CORAL GABLES, Fla.–(BUSINESS WIRE) — Fresh Del Monte Produce Inc. BB #:111187 today reported financial results for the second quarter ended July 1, 2022.
“We delivered strong net sales during the second quarter, marking the fifth consecutive quarter of net sales growth compared with the prior-year periods — demonstrating the resilience of our iconic brand. Our net sales increased by $70 million, resulting from necessary pricing actions — generating growth across most product categories,” said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer.
“We continue to operate in one of the most volatile and uncertain macroeconomic environments in recent history. As a result, the cost of product sold increased by $100 million, driven by broad-based inflationary, supply chain, and logistical headwinds. Despite these headwinds, we generated positive earnings — all while maintaining our debt balance in line with last year, generating strong cash flow from operations and continuing our dividend payout.”
Mr. Abu-Ghazaleh added, “As we move forward, I am confident in our team’s dedication to drive profitable sales. We plan to do that by focusing on our sustainable growth strategy and delivering against its key elements — organic expansion, product innovation, investments in technology, best-in-class customer relationships and sustainability.”
Net sales for the second quarter of 2022 increased $70.3 million, or 6%, compared with the prior-year period. Net sales benefited from inflation-justified price increases. Partially offsetting the increase was the negative impact of fluctuations in exchange rates, primarily versus the Japanese yen and euro 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 second quarter of 2022 was $80.7 million compared with $110.0 million in the prior-year period. Despite higher net sales, gross profit continued to be negatively impacted by multilayered cost pressures compared with the prior-year period. Higher costs across the board including costs of packaging materials, fertilizers, ocean and inland freight, fuel and labor, offset our higher net sales.
Operating income for the second quarter of 2022 was $34.3 million compared with $59.3 million in the prior-year period, and Adjusted operating income(3) was $33.4 million compared with $60.6 million in the prior-year period. The decrease in operating income was primarily due to lower gross profit, partially offset by lower administrative and advertising expenses.
Second Quarter 2022 Business Segment Performance
Fresh and Value-Added Products
Net sales for the second quarter of 2022 increased by $58.4 million, or approximately 9%, compared with the prior-year period. The increase in net sales was driven by higher pricing in most product categories. Sales volume remained in line with the prior-year period.
Gross profit for the second quarter of 2022 was $49.4 million compared with $58.3 million in the prior-year period. The decrease in gross profit from the prior-year period was primarily driven by non-tropical fruit products, which were negatively impacted by lack of availability of third-party shipping capacity on certain shipping routes, and avocados due to market volatility.
Additionally, despite higher net sales, gross profit continued to be negatively impacted by ongoing cost pressures, which resulted in higher per unit production and distribution costs, including ocean and inland freight.
As a result, gross margin decreased to 6.7% compared with 8.7% in the prior-year period.
Gross profit in the fresh and value-added products segment included $1.6 million of other product-related charges in the second quarter of 2021, primarily comprised of a $1.3 million inventory write-off incurred in the Middle East. There were no other product-related charges in the second quarter of 2022.
Net sales for the second quarter of 2022 decreased by $5.1 million compared with the prior-year period. The decrease in net sales was primarily driven by lower sales volume and the negative impact of fluctuations in exchange rates in Asia.
Gross profit for the second quarter of 2022 was $22.2 million compared with $48.1 million in the prior-year period. The decrease in gross profit was primarily driven by higher per unit distribution costs, including ocean and inland freight, and higher production costs. As a result of these factors, gross margin decreased to 5.3% compared with 11.3% in the prior-year period.
Other Products and Services
Net sales of other products and services increased by $17.0 million, or 42%, compared with the prior-year period, mainly due to higher net sales of third-party freight services. The Company’s fleet of vessels has enabled the expansion of commercial cargo services, which are benefiting from elevated shipping rates and demand due to market logistical constraints.
Gross profit increased by $5.5 million as a result of higher net sales of third-party freight services. Gross margin increased to 15.6% from 8.9%.