimistic about Fresh Del Monte’s future prospects. Our financial depth and flexibility are exceptionally sound.”
Net sales for the quarter were $766.2 million, compared with $832.9 million in the third quarter of 2008. Net sales increased in the Company’s banana business due to higher worldwide banana selling prices and strong global demand. These gains were more than offset by lower net sales in the Company’s other fresh produce, other products and services and prepared food businesses.
Gross profit for the quarter was $69.0 million, compared with gross profit of $79.0 million for the same period last year. The decline in gross profit was a direct result of expected lower volume and selling prices in the Company’s gold pineapple product line and higher fruit procurement costs in the Company’s banana business, partially offset by higher gross profit in the Company’s fresh-cut product line.
Excluding asset impairment and other charges, (credits), net, operating income for the quarter was $25.7 million, compared with $37.7 million for the same period last year, a result of the decrease in gross profit.
Net income for the quarter was $38.6 million, compared with $29.1 million in the third quarter of 2008, excluding asset impairment and other charges, (credits), net. The increase in net income reflects the effect of tax benefits, foreign exchange translation gains, and lower interest expense, partially offset by the decline in operating income.
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| Fresh Del Monte Produce Inc. and Subsidiaries |
| Condensed Consolidated Statements of Income |
| (U.S. dollars in millions, except share and per share data) - (Unaudited) |
|
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Quarter ended |
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Nine months ended |
| Income Statement: |
September 25, |
|
September 26, |
|
September 25, |
|
September 26, |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
| Net sales |
$ |
766.2 |
|
|
$ |
832.9 |
|
|
$ |
2,624.3 |
|
|
$ |
2,700.0 |
|
| Cost of products sold |
|
697.2 |
|
|
|
753.9 |
|
|
|
2,363.4 |
|
|
|
2,422.4 |
|
| Other charges (1) |
|
- |
|
|
|
- |
|
|
|
17.1 |
|
|
|
2.1 |
|
| Gross profit |
|
69.0 |
|
|
|
79.0 |
|
|
|
243.8 |
|
|
|
275.5 |
|
|
|
|
|
|
|
|
|
| Selling, general and administrative expenses |
|
43.3 |
|
|
|
41.3 |
|
|
|
122.6 |
|
|
|
123.5 |
|
| Asset impairment and other charges (credits), net (2) |
|
10.0 |
|
|
|
(0.2 |
) |
|
|
11.5 |
|
|
|
16.0 |
|
| Operating income |
|
15.7 |
|
|
|
37.9 |
|
|
|
109.7 |
|
|
|
136.0 |
|
|
|
|
|
|
|
|
|
| Interest expense, net |
|
2.7 |
|
|
|
3.6 |
|
|
|
8.4 |
|
|
|
8.7 |
|
| Other income (expense), net |
|
3.4 |
|
|
|
(2.3 |
) |
|
|
2.5 |
|
|
|
12.0 |
|
|
|
|
|
|
|
|
|
| Income before income taxes |
|
16.4 |
|
|
|
32.0 |
|
|
|
103.8 |
|
|
|
139.3 |
|
|
|
|
|
|
|
|
|
| Provision for (benefit from) income taxes |
|
(12.8 |
) |
|
|
2.6 |
|
|
|
(13.8 |
) |
|
|
5.0 |
|
| Net income |
$ |
29.2 |
|
|
$ |
29.4 |
|
|
$ |
117.6 |
|
|
$ |
134.3 |
|
|
|
|
|
|
|
|
|
| Less: Net income (loss) attributable to noncontrolling interests |
|
0.6 |
|
|
|
0.1 |
|
|
|
1.9 |
|
|
|
(0.5 |
) |
| Net income attributable to Fresh Del Monte Produce Inc. |
$ |
28.6 |
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|
$ |
29.3 |
|
|
$ |
115.7 |
|
|
$ |
134.8 |
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|
|
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Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Basic |
$ |
0.45 |
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|
$ |
0.46 |
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|
$ |
1.82 |
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|
$ |
2.13 |
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Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Diluted |
$ |
0.45 |
|
|
$ |
0.46 |
|
|
$ |
1.82 |
|
|
$ |
2.12 |
|
|
|
|
|
|
|
|
|
| Weighted average number of ordinary shares: |
|
|
|
|
|
|
|
| Basic |
|
63,568,042 |
|
|
|
63,553,299 |
|
|
|
63,558,155 |
|
|
|
63,279,692 |
|
| Diluted |
|
63,682,513 |
|
|
|
63,695,040 |
|
|
|
63,629,854 |
|
|
|
63,609,428 |
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|
|
|
|
|
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| Selected Income Statement Data: |
|
|
|
|
|
|
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| Depreciation and amortization |
$ |
21.1 |
|
|
$ |
21.4 |
|
|
$ |
63.2 |
|
|
$ |
62.3 |
|
|
|
|
|
|
|
|
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| Non-GAAP Measures: |
|
|
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| Reported net income per share - Diluted |
$ |
0.45 |
|
|
$ |
0.46 |
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|
$ |
1.82 |
|
|
$ |
2.12 |
|
| Other charges (1) |
|
- |
|
|
|
- |
|
|
|
0.27 |
|
|
|
0.03 |
|
| Asset impairment and other charges (credits), net (2) |
|
0.16 |
|
|
|
- |
|
|
|
0.18 |
|
|
|
0.25 |
|
| Adjusted net income per share - Diluted (3) |
$ |
0.61 |
|
|
$ |
0.46 |
|
|
$ |
2.27 |
|
|
$ |
2.40 |
|
|
|
|
|
|
|
|
|
| Reported gross profit |
$ |
69.0 |
|
|
$ |
79.0 |
|
|
$ |
243.8 |
|
|
$ |
275.5 |
|
| Other charges (1) |
|
- |
|
|
|
- |
|
|
$ |
17.1 |
|
|
|
2.1 |
|
| Adjusted gross profit (3) |
$ |
69.0 |
|
|
$ |
79.0 |
|
|
$ |
260.9 |
|
|
$ |
277.6 |
|
|
|
|
|
|
|
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| (1) Other charges for the nine months ended September 25, 2009 relates to the second quarter write-down of growing crop inventory resulting from our decision to discontinue pineapple planting in Brazil. Other charges for the nine months ended September 26, 2008 related to wages paid to idle workers and write-offs of packaging material inventory incurred in the second quarter as a result of extensive flood damage at our banana farms in Brazil. |
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(2) Asset impairment and other charges (credits), net, for the third quarter ended September 25, 2009 related principally to asset impairment charges resulting from our decision to discontinue pineapple planting in Brazil during the second quarter and our subsequent decision during the third quarter to not use certain property, plant and equipment as originally intended for other crop production. Also included in asset impairment and other charges were one-time termination benefits and contract termination costs resulting from the decision to discontinue our commercial cargo service in Europe, and the reversal of contract termination costs related to the closure of an under-utilized distribution center in the United Kingdom. Asset impairment and other charges, net, for the nine months ended September 25, 2009 related principally to asset impairment charges resulting from our decision to discontinue pineapple planting in Brazil and subsequent decision during the third quarter as explained above, one-time termination benefits and contract termination costs resulting from the decision to discontinue our commercial cargo service in Europe, an impairment charge of the Del Monte(R) perpetual, royalty-free brand name license due to lower than expected volumes and pricing related to the U.K. beverage products, the reversals of contract termination costs related to the closure of an under-utilized distribution center in the United Kingdom and the previously announced closing of our Hawaii pineapple operations. |
| Asset impairment and other charges (credits), net for the third quarter and nine months ended September 28, 2008 related 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 they better represent the underlying business trends and performance of the Company. |
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| Fresh Del Monte Produce Inc. and Subsidiaries |
| Business Segment Data |
| (U.S. dollars in millions) - (Unaudited) |
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Quarter ended |
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September 25, 2009 |
|
September 26, 2008 |
| Segment Data: |
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
Gross Profit (Loss) |
|
Net Sales |
|
Gross Profit (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Banana |
|
$ |
350.9 |
|
46 |
% |
|
$ |
14.0 |
|
|
20 |
% |
|
$ |
332.7 |
|
40 |
% |
|
$ |
23.7 |
|
|
30 |
% |
| Other Fresh Produce |
|
|
311.0 |
|
41 |
% |
|
|
44.0 |
|
|
64 |
% |
|
|
354.5 |
|
43 |
% |
|
|
45.3 |
|
|
57 |
% |
| Prepared Food |
|
|
85.5 |
|
11 |
% |
|
|
14.0 |
|
|
20 |
% |
|
|
102.4 |
|
12 |
% |
|
|
13.3 |
|
|
17 |
% |
| Other Products and Services |
|
|
18.8 |
|
2 |
% |
|
|
(3.0 |
) |
|
-4 |
% |
|
|
43.3 |
|
5 |
% |
|
|
(3.3 |
) |
|
-4 |
% |
| Total |
|
$ |
766.2 |
|
100 |
% |
|
$ |
69.0 |
|
|
100 |
% |
|
$ |
832.9 |
|
100 |
% |
|
$ |
79.0 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
September 25, 2009 |
|
September 26, 2008 |
| Segment Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
Gross Profit (Loss) |
|
Net Sales |
|
Gross Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Banana |
|
$ |
1,125.5 |
|
43 |
% |
|
$ |
105.0 |
|
|
43 |
% |
|
$ |
1,054.3 |
|
39 |
% |
|
$ |
95.4 |
|
(2) |
35 |
% |
| Other Fresh Produce |
|
|
1,176.1 |
|
45 |
% |
|
|
98.9 |
|
(1) |
41 |
% |
|
|
1,218.0 |
|
45 |
% |
|
|
139.4 |
|
|
50 |
% |
| Prepared Food |
|
|
248.0 |
|
9 |
% |
|
|
41.8 |
|
|
17 |
% |
|
|
318.8 |
|
12 |
% |
|
|
38.6 |
|
|
14 |
% |
| Other Products and Services |
|
|
74.7 |
|
3 |
% |
|
|
(1.9 |
) |
|
-1 |
% |
|
|
108.9 |
|
4 |
% |
|
|
2.1 |
|
|
1 |
% |
| Total |
|
$ |
2,624.3 |
|
100 |
% |
|
$ |
243.8 |
|
|
100 |
% |
|
$ |
2,700.0 |
|
100 |
% |
|
$ |
275.5 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended |
|
Nine months ended |
|
|
September 25, |
|
September 26, |
|
September 25, |
|
September 26, |
| Net Sales by Geographic Region: |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
$ |
357.3 |
|
47 |
% |
|
$ |
397.8 |
|
|
48 |
% |
|
$ |
1,270.7 |
|
48 |
% |
|
$ |
1,251.9 |
|
|
46 |
% |
| Europe |
|
|
210.4 |
|
27 |
% |
|
|
234.9 |
|
|
28 |
% |
|
|
728.8 |
|
28 |
% |
|
|
834.2 |
|
|
31 |
% |
| Asia |
|
|
95.7 |
|
12 |
% |
|
|
88.5 |
|
|
11 |
% |
|
|
335.9 |
|
13 |
% |
|
|
306.1 |
|
|
11 |
% |
| Middle East |
|
|
88.7 |
|
12 |
% |
|
|
69.4 |
|
|
8 |
% |
|
|
222.6 |
|
8 |
% |
|
|
204.2 |
|
|
8 |
% |
| Other |
|
|
14.1 |
|
2 |
% |
|
|
42.3 |
|
|
5 |
% |
|
|
66.3 |
|
3 |
% |
|
|
103.6 |
|
|
4 |
% |
| Total |
|
$ |
766.2 |
|
100 |
% |
|
$ |
832.9 |
|
|
100 |
% |
|
$ |
2,624.3 |
|
100 |
% |
|
$ |
2,700.0 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) Other fresh produce gross profit for the nine months ended September 25, 2009 included 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 for the nine months ended September 26, 2008 included 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 at our banana farms in Brazil. |
| |
|
|
|
|
|
| Fresh Del Monte Produce Inc. and Subsidiaries |
| Condensed Consolidated Statements of Cash Flows |
| (U.S. dollars in millions) - (Unaudited) |
|
|
|
|
|
|
|
Nine months ended |
|
|
September 25, |
|
September 26, |
|
|
2009 |
|
2008 |
| Operating activities: |
|
|
|
|
| Net income |
|
$ |
117.6 |
|
|
$ |
134.3 |
|
| Adjustments to reconcile net income to net cash |
|
|
|
|
| provided by operating activities: |
|
|
|
|
| Depreciation and amortization |
|
|
63.2 |
|
|
|
62.3 |
|
| Amortization of debt issuance costs |
|
|
2.7 |
|
|
|
1.3 |
|
| Asset impairment charges |
|
|
12.5 |
|
|
|
12.6 |
|
| Gain on sales of assets |
|
|
(4.3 |
) |
|
|
(7.5 |
) |
| Foreign currency translation adjustment |
|
|
9.0 |
|
|
|
(4.9 |
) |
| Other |
|
|
(8.9 |
) |
|
|
7.1 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
| Receivables |
|
|
67.7 |
|
|
|
43.0 |
|
| Inventories |
|
|
16.0 |
|
|
|
(20.3 |
) |
| Other current assets |
|
|
4.5 |
|
|
|
(9.1 |
) |
| Accounts payable and accrued expenses |
|
|
(25.9 |
) |
|
|
32.2 |
|
| Other noncurrent assets and liabilities |
|
|
15.8 |
|
|
|
(5.1 |
) |
| Net cash provided by operating activities |
|
|
269.9 |
|
|
|
245.9 |
|
|
|
|
|
|
| Investing activities: |
|
|
|
|
| Capital expenditures |
|
|
(63.2 |
) |
|
|
(72.3 |
) |
| Proceeds from sales of assets |
|
|
12.4 |
|
|
|
16.5 |
|
| Purchase of subsidiaries, net of cash acquired |
|
|
- |
|
|
|
(414.1 |
) |
| Net cash used in investing activities |
|
|
(50.8 |
) |
|
|
(469.9 |
) |
|
|
|
|
|
| Financing activities: |
|
|
|
|
| Net (payments) proceeds on long-term debt |
|
|
(204.7 |
) |
|
|
207.5 |
|
| Proceeds from stock options exercised |
|
|
0.7 |
|
|
|
21.8 |
|
| Contributions from noncontrolling interests |
|
|
(3.7 |
) |
|
|
(4.6 |
) |
| Net cash (used in) provided by financing activities |
|
|
(207.7 |
) |
|
|
224.7 |
|
|
|
|
|
|
| Effect of exchange rate changes on cash |
|
|
(0.2 |
) |
|
|
(2.5 |
) |
|
|
|
|
|
| Net increase (decrease) in cash and cash equivalents |
|
|
11.2 |
|
|
|
(1.8 |
) |
| Cash and cash equivalents, beginning |
|
|
27.6 |
|
|
|
30.2 |
|
| Cash and cash equivalents, ending |
|
$ |
38.8 |
|
|
$ |
28.4 |
|
|
|
|
|
|
|
|
|
|
|
| Fresh Del Monte Produce Inc. and Subsidiaries |
| Condensed Consolidated Balance Sheets |
| (U.S. dollars in millions) |
|
|
|
|
|
|
|
September 25, |
|
December 26, |
|
|
2009 |
|
2008 |
|
|
(Unaudited) |
|
|
| Assets |
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash equivalents |
|
$ |
38.8 |
|
$ |
27.6 |
| Trade accounts receivable, net |
|
|
298.2 |
|
|
348.0 |
| Other accounts receivables, net |
|
|
46.4 |
|
|
62.0 |
| Inventories |
|
|
441.2 |
|
|
459.8 |
| Other current assets |
|
|
49.8 |
|
|
77.2 |
| Total current assets |
|
|
874.4 |
|
|
974.6 |
|
|
|
|
|
| Investment in and advances to unconsolidated companies |
|
|
8.5 |
|
|
8.0 |
| Property, plant and equipment, net |
|
|
1,071.5 |
|
|
1,085.2 |
| Goodwill |
|
|
407.9 |
|
|
401.1 |
| Other noncurrent assets |
|
|
196.3 |
|
|
182.1 |
| Total assets |
|
$ |
2,558.6 |
|
$ |
2,651.0 |
|
|
|
|
|
| Liabilities and shareholders' equity |
|
|
|
|
| Current liabilities: |
|
|
|
|
| Accounts payable and accrued expenses |
|
$ |
342.7 |
|
$ |
379.6 |
| Current portion of long-term debt and capital lease obligations |
|
|
5.4 |
|
|
358.0 |
| Other current liabilities |
|
|
32.1 |
|
|
36.8 |
| Total current liabilities |
|
|
380.2 |
|
|
774.4 |
|
|
|
|
|
| Long-term debt and capital lease obligations |
|
|
309.0 |
|
|
154.8 |
| Other noncurrent liabilities |
|
|
211.8 |
|
|
207.9 |
| Total liabilities |
|
|
901.0 |
|
|
1,137.1 |
|
|
|
|
|
| Total Fresh Del Monte Produce Inc. shareholders' equity |
|
|
1,634.9 |
|
|
1,496.9 |
| Noncontrolling interests |
|
|
22.7 |
|
|
17.0 |
| Total shareholders' equity |
|
|
1,657.6 |
|
|
1,513.9 |
| Total liabilities and shareholders' equity |
|
$ |
2,558.6 |
|
$ |
2,651.0 |
|
|
|
|
|
|
|
|
|
|
| Selected Balance Sheet Data: |
|
|
|
|
| Working capital |
|
$ |
494.2 |
|
$ |
200.2 |
| Total Debt |
|
$ |
314.4 |
|
$ |
512.8 |
|
|
|
|
|
Third Quarter 2009 Business Segment Performance
(As reported in business segment data)
Bananas
Net sales increased 5% to $351.0 million during the quarter. The increase in net sales was primarily driven by higher sales in the Company’s Middle East, Europe and Asia-Pacific regions. Volume was in line with the prior year period. Worldwide pricing increased 4% to $13.75 per unit. These gains were partially offset by an 8% increase in unit costs, the result of higher fruit procurement costs. Gross profit decreased $9.6 million to $14.0 million.
Other Fresh Produce
Net sales for the quarter decreased 12% to $311.0 million. The decrease in net sales was primarily the result of lower sales in the Company’s gold pineapple, melon and tomato product lines. Volume decreased by 13%, the result of lower supply of gold pineapple and the Company’s planned reduction of domestic melons. Gross profit decreased $1.3 million to $44.0 million.
-
Gold pineapple – Net sales decreased 15% to $104.0 million. Volume decreased 8% for the quarter. The decline in volume was the result of the previously announced supply shortages associated with the temporary reduction in volume sourced from Costa Rica. Pricing decreased 8%, primarily due to consumer-price sensitivity. Unit cost increased 1%.
-
Melon – Net sales decreased 34% to $21.7 million. Volume was 39% lower than the prior year period. The decline in domestic melon volume was the result of the Company’s decision to reduce purchases from third-party growers in California. Pricing increased 8%, with unit cost 8% higher.
-
Fresh-cut – Net sales decreased 2% to $82.2 million. Volume was 4% lower. Pricing increased 2%, with an 8% decrease in unit cost.
-
Non-tropical – Net sales decreased 4% to $46.9 million. Volume increased 15%. Pricing was 16% lower. Unit cost decreased 21%.
-
Tomato – Net sales decreased 15% to $26.7 million. Volume decreased 10%. Pricing decreased 6%. Unit cost decreased 6%.
Prepared Food
Net sales decreased 17% to $85.5 million for the third quarter. The decline in net sales was largely attributable to challenging economic conditions and the negative impact of unfavorable exchange rates. Pricing increased by 3%, with a 1% decrease in unit cost. Gross profit for the quarter was $14.0 million, compared with $13.3 million in the third quarter of 2008.
Other Products and Services
Net sales decreased 57% to $18.8 million, compared to the prior year period, the result of lower commodity selling prices in the Company’s Argentine grain business. Gross profit was a loss, in line with the prior year period due to lower gross profit in the Company’s Argentine grain business, offset by lower expenses associated with the Company’s third-party shipping operations.
Income Taxes
The income tax benefit recorded in the third quarter was $12.8 million. The benefit included two large changes in valuation allowances that netted to a tax benefit of $8.3 million.
Cash Flows for the Nine Months
Net cash provided by operating activities for the first nine months of 2009 was $269.9 million, compared with $245.9 million in the same period of 2008. The increase was primarily due to lower accounts receivable and inventory balances, offset by higher payments for accounts payable and accrued expenses.
Total Debt
Total debt decreased from $512.8 million at the end of 2008 to $314.4 million, a $198.4 million decrease.
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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