Fresh Del Monte Produce Q4 2024 Earnings Report

Fresh Del Monte Produce EPS Results

• Actual EPS: $0.26
• Consensus EPS: $0.42
• Beat/Miss: Missed by -$0.16
• One Year Ago EPS: $0.25

Fresh Del Monte Produce Revenue Results

• Actual Revenue: $1.01 billion
• Expected Revenue: $1.14 billion
• Beat/Miss: Missed by -$124.30 million
• YoY Revenue Growth: +0.50%

Fresh Del Monte Produce Announcement Details

• Quarter: Q4 2024
• Date: 2/24/2025
• Time: Before Market Opens
• Conference Call Date: Monday, February 24, 2025
• Conference Call Time: 11:00AM ET

Fresh Del Monte Produce (NYSE:FDP), through its subsidiaries, produces, markets, and distributes fresh and fresh-cut fruits and vegetables in North America, Central America, South America, Europe, the Middle East, Africa, Asia, and internationally. It operates through three segments: Fresh and Value-Added Products, Banana, and Other Products and Services. The company offers pineapples, fresh-cut fruit, fresh-cut vegetables, melons, and vegetables; non-tropical fruits, such as grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries, and kiwis; other fruit and vegetables, and avocados; and prepared fruit and vegetables, juices, other beverages, and meals and snacks. It also engages in the sale of poultry and meat products; and third-party freight services business. The company offers its products under the Del Monte brand, as well as under other brands, such as UTC, Rosy, Just Juice, Fruitini, Pinkglow, Del Monte Zero, Honeyglow, Rubyglow, Honey Miniglow, Bananinis, Mann, Mann's Logo, Arcadian Harvest, Nourish Bowls, Broccolini, Caulilini, Better Burger Leaf, Romaleaf, and other regional brands. It markets and distributes its products to retail stores, club stores, convenience stores, wholesalers, distributors, and foodservice operators. Fresh Del Monte Produce Inc. was founded in 1886 and is based in George Town, Cayman Islands.

Fresh Del Monte Produce Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, everyone, and welcome to Fresh Del Monte Produce's Fourth Quarter and Full Fiscal Year twenty twenty four Earnings Conference Call. Today's conference call is being broadcast live over the Internet and is also being recorded for playback purposes. After the speakers' remarks, there will be a question and answer session. Thank you. For opening remarks and introductions, I would like to turn today's call over to the Vice President, Investor Relations with Fresh Del Monte Produce, Ms.

[Operator]

Christine Canela. Please go ahead, Ms. Canela.

[Christine Cannella, Vice President-Investor Relations at Fresh Del Monte Produce]

Thank you, Louella. Good morning, everyone, and thank you for joining our fourth quarter and full fiscal year '20 '20 '4 conference call. Joining me in today's discussion are Mr. Mohammad Abu Ghazali, Chairman and Chief Executive Officer and Ms. Monica Vicente, Senior Vice President and Chief Financial Officer.

[Christine Cannella, Vice President-Investor Relations at Fresh Del Monte Produce]

I hope that you had a chance to review the press release that was issued earlier by a business wire. You may also visit the company's IR website at investorrelations.freshdelmonte.com to access today's earnings materials and to register for future distribution. This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non GAAP measures. Reconciliations of these non GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website.

[Christine Cannella, Vice President-Investor Relations at Fresh Del Monte Produce]

I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward looking statements within the safe harbor provisions of the federal securities laws. In today's press release and in our SEC filings, we detail risks that may cause our future results to differ materially from those forward looking statements. Our statements are as of today, 02/24/2024 and we have no obligation to update any forward looking statement we may make. During the call, we will provide a business update along with an overview of our fourth quarter and full fiscal year 2024 financial results followed by a question and answer session. With that, I will now turn today's call over to Mr.

[Christine Cannella, Vice President-Investor Relations at Fresh Del Monte Produce]

Mohammed Abu Ghazali. Please go ahead.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

Thank you, Christine. Good morning, everyone, and thank you for joining us today. Let me take you through the highlights of our full year 2024 results. Our fresh and value added product segments, pineapple, fresh cut fruit, and avocados performed exceptionally well in 2024, driving growth and improving company gross margins. These categories remain core strength of our portfolio, which we believe validates the direction we have taken to focus on higher margin products that align with market demands.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

While total net sales were 1% lower year over year at $4,280,000,000 Gross profit increased by 2% to $358,000,000 from the prior year period and gross margins improved to 8.4 compared with 8.1% in 2023, underscoring our progress in building a more profitable and efficient business model. Furthermore, we achieved another reduction in long term debt supported by strong cash flow and increased our quarterly dividend for the third consecutive year. Pineapples are the heart of who we are. And in 2024, we continued to solidify our position as the global reader in this category. Last year, we launched our latest innovation, the Ruby Glow pineapple.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

As global demand for our pineapples continue to exceed supply, we remain active in expanding our production and sourcing operations. We understand how important it is to ensure consistent and interrupted supply to consumers globally and for that we have established a five year growth strategy that we believe will support our customers globally. We believe in the next few years will be a tremendous story for our pineapple segment driven by our relentless focus on quality innovation and reaching more consumers around the world. Pineapples are central to our growth strategy, driving every stage of our business from whole fresh produce to fresh cut and value added products, manufacturing with IQF and juice concentrates and our newest biomass initiative, which seeks to monetize every part of the fruit and plant. We are also leveraging improvements across our fresh cut facilities worldwide.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

In North America, the program is expanding particularly in club, retail and e commerce channels where we have partnered with one of the world's largest platform. In the fourth quarter, we introduced more automation into our fresh cut facilities and other innovations that have enhanced efficiency and operational effectiveness. These investments align with our strategy to build our fresh cut program into a key profit center, which we expect will enable us to deliver sustained growth in this category. Our avocado program, another core strength, performed well in 2024, driving growth despite industry supply chain challenges. Expanding global sourcing remains a key focus on our growth strategy.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

While our state of the art packing operations in Mexico is our largest strength, we are evaluating plans to diversify our sourcing through partnerships in Colombia, Guatemala, Uganda and Kenya. We believe that we will be able to sustain the momentum, expand our reach and deliver greater value to customers and consumers worldwide. Our banana business remains an important focus even though even as the market has become increasingly competitive over the past few years. To meet customer demand and ensure a stable supply, we have taken steps to diversify sourcing and expand supply. A key initiative is our Somalia banana project, which was announced in February 2023, located in the heart of Somalia's historic banana belt.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

This project is revitalizing an industry that was that once thrived before the civil war of the 1990s when Somalia was the leading banana exported to Europe and The Middle East. In quarter four, twenty twenty four, '3 '50 hectares were planted with plans to expand to 1,500 hectares by the end of twenty twenty five. We expect that this project will not only strengthen our supply chain and reduce transport times to key markets but will also position us to penetrate new banana markets. Additionally, we believe that this project plays a vital role in Somalia's economic recovery by creating jobs, stimulating the local economy and establishing critical infrastructure. On the regulatory front, we believe we are ahead of the curve when it comes to FESMA two zero four compliance, positioning Fresh Dalmonte as a leader in supply chain traceability.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

This rule, which requires enhanced traceability for high risk food, is one we have embraced early and we are well into the implementation and integration phase with several key suppliers. We are on track to achieve full compliance in time for the January 2026 deadline. With dedicated team and robust system in place, we are strengthening our risk management framework and operational efficiency. We expect to be ready to continue servicing our customers and take on new whose current suppliers are unable to meet these requirements in time, giving us a significant competitive advantage. By leading the way in FESPA two zero four compliance, we are aiming to ensure continued growth, particularly in our fresh cut category and reinforcing our ability to deliver value to our partners.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

As you can see, 2024 was a remarkable year for us, further underscored by the pivotal launch of our biomass initiative. This initiative seeks to transform residues and byproducts into innovative solutions, enhancing soil health, advancing wellness and exploring new applications in textiles. While still in its early stages, the initiative reflects our commitment to sustainability and innovation, creating value for both our business and the environment. To drive the growth of our biomass initiatives, we recently completed hiring the core team that will lead this next phase. Further underscoring our leadership in sustainability, we were recently honored with the Seal Environment Initiative Award, our fourth Seal Award in five years.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

This recognition celebrates our achievement and surpassing our emissions reduction targets, an impressive seven years ahead of schedule. The Seal Business Sustainability Awards honor the most sustainable companies in the world. And this latest win reaffirms our ongoing commitment to environmental stewardship and responsible business practices. Finally, I want to express my gratitude to our team members worldwide. Their dedication and hard work made 2024 a transformative year for FreshMLMNT.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

The progress we have achieved is a testament to their efforts. I would like to thank you at this time and move the call to Monica Bicelte, our Chief Financial Officer, who will get into the financial results.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Thank you, Mr. Evbu Gaselli, and good morning and thank you for joining us on the call today. As Christine mentioned, our press release and our call today include non GAAP measures. Reconciliations of these non GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website. For the fourth quarter of twenty twenty four, net sales were $1,013,000,000 compared with $1,090,000,000 in the prior year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

The increase in net sales was driven by higher sales in our fresh and value added segment, primarily driven by higher per unit selling prices. The increase was partially offset by a decrease in net sales in our Banana segment due to lower per unit selling prices and volume. For the full year of 2024, net sales were $4,280,000,000 compared with $4,321,000,000 in the prior year. The decrease in net sales was primarily due to lower sales and per unit selling prices in our Banana segment as well as the negative impact of exchange rate fluctuations, primarily the Japanese yen and Korean won, partially offset by higher per unit selling prices and sales volume in our fresh and value added product segments. Gross profit for the fourth quarter of twenty twenty four was $69,000,000 compared with $63,000,000 in the prior year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

The increase in gross profit was driven by higher net sales in our Fresh and Value Added Products segment, partially offset by lower net sales in our Banana segment as well as higher per unit production and procurement costs. Gross margin for the fourth quarter was 6.8% compared with 6.2% in the prior year. Adjusted gross profit for the fourth quarter was $69,000,000 compared with $56,000,000 in the prior year. For the full year of 2024, gross profit was $358,000,000 compared with $351,000,000 last year. The increase in gross profit was primarily driven by higher net sales in our fresh and value added product segment and lower ocean freight costs, partially offset by lower net sales in our Banana segment, higher production and procurement costs and the negative impact of fluctuations in exchange rates related to the Costa Rica colon.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Gross margin for the full year increased to 8.4% compared with 8.1% in the prior year. Adjusted gross profit for the full year was $359,000,000 compared with $355,000,000 last year. Operating income for the fourth quarter of twenty twenty four was $30,000,000 compared with an operating loss of $113,000,000 last year. The notable change in operating income was due to $134,000,000 non cash impairment charge in 2023, primarily relating to long lived assets in our man packing operations and goodwill in our Prepared Foods reporting unit. Adjusted operating income for the fourth quarter was $17,000,000 compared with $12,000,000 in the prior year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

For the full year of 2024, operating income was $196,000,000 compared with $59,000,000 last year. The increase in operating income was primarily driven by lower asset impairment charges and higher gross profit, partially offset by higher selling, general and administrative expenses compared to the prior year. Adjusted operating income for the year was $159,000,000 compared with $165,000,000 last year. The year over year decrease in adjusted operating income was driven by higher selling, general and administrative expenses. Other income expense, net, for the fourth quarter of twenty twenty four was a loss of $3,000,000 compared with a gain of $4,000,000 last year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

The change was primarily due to foreign exchange losses in 2024 compared with foreign exchange gains last year. Other expense, net for the full year of 2024 was $8,000,000 compared with $19,000,000 in 2023. The decrease in expense was mainly driven by gains from unconsolidated minority equity investments. FDP net income for the fourth quarter of twenty twenty four was $20,000,000 compared with FDP net loss of 106,000,000 last year. Adjusted FDP net income for the fourth quarter was $12,000,000 which is at par with the fourth quarter of twenty twenty three.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

For the full year of 2024, FTP net income was $142,000,000 compared with a net loss of $11,000,000 last year. Adjusted FDP net income for the year was $116,000,000 compared with $102,000,000 the prior year. Our diluted EPS in the fourth quarter of twenty twenty four was 0.42 per share compared with a loss of $2.22 per share in the prior year. Adjusted diluted EPS was $0.26 per share compared with $0.25 per share last year. For the full year of 2024, diluted EPS was $2.96 per share compared with a loss of $0.24 per share in the prior year period.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Adjusted diluted EPS was $2.42 per share compared with $2.12 last year. Adjusted EBITDA for the fourth quarter of twenty twenty four was $35,000,000 or 4% of net sales, in line with the prior year. For the full year of 2024, adjusted EBITDA was $236,000,000 or 6% of sales, also in line with the prior year. I'll now go more into detail on the full year performance for each of our segments, beginning with our fresh and value added product segment. Net sales for the full year of 2024 increased to $2,607,000,000 compared with 2,478,000,000 in the prior year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

The increase in net sales was primarily a result of higher per unit selling prices and sales volume in our avocado and pineapple product lines due to stronger demand as well as higher sales of volume in our melon product line. The increase was partially net sales in our vegetable and fresh cut fruit product lines due to lower sales volume and the unfavorable impact of fluctuations in exchange rates due to a weaker Japanese yen and Korean won. This performance exceeds the net sales guidance range of 3% to 4% that was previously provided. Gross profit was $243,000,000 compared with $167,000,000 in the prior year. The increase in gross profit was primarily driven by higher net sales and lower per unit production costs in our pineapple, fresh cut fruit and fresh cut vegetable product lines, partially offset by the negative impact of fluctuations in exchange rates due to a stronger Costa Rica colon.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Gross margin increased to 9.3% compared to 6.8% in the prior year, in line with the forecasted range of 9% to 10% for this segment that we previously shared with you. Moving to our Banana segment. Net sales for the full year of 2024 decreased to $1,476,000,000 compared with $1,638,000,000 in the prior year. The decrease in net sales was primarily driven due to lower sales in North America, driven by competitive market pressures, lower sales volume in Asia due to decreased supply from The Philippines as a result of weather related events and the negative impact of exchange rate fluctuations due primarily due to a weaker Japanese yen and Korean won. Gross profit was $87,000,000 compared with $163,000,000 in the prior year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

The decrease in gross profit was primarily due to lower net sales, higher per unit production and procurement costs and the negative impact of fluctuations in exchange rate from a stronger Costa Rica colon, partially offset by lower per unit ocean freight and distribution costs. As a result of these factors, gross margin decreased to 5.9% compared with 10% in the prior year. It's important to note that the full year 2023 gross margin was exceptionally strong for this segment and outside our historical range. Our full year 2024 gross margin for our Banana segment of 5.9% falls in line with the forecast range of 5% to seven percent that we shared with you, which is consistent with our long term historical trends. Lastly, our full year results for Other Products and Services segment.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Net sales for the full year of 2024 were $197,000,000 compared with $2.00 $5,000,000 in the prior year. The decrease in net sales was primarily due to the sale of a plastics subsidiary in 2023, partially offset by the higher net sales in our poultry and meat business driven by an increase in per unit selling prices. Gross profit was 28 compared with $20,000,000 I'm sorry, $28,000,000 compared with $20,000,000 in the prior year period. The increase in gross profit was primarily due to our poultry and meat business, partially offset by lower net sales in our third party ocean freight. Gross margin increased to 14.1% compared with 9.8% in the prior year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

As a result, gross margin exceeded our expectations for this segment. Now moving to selected financial data for 2024. Income tax provision for the full year was $29,000,000 compared with $18,000,000 in the same period last year. The increase in income tax provision was primarily due to higher earnings in certain higher tax jurisdictions. Our effective tax rate for the full year was 17%, slightly below the 20% effective tax rate we had anticipated for 2024.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Net cash provided by operating activities was $183,000,000 compared with $178,000,000 in the prior year. The increase was due to current year's working capital fluctuations, primarily a result of higher levels of accounts payable and accrued expenses compared to last year due to timing of period end payments to suppliers. We ended the year with $244,000,000 of long term debt, a $156,000,000 or 39% reduction from $400,000,000 at the end of twenty twenty three. By lowering our debt, our adjusted leverage ratio is now less than 1x EBITDA. Our full CapEx investment was $52,000,000 compared with $58,000,000 in the prior year.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

As previously announced, our Board of Directors declared an increase in our quarterly dividend from $0.25 to $0.3 per share per quarter, reaffirming our commitment to our shareholders. The dividend is payable on 03/28/2025 to shareholders of record on 03/10/2025. Additionally, as part of our broader capital allocation framework, our board has approved a $150,000,000 share repurchase program. We plan to execute this program opportunistically over time, allowing us to take advantage of market dynamics while maintaining financial flexibility for our business needs. Before we turn to the outlook, I'd like to take a moment to discuss a few key challenges we have faced in the first quarter of twenty twenty five and also give you an update on our man packing business.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

As we closed out 2024, we faced a tight supply of both bananas and pineapples. Entering 2025, parts of The US experienced unprecedented weather conditions, particularly in January, which also affected the Southern region of The United States and influenced the climate in Central America with colder than normal temperatures and above average rainy season, further reducing production volumes of both bananas and pineapples as we started the new year. While industry wide production remains tight, we are just beginning to see improvements in volume across our sourcing regions. In addition to these weather related challenges, earlier this month, the current administration announced potential international tariffs on imports from key trade partners, including markets we trade we actively trade with. While none of these have taken effect yet, the risk remains that they could be implemented or expanded at any time adding to global trade volatility.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Given the nature of our products, sourcing from alternative sources may take time. As Mr. Abubacelli mentioned, we are expanding our global sourcing footprint and have a growth strategy for avocados, bananas and pineapples. While these efforts position us well for the future, we remain cautiously optimistic and are prepared to adapt as necessary in response to any tariff developments. Now I would like to update you on man packing operations.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Last quarter, we shared with you our decision to consolidate three facilities into one, discontinue several product lines, and sell certain assets of Fresh Leaf Farms, a wholly owned subsidiary of Mann Packing. The sale closed in November 2024 for $18,000,000 We remain optimistic about the future of this operation and look forward to seeing the positive changes reflected in our financials as the year progresses. Let's turn to our outlook for the full year of 2025 for our business segments as well as for key financial priorities, including SG and A, capital expenditures and cash flows. Our guidance that I will share reflects our baseline expectations and does not incorporate potential risks or adjustments that could arise from changes in tariffs or significant shifts in the economic environment. We project net sales for the year to be 2% higher than prior year from higher sales of avocado, pineapple, fresh cut fruit and bananas, partially offset by lower net sales in our fresh cut vegetable and vegetable product lines resulting from the rationalization of the Mann Packing operations.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

And as far as gross margin by segment, in our fresh and value added segment, gross margin is expected to be in the range of 10% to 11%, driven by higher per unit selling prices as well as the impact of man packing consolidation to one facility. In our Banana segment, gross margin is expected to be in the historical range of 5% to 7%. For our other products and services segment, gross margin is expected to be between 1214%, supported by an increase in rates for our third party ocean freight services. Turning to other key financial metrics for the full year of 2025. Our selling, general and administrative expenses are expected to be in the range of $2.00 $5,000,000 to $210,000,000 primarily due to increased employee related costs as we invest in human capital to support our growth plans.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Our projected capital expenditures for the full fiscal year of 2025 is expected to be in the range of $80,000,000 to $90,000,000 The funds will primarily be allocated towards expansion of our pineapple growing and packing operations, banana farm renovations, efficiency and cost saving projects as well as facility upgrades. For the full fiscal year 2025, we anticipate delivering net cash provided by operating activities in the range of $190,000,000 to $200,000,000 This concludes our financial review. We can now turn the call over to Q and A.

[Operator]

Your first question comes from the line of Mitch Panayo with Sturdivant and Company. Please go ahead.

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

Yes. Good morning.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Good morning, Paul.

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

Yes. And thanks for the for some of the detailed guidance for next year, very helpful, especially in the businesses that can be as volatile as yours.

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

So thank you for that. I guess I wanted to start with, just so you talk about your core focus, pineapples, fresh cut fruit and avocados. And I was wondering if you could provide a little bit further color. So with pineapples, you're increasing supply like as fast as you can. Are you constrained even more because of the weather operations?

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

Does that push up prices? I mean, can you get a gross margin on the pineapples in line with last year? Same with fresh cut fruit, are we going to see a steady improvement in your fixed cost leverage or will there be some seasonality? And then finally in the avocado business, you've seen some pretty good improvement there. And I was wondering, I guess if there were tariffs in Mexico imports, do you expect demand to see is there inelastic demand there or do you think it would have a meaningful impact on your business?

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

Thank you, Mitch. Listen, as far as pineapple is concerned, yes, we are expanding our plantation in Costa Rica. This is as we speak. And we have already started as well replanting our fields in Brazil. You know, we used to, to plant pineapple in Brazil about, I would say, twenty years ago.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

And for a certain disease, we were hit and we stopped planting then. During these years, we have worked very diligently to create a new variety that would be resistant to this disease, and we have cited that, you know, this is the first time that we just we disclosed this. These new varieties that we have developed, which comes from the gold variety, it's not something new, but we have created a variety that is resistant to the fusarium disease in Brazil, which will be the only one in the world actually, that is anti resistant to Fusarium. And we have patented this, and we started actually as we speak, created a tissue culture operation in Brazil and we are now accelerating, you know, the seedlings to start planting commercially. Hopefully within the next years, we will have kind of, you know, meaningful production there.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

So the the Mote will be producing in four continents, the only company in the world that will be producing fresh pineapples in four continents, Central America, you know, in South America as well as, Brazil, Kenya and Philippines. And that's when we talk about, you know, expanding our sourcing capabilities. And that's only one of the, you know, we are working on other as well, sourcing opportunities, but are these the ones, the major ones that we have? As far as Avocado is concerned, we are just one out of several importers, exporters out of Mexico, and we just have to wait and see what will be the outcome about the tariffs and if they really take effect on avocado. Avocado might be excluded or maybe farm products, we don't know.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

But if it does and if there is any tariffs, unfortunately, this will have to be kind of passed to the buyers, because this is something that we cannot control. And we will see how this will really impact demand in the market. But it's maybe premature to assume anything at this stage, so we don't want to speculate on that.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

And on the pineapple pricing, we we are confident that our pricing on pineapple will be just as strong or stronger than last year. So, yeah, the the pineapple pricing should be very strong. And so we feel confident with that.

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

And then, you also, Mohammed, you talk about avocado being, expanding your global sourcing as a core strategy. But some of the other areas outside of Mexico and California, the quality isn't really what is expected probably in the North American markets. Would that be is the expanded sourcing for other export markets? Or is it more of a foodservice kind of strategy?

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

Actually, I mean, it was a perception that the Mexican avocado and the California avocado are the best kind of quality. But I do believe that and I'm sure that the ones coming from Chile or Peru or Colombia are just as good and equal to the quality of Mexico sources. So we are working on diversifying and increasing our volumes from some of these countries, including Dominican Republic, but of course, volume wise, nothing can compensate for the Mexico, let's say, source. So we need to do the best that we can to really kind of try to deemphasize or the dependence 100% on Mexico as a source of supply. This will take time.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

It's not going to happen overnight, But that's our target, that's our objective.

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

Okay. And then just another question on bananas. I understand obviously it's not your growth focus, but is there, so if you have production growing in Somalia, is you've growing I don't know what you in Brazil, you might be growing some bananas maybe in addition to the pineapple. I'm not sure. But is that does that take pressure off of like the Costa Rica operations in terms of bananas like in focus Costa Rica away from bananas and not chase demand?

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

Or can you talk a little bit about maybe your strategy there?

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

Well, listen, banana is a banana. And the banana business has been going like for same kind of momentum for the last, I would say, twenty plus years. And what we we are not trying to rationalize our business in terms of when it comes to bananas, because it's a low margin business and it's large volumes. And, it definitely is a core part of our business and we are not going to underscore or neglect, banana business. However, what you are what you just said is correct.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

We are producing bananas in Brazil and actually we have been expanding our acreage in Brazil recently to supply the local market, which has been very kind of rewarding as well as the European market. So that would be geared towards European market destination. Somalia will become, in my opinion, a very, very important, source of supply for our Middle Eastern, as well as some Southern Europe, countries. And and this will be once it is in in full gear, you know, and and maturity, which probably would take another couple of years. The proximity of the source to the markets is very close.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

It's not like, you know, I mean, in The Middle East, it's probably going to be two to three days from source to market, unlike what we are doing right now about forty days if we are lucky to get the fruit from Central America or Ecuador to The Middle East. The same thing would be for Europe, would be probably around eight, nine days to go from Somalia to, let's say, Italy or Greece. Unlike, you know, today could be, from eighteen to thirty days depending on the ship and the conditions, the weather conditions. So there is a lot of opportunities there. It's not going to happen tomorrow, but I can see it, you know, in in in a proximity of, let's say, between eighteen to twenty four months, this will become a very important source of supply to us, and it definitely will change the picture in terms of volume as well as in terms of gross margins as well.

[Mitchell Pinheiro, Director - Research at Sturdivant & Co]

All right. Well, thank you for the answers.

[Monica Vicente, Senior VP & CFO at Fresh Del Monte Produce]

Thank you, Mitch.

[Operator]

I will now turn the call back over to Mr. Mohammad Abu Ghazali for closing remarks. Please go ahead, sir.

[Mohammad Abu-Ghazaleh, Chairman & CEO at Fresh Del Monte Produce]

I would like to thank everyone today for joining us on this call. And I hope that I will update you on whatever happens the next few months on our next call. Thank you and have a good

[Operator]

day.

Participants

Executives

• Christine Cannella, Vice President-Investor Relations
• Mohammad Abu-Ghazaleh, Chairman & CEO
• Monica Vicente, Senior VP & CFO

Analysts

• Mitchell Pinheiro, Director - Research at Sturdivant & Co