OXNARD, Calif., Sept. 08, 2022 (GLOBE NEWSWIRE) — Mission Produce, Inc. BB #:118126, a world leader in sourcing, producing, and distributing fresh Hass avocados with additional offerings in mangos, today reported its financial results for the fiscal third quarter ended July 31, 2022.
Fiscal Third Quarter 2022 Highlights:
- Total revenue of $313.2 million, a 27% increase driven by average selling price increases of 42%, partially offset by a 11% decrease in avocado volume sold, compared to the same period last year
- Net income of $18.4 million, or $0.26 per diluted share, compared to $18.4 million, or $0.26 per diluted share, for the same period last year
- Adjusted net income of $18.9 million, or $0.27 per diluted share, compared to $19.1 million, or $0.27 per diluted share, for the same period last year
- Adjusted EBITDA of $31.6 million compared to $30.1 million for the same period last year
- Appointed Tim Bulow as President and Chief Operating Officer, further strengthening the Company’s executive leadership team
“We produced strong revenue growth in the third quarter due to sustained strength in pricing amid lower industry supply. We achieved robust per-unit margins in the third quarter, demonstrating the flexibility of our diversified global sourcing platform which helps offset volatility from Mexican source markets,” commented Steve Barnard, Founder and CEO of Mission Produce. “Our Peruvian farming operations are performing well this season, and we expect to produce approximately 15% more volume than what we achieved in fiscal 2021. Reliable access to our owned fruit during the transitional Mexican season allows us to make long-term commitments to our retail partners, bringing confidence and stability to the program, which is a capability that Mission is uniquely able to deliver for customers. We are well positioned heading into our fourth quarter and expect that industry supply constraints will ease, causing some softening of the pricing environment which has historically led to improving consumption trends across the global markets that we serve.”
Fiscal Third Quarter 2022 Consolidated Financial Review
Total revenue for the third quarter of fiscal 2022 increased 27% to $313.2 million, as compared to $246.8 million for the same period last year. Growth was driven by a 42% increase in average per-unit avocado sales prices due to lower industry supply out of Mexico, as well as inflationary pressures. Partially offsetting price gains was a decrease in avocado volume sold of 11%, which was primarily driven by lower Mexican supply. Domestic volumes declined at a lower rate relative to export markets for the period, demonstrating the resiliency of demand for avocados amid higher price points in the U.S. market.
Gross profit for the third quarter increased $1.7 million or 4%, to $42.6 million, and gross profit percentage decreased 300 basis points to 13.6% of revenue. The increase in gross profit was primarily driven by higher per-unit margin, partially offset by the impact of lower avocado volume sold and its related impact on fixed cost absorption in the Company’s Marketing & Distribution segment. Margin is primarily managed on a per-unit basis in the Marketing and Distribution segment, which can lead to significant movement in gross profit percentage when sales prices fluctuate. Gross profit in its International Farming segment was essentially flat with the prior year period.
Selling, general and administrative expense (“SG&A”) for the third quarter increased $3.4 million to $20.6 million, primarily due to higher employee-related costs driven by higher stock-based compensation expense and labor inflation, as well as non-capitalizable costs associated with the implementation of the new ERP system in the Company’s Marketing and Distribution segment. Additionally, the Company recorded a $0.8 million gain on insurance settlement in the same period last year. The consolidation of Moruga during the third quarter of 2022 increased selling, general and administrative expense by $0.5 million.
Net income for the third quarter of fiscal 2022 was $18.4 million, or $0.26 per diluted share, compared to $18.4 million, or $0.26 per diluted share, for the same period last year.
Adjusted net income for the third quarter of fiscal 2022 was $18.9 million, or $0.27 per diluted share, compared to $19.1 million, or $0.27 per diluted share, for the same period last year.
Adjusted EBITDA was $31.6 million for the third quarter of fiscal 2022, compared to $30.1 million for the same period last year, due primarily to higher per-unit gross margins, partially offset by the impact of lower avocado volume sold.
Fiscal Third Quarter Business Segment Performance
On May 1, 2022, a reconsideration event occurred wherein Mission Produce obtained a controlling interest in Moruga, an entity for which the Company owns a 60% equity interest, previously accounted for under the equity method. Moruga is an entity which farms blueberries in Peru through a wholly owned subsidiary. Following this event, Moruga was prospectively consolidated in the Company’s results of operations. The Company’s reportable segments are presented based on how information is used by the CEO to measure performance and allocate resources.
As the information used by the CEO was expanded to include the results of Moruga, the Company determined its reportable segments to be:
- Marketing and Distribution. The Marketing and Distribution reportable segment sources fruit from growers and then distributes the fruit through the Company’s global distribution network.
- International Farming. International Farming owns and operates orchards from which substantially all fruit produced is sold to the Marketing and Distribution segment. Its farming activities range from cultivating early-stage plantings to harvesting from mature trees, and it also earns service revenues for packing and processing for the Blueberries segment, as well as for third-party producers of other crops during the avocado off-harvest season. Operations are principally located in Peru, with smaller operations emerging in other areas of Latin America.
- Blueberries. The new Blueberries segment represents the results of Moruga, subsequent to its consolidation on May 1, 2022. Moruga’s farming activities include cultivating early-stage blueberry plantings and harvesting mature bushes. Substantially all of blueberries produced are sold to a single distributor under an exclusive marketing agreement.
Marketing & Distribution
Net sales in the Marketing & Distribution segment increased 29% to $308.9 million for the quarter, due to the same drivers impacting consolidated revenue.
Segment adjusted EBITDA increased $2.4 million or 18% to $15.5 million, due to the same drivers impacting consolidated adjusted EBITDA.
Substantially all sales of fruit from the International Farming segment are to the Marketing and Distribution segment, with the remainder of revenue largely derived from services provided to third parties and the Blueberries segment. Affiliated sales are concentrated in the second half of the fiscal year in alignment with the Peruvian avocado harvest season, which typically runs from April through August of each year. As a result, adjusted EBITDA for International Farming is generally concentrated in the third and fourth quarters of the fiscal year in alignment with the timing of sales.
The Company operates approximately 300 hectares of mangos in Peru that are largely in an early-stage of production. The timing of the mango harvest is concentrated in the fiscal second quarter and, as a result, mangos have a more pronounced impact on segment financial performance during this timeframe.
Total segment sales in the International Farming segment decreased $1.5 million, or 2% in the three months ended July 31, 2022 compared to the same period last year, due primarily to lower third-party service revenue. Affiliated sales were slightly higher due to increase in avocado volume harvested and sold. Segment affiliated sales reflects the consideration returned to the International Farming segment net of logistics costs, the most significant of which is ocean freight. The higher average per-unit pricing that was realized in third quarter was offset by these higher logistics costs.
Segment adjusted EBITDA decreased $0.7 million or 4% to $16.3 million primarily due to inflationary pressures on input costs in the Company’s farming and packing operations in Peru.
Net sales in the Blueberries segment in the three months ended July 31, 2022 were $0.3 million. Segment adjusted EBITDA for the three months ended July 31, 2022 was $(0.2) million.
For the fiscal fourth quarter of fiscal year 2022, the Company is providing the following industry update to inform modeling assumptions:
- The industry is expecting fourth quarter volumes to increase sequentially and remain consistent with the prior year period, primarily due to ample Peruvian product in the supply chain, along with the transition to the new Mexican crop, which is expected to be larger than the prior year.
- Pricing peaked early in third quarter and based on the expectation for sequentially improving industry volumes, the Company believes that the pricing environment should continue to soften further during fiscal fourth quarter.
- Expectations for avocado production from owned farms in the range of 110 million to 120 million pounds for the full harvest season (versus 101 million pounds in fiscal 2021), of which approximately 38 million pounds was sold through as of the end of fiscal third quarter.
About Mission Produce, Inc.
Mission Produce is a global leader in the worldwide avocado business. Since 1983, Mission Produce has been sourcing, producing and distributing fresh Hass avocados, and as of 2021, fresh mangos, to retail, wholesale and foodservice customers in over 25 countries. The vertically integrated Company owns and operates four state-of-the-art packing facilities in key growing locations globally, including California, Mexico and Peru and has additional sourcing capabilities in Chile, Colombia, the Dominican Republic, Guatemala, Brazil, Ecuador, South Africa and more, which allow the company to provide a year-round supply of premium fruit. Mission’s global distribution network includes 12 forward distribution centers that are strategically positioned in key markets throughout North America, China and Europe, offering value-added services such as ripening, bagging, custom packing and logistical management. For more information, please visit www.missionproduce.com.