Fresh Del Monte Produce Announces Third Quarter 2008 Financial Results
The Company reported earnings per diluted share of $0.46, compared with earnings per diluted share of $0.51 in the third quarter of 2007.
28/10/08 Fresh Del Monte Produce Inc. reported financial results for the third quarter ended September 26, 2008. The Company reported earnings per diluted share of $0.46, compared with earnings per diluted share of $0.51 in the third quarter of 2007. Earnings per diluted share for the first nine months of 2008, excluding asset impairment and other charges or credits, net, were $2.40, compared with $2.54 for the first nine months of 2007, excluding asset impairment and other charges, net.
Fresh Del Monte’s Chairman and Chief Executive Officer, Mohammad Abu-Ghazaleh said, “In contrast to the unprecedented volatility in the global economy and financial markets, the third quarter of 2008 was a period of steady growth and solid performance for Fresh Del Monte Produce. Our business continued to expand around the world, and consumers continued to purchase our fresh fruit and vegetables, including our premium-priced gold pineapple and fresh-cut products. These factors enabled us to deliver increases in net sales, gross profit and operating income; strong results in light of the uncertain global environment which prevailed in the third quarter and continues. I believe our performance clearly underscores Fresh Del Monte’s primary strengths: our business strategies, our management team’s execution skills, our well-respected brand, and our balance sheet.”
Mr. Abu-Ghazaleh said, “We made significant gains in the third quarter despite the fact that we continued to experience higher fruit production, procurement and logistic costs. This quarter’s performance once again demonstrates our mandate to control expenditures, improve efficiencies, and increase profitability.”
He added, “It takes a competitive edge to win in today’s markets, and we are confident that we have the qualities we need to address the challenges ahead. We have weathered volatile cycles before, and we believe that our business and brand are well-positioned to perform in a wide range of economic conditions. The foundation we have created sets the stage for us to deliver improved shareholder value over the long term, which has always been our goal.”
Third Quarter 2008 Results
Net sales for the quarter increased 10% to $832.9 million, compared with $757.1 million in the third quarter of 2007. Net sales, compared with the prior year period, increased in the Company’s banana, other fresh produce and other products and services business segments, primarily due to improved pricing, partially offset by lower sales in the Company’s prepared food business segment.
Gross profit for the quarter was $79.0 million, compared with gross profit of $67.8 million for the same period last year. For all business segments, gross profit was impacted by the significantly higher cost associated with production, procurement and transportation.
Operating income for the quarter increased 46% to $37.9 million, compared with $25.9 million, a result of the increase in gross profit.
Net income for the quarter was $29.3 million, compared with $29.9 million in the third quarter of 2007. The decrease in net income reflects the effect of unfavorable foreign currency exchange in the third quarter of 2008, and the fact that the third quarter of 2007 included higher gains from the sale of assets and tax benefits.
Third Quarter Business Segment Performance
(As reported in business segment data)
Bananas
Net sales increased 20% to $332.7 million during the quarter. Volume was up 5% primarily in North America, the result of the Caribana acquisition in the second quarter of 2008. Worldwide pricing increased 14% to $13.17 per unit. Gross profit rose to $23.7 million, due to higher selling prices in North America, the Middle East and Asia; favorable foreign currency in Asia; and growing demand. The increase in selling prices was partially offset by 9% higher unit costs.
Other Fresh Produce
Net sales for the quarter increased 4% to $354.5 million. The Company’s gold pineapple, fresh-cut and melon product lines drove the increase in net sales. Overall pricing for the segment increased 11%. However, overall volume decreased by 6%, with an 11% increase in unit costs. As a result, gross profit decreased 2% to $45.3 million.
* Gold pineapple – Net sales increased 13% to $122.5 million, primarily the result of higher sales in North America. Volume increased 9% for the quarter, primarily due to the Caribana acquisition. Pricing increased 4% and unit cost increased 12% * Melon – Net sales increased 6% to $32.8 million, primarily the result of a 7% increase in selling price. Volume and unit cost were in line with last year’s levels.
* Fresh-cut – Net sales increased 10% to $84.2 million, primarily the result of increased pricing in North America and higher sales in the Middle East. Volume rose 4%, mainly due to increased demand in the Middle East. Pricing increased 5%, offset by a 9% increase in unit cost.
* Non-tropical – Net sales were $48.8 million, in line with last year’s levels, as a 7% increase in price was offset by a 7% decrease in volume. Unit cost decreased 4%.
* Tomato – Net sales decreased 7% to $31.5 million with a 17% decrease in volume, a direct result of the salmonella outbreak in the United States originally linked to tomatoes. Pricing increased 13%, offset by an 11% increase in unit cost.
Prepared Food
Net sales decreased 4% to $102.4 million for the third quarter, due to lower sales in the pineapple and beverage product lines, partially offset by growth in the Company’s Middle East poultry and processed meat businesses. Pricing increased 13%, with a 13% increase in costs. Operating income improved by $2.0 million, the result of reductions in selling and marketing costs as the Company shifted to use of independent distributors.
Other Products and Services
Net sales increased 39% to $43.3 million for the quarter, driven by increased sales in the Company’s Argentina based grain business. However, the increase in sales was offset by significantly higher costs of other products and services, resulting in a $3.7 million decrease in gross profit.
Cash Flow for the Nine Months
Net cash provided by operating activities for the first nine months of 2008 was $241.3 million, compared with $166.1 million in the same period of 2007. The increase was primarily due to lower accounts receivable, driven by increased collections and higher accounts payables and accrued expenses.
Guatemala Acquisition
In the third quarter of 2008, the Company acquired two melon operations in Guatemala. These acquisitions further strengthened the Company’s position as a leader in the off-shore melon season, securing approximately 4.5 million incremental boxes of cantaloupes and honeydews to be marketed under the Del Monte brand.
Total Debt
Total debt increased from $238.6 million at the end of 2007 to $446.5 million, a $207.9 million increase, primarily the result of the Caribana acquisition.
Conference Call and Web Cast Data
Fresh Del Monte will host a conference call and simultaneous Web cast at 11:00 a.m. Eastern Time to discuss the third quarter 2008 results and to review the Company’s progress and outlook. The Web cast can be accessed on the Company’s Investor Relations home page at www.freshdelmonte.com. The call will be available for re-broadcast on the Company’s Web site approximately two hours after the conclusion of the call.
