Market Overview

Fresh Del Monte Produce Inc. Reports Second Quarter 2018 Financial Results

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Fresh Del Monte Produce Inc. (NYSE:FDP) today reported financial
results for the second quarter ended June 29, 2018. The Company reported
a loss per diluted share of $0.16 for the second quarter 2018, compared
with earnings per diluted share of $1.36 in the second quarter of 2017.
Comparable earnings per diluted share were $0.14 in the second quarter
of 2018, compared with comparable earnings per diluted share of $1.40 in
the second quarter of 2017.

"The quarter was highlighted by our recent acquisition of Mann Packing
Company, and by strong sales growth, despite reductions in pricing
across many of our products," said Mohammad Abu-Ghazaleh, Chairman and
Chief Executive Officer. "Uncontrollable factors led by congestion,
delays and inclement weather at our loading ports in Central America,
substantially lower banana selling prices in Europe, an oversupply of
pineapples in North America, continued tightening of the transportation
market, and higher commodity costs adversely affected our overall
performance. Looking ahead, we remain firmly focused and committed to
investing in and further diversifying our global operations while
driving profitable growth over the long-term."

Net sales for the second quarter of 2018 were $1,272.4 million, compared
with $1,147.1 million in the second quarter of 2017. The increase in net
sales was the result of higher net sales in the Company's other fresh
produce and prepared food business segments, primarily due to the
acquisition of Mann Packing, partially offset by lower net sales in the
Company's banana business segment.

Gross profit for the second quarter of 2018 was $78.3 million, compared
with $123.2 million in the second quarter of 2017. The decrease in gross
profit was the result of lower gross profit in all of the Company's
business segments, principally due to lower selling prices in the
Company's banana and other fresh produce business segments, along with
the negative impact of transportation and production costs.

Operating income for the second quarter of 2018 was $13.8 million,
compared with operating income of $79.5 million in the second quarter of
2017. Comparable operating income was $28.6 million in the second
quarter of 2018, compared with comparable operating income of $81.6
million in the second quarter of 2017. The decrease was primarily due to
lower gross profit, higher asset impairment and other charges, net and
higher selling, general and administrative expenses.

Net income attributable to Fresh Del Monte Produce Inc. for the second
quarter of 2018 was a net loss of $7.9 million, compared with net income
attributable to Fresh Del Monte Produce Inc. of $69.2 million in the
second quarter of 2017. Comparable net income was $6.9 million in the
second quarter of 2018, compared with comparable net income of $71.3
million in the second quarter of 2017. The change was primarily the
result of lower operating income, higher foreign exchange losses, and
higher interest expense.

 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(U.S. dollars in millions) - (Unaudited)
       
Quarter ended Six months ended
 
Income Statement: June 29,
2018
June 30,
2017
June 29,
2018
June 30,
2017
Net sales $ 1,272.4 $ 1,147.1 $ 2,378.5 $ 2,179.5
Cost of products sold 1,193.9 1,023.6 $ 2,193.5 1,956.9
Other charges (1) 0.2   0.3   0.2   0.3  
Gross profit 78.3 123.2 184.8 222.3
 
Selling, general and administrative expenses 49.9 41.9 98.5 89.8
Gain on disposal of property, plant and equipment, net (2) (5.7 ) (0.1 ) (5.9 ) (0.9 )
Asset impairment and other charges, net (1) 20.3   1.9   21.9    
Operating income 13.8 79.5 70.3 133.4
 
Interest expense, net 5.7 1.4 9.3 2.7
Other expense, net 7.3   0.5   10.7   0.6  
 
Income before income taxes 0.8 77.6 50.3 130.1
 
Provision for income taxes 6.4   7.8   12.7   14.7  
Net (loss) income $ (5.6 ) $ 69.8   $ 37.6   $ 115.4  
 
Less: Net income (loss) attributable to redeemable and
noncontrolling interests
2.3   0.6   4.0   (0.2 )
Net (loss) income attributable to Fresh Del Monte Produce Inc. $ (7.9 ) $ 69.2   $ 33.6   $ 115.6  
 
Net (loss) income per ordinary share attributable to
Fresh Del Monte Produce Inc. - Basic $ (0.16 ) $ 1.37   $ 0.69   $ 2.27  
 
Net (loss) income per ordinary share attributable to
Fresh Del Monte Produce Inc. - Diluted $ (0.16 ) $ 1.36   $ 0.69   $ 2.25  
 
Dividends declared per ordinary share $ 0.15   $ 0.15   $ 0.30   $ 0.30  
 
Weighted average number of ordinary shares:
Basic 48,753,227   50,572,056   48,767,411   50,895,738  
Diluted 48,753,227   50,932,365   49,012,397   51,300,697  
 
Selected Income Statement Data:
Depreciation and amortization $ 23.5   $ 20.2   $ 44.6   $ 40.2  
 
Non-GAAP Measures (per share):
Reported net (loss) income - Diluted $ (0.16 ) $ 1.36 $ 0.69 $ 2.25
Asset impairment and other charges, net (1) 0.42 0.04 0.45 0.01
Gain on disposal of property, plant and equipment, net (2) (0.12 )   (0.12 ) (0.02 )
Comparable net (loss) income - Diluted $ 0.14   $ 1.40   $ 1.02   $ 2.24  
 
(1)   Asset impairment and other charges, net for the quarter ended June
29, 2018 included restructuring activities in Asia and South America
and acquisition costs in North America. Asset impairment and other
charges, net for the six months ended June 29, 2018 also included
acquisition costs related to Mann Packing and insurance proceeds in
North America. Asset impairment and other charges, net for the
quarter ended June 30, 2017 included impairment charges in South
America, Central America and Asia. Asset impairment and other
charges, net for the six months ended June 30, 2017 also included
insurance proceeds related to previously announced flooding in South
America offset by impairment charges in Asia.
 
(2) Gain on disposal of property, plant and equipment, net for the
quarter and six months ended June 29, 2018 primarily related to a
gain on sale of property and assets in Europe and South America
offset by asset disposals in South America due to restructuring
activities. Gain on disposal of property, plant and equipment, net
for the quarter and six months ended June 30, 2017 primarily related
to maritime equipment sales.
 
Fresh Del Monte Produce Inc. and Subsidiaries
Business Segment Data
(U.S. dollars in millions) - (Unaudited)
   
  Quarter ended
  June 29, 2018     June 30, 2017
Segment Data:                      
  Net Sales     Gross Profit   Net Sales   Gross Profit
 
Other fresh produce

$

721.0 57 %

$

46.9 60 %

$

568.1 49 %

$

55.0 45 %
Banana

 

457.8 36 %

 

23.8 30 %

 

499.5 44 %

 

58.1 47 %
Prepared food   93.6   7 %   7.6   10 %   79.5   7 %   10.1   8 %

$

1,272.4   100 %

$

78.3   100 %

$

1,147.1   100 %

$

123.2   100 %
 
 
Quarter ended
Net Sales by Geographic Region: June 29,
2018
  June 30,
2017
           
North America $ 814.8   64 % $ 655.5   57 %
Europe 175.8 14 % 192.7 17 %
Middle East 126.0 10 % 147.8 13 %
Asia 135.8 11 % 138.5 12 %
Other 20.0   1 % 12.6   1 %
$ 1,272.4   100 % $ 1,147.1   100 %
 
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(U.S. dollars in millions) - (Unaudited)
   
June 29,
2018
December 29,
2017
 
Assets
Current assets:
Cash and cash equivalents $ 39.8 $ 25.1
Trade accounts receivable, net 421.1 358.8
Other accounts receivable, net 72.2 73.6
Inventories, net 513.1 541.8
Other current assets 37.3   20.5
Total current assets 1,083.5   1,019.8
 
Investment in and advances to unconsolidated companies 6.1 2.0
Property, plant and equipment, net 1,414.7 1,328.3
Goodwill 590.4 261.9
Other noncurrent assets 165.8   154.9
Total assets $ 3,260.5   $ 2,766.9
 
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 479.3 $ 382.4
Current portion of long-term debt and capital lease obligations 0.5 0.6
Other current liabilities 12.7   10.8
Total current liabilities 492.5   393.8
 
Long-term debt and capital lease obligations 689.1 357.0
Other noncurrent liabilities 228.3   224.9
Total liabilities 1,409.9   975.7
 
Redeemable noncontrolling interests 40.8
 
Total Fresh Del Monte Produce Inc. shareholders' equity 1,783.4 1,767.4
Noncontrolling interests 26.4   23.8
Total shareholders' equity 1,809.8   1,791.2
Total liabilities and equity $ 3,260.5   $ 2,766.9
 
 
Selected Balance Sheet Data:
Working capital $ 591.0 $ 626.0
Total debt $ 689.6 $ 357.6
 
 
Fresh Del Monte Produce Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(U.S. dollars in millions) - (Unaudited)
  Six months ended
June 29,
2018
  June 30,
2017
Operating activities:
Net income $ 37.6 $ 115.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 44.3 40.0
Amortization of debt issuance costs 0.3 0.2
Asset impairment, net 18.3 2.2
Share-based compensation expense 7.0 6.5
Deferred income taxes 1.6 0.2
Gain on disposal of property, plant and equipment, net (5.9 ) (0.9 )
Foreign currency translation adjustment (1.8 ) 6.2
Other 0.1 0.2
Changes in operating assets and liabilities, net of the effect of
acquisitions:
Receivables (22.3 ) (28.2 )
Inventories 51.6 34.4
Prepaid expenses and other current assets (11.4 ) (4.2 )
Accounts payable and accrued expenses 53.1 12.5
Other noncurrent assets and liabilities (10.2 ) (10.6 )
Net cash provided by operating activities 162.3   173.9  
 
Investing activities:
Capital expenditures (81.8 ) (71.9 )
Investments in unconsolidated companies (4.2 )
Proceeds from sales of property, plant and equipment 8.2 2.9
Purchase of businesses, net of cash acquired (373.3 )  
Net cash used in investing activities (451.1 ) (69.0 )
 
Financing activities:
Net borrowings on long-term debt 329.4 (6.4 )
Distributions to noncontrolling interests, net (1.8 ) (3.6 )
Net proceeds related to share-based awards 0.4 (3.7 )
Dividends paid (14.6 ) (15.2 )
Repurchase and retirement of ordinary shares (9.8 ) (71.6 )
Net cash provided by (used in) financing activities 303.6   (100.5 )
 
Effect of exchange rate changes on cash (0.1 ) (0.1 )
 
Net increase in cash and cash equivalents 14.7 4.3
Cash and cash equivalents, beginning 25.1   20.1  
Cash and cash equivalents, ending $ 39.8   $ 24.4  
 

Second Quarter 2018 Business Segment Performance

(As reported in business segment data)

Other Fresh Produce

Net sales for the second quarter of 2018 increased to $721.0 million,
compared with $568.1 million in the second quarter of 2017. The increase
in net sales was primarily due to higher net sales in the Company's
fresh-cut, vegetable and avocado product lines. Gross profit for the
second quarter of 2018 decreased to $46.9 million, compared with gross
profit of $55.0 million in the second quarter of 2017.

Gold pineapple - Net sales increased 3% to $139.4 million, compared with
the prior year. Volume increased 12%. Pricing was 8% lower. Unit cost
was 6% higher.

Fresh-cut - Net sales increased 61% to $272.0 million, compared with the
prior year, principally due to the acquisition of Mann Packing. Volume
increased 96%. Pricing was 18% lower. Unit cost was 19% lower.

Avocados - Net sales increased 11% to $95.1 million, compared with the
prior year. Volume increased 43%. Pricing decreased 22%. Unit cost was
24% lower.

Non-tropical - Net sales increased 10% to $86.4 million, compared with
the prior year. Volume increased 5%. Pricing increased 5%. Unit cost was
12% higher.

Vegetables - Net sales increased to $38.7 million, compared with $6.8
million in the prior year. Volume and pricing also increased,
principally due to the acquisition of Mann Packing. Unit cost was 4%
lower.

Bananas

Net sales for the second quarter of 2018 decreased to $457.8 million,
compared with $499.5 million in the second quarter of 2017. Volume was
6% lower than the prior year. Worldwide pricing decreased $0.40, or 3%,
to $14.52 per unit, compared with $14.92 per unit in the second quarter
of 2017. Gross profit for the second quarter of 2018 decreased to $23.8
million, compared with $58.1 million in the second quarter of 2017. Unit
cost was 4% higher than the prior year period.

Prepared Food

Net sales for the second quarter of 2018 increased to $93.6 million,
compared with $79.5 million in the second quarter of 2017, primarily the
result of higher net sales in the Company's prepared vegetables product
line, principally due to the acquisition of Mann Packing, partially
offset by lower net sales in the Company's canned pineapple product
line. Gross profit for the quarter decreased to $7.6 million, compared
with $10.1 million in the second quarter of 2017, principally the result
of higher fruit costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the second quarter
increased to $49.9 million, compared with $41.9 million in the second
quarter of 2017, principally due to higher selling, marketing and
administrative expenses in North America as a result of the acquisition
of Mann Packing.

Cash Flows

Net cash provided by operating activities for the first six months of
2018 was $162.3 million, compared with $173.9 million in the same period
of 2017. The decrease in net cash provided by operating activities was
primarily attributable to lower net income, partially offset by higher
levels of accounts payable and accrued expenses, and lower inventory.

Other Expense, Net

Other expense, net for the second quarter was an expense of $7.3
million, compared with an expense of $0.5 million in the second quarter
of 2017. The change was principally attributable to higher foreign
exchange losses during the second quarter of 2018.

Total Debt

Total debt increased from $357.6 million at the end of 2017 to $689.6
million at the end of the second quarter of 2018, primarily related to
the acquisition of Mann Packing.

Interest Expense, Net

Interest expense, net for the second quarter was $5.7 million, compared
with $1.4 million in the second quarter of 2017. The increase was due to
higher average loan balances as a result of the Mann Packing
acquisition, along with higher interest rates.

Non-GAAP Measures

The Company's results are determined in accordance with U.S. generally
accepted accounting principles (GAAP). Some of the information presented
in this press release reflects adjustments to GAAP measures such as
amounts related to restructuring, asset impairment charges, loss (gain)
on sales of assets and certain other special items, if any. Management
believes these adjustments provide a more comparable analysis of the
ongoing operating performance of the business. These adjustments result
in non-GAAP financial measures and are referred to in this press release
as comparable operating income, comparable net income and comparable net
income per share. Because all companies do not use identical
calculations, our presentation of these non-GAAP financial measures may
not be comparable to similarly titled measures used by other companies.

Comparable operating income (loss) and comparable net income (loss)
provide us with an understanding of the results from the primary
operations of our business. We use comparable operating income (loss)
and comparable net income (loss) to evaluate our period-over-period
operating performance because management believes they provide more
comparable measures of our continuing business as they adjust for
special items that are not reflective of the normal earnings of our
business. These measures may be useful to an investor in evaluating the
underlying operating performance of our business because these measures:

  1. Are used by investors to measure a company's comparable operating
    performance;
  2. Are financial measurements that are used by lenders and other parties
    to evaluate creditworthiness; and
  3. Are used by our management for various purposes, including as measures
    of performance of our operating entities and as a basis of strategic
    planning and forecasting.

Conference Call and Web Cast Data

Fresh Del Monte will host a conference call and simultaneous webcast at
11:00 a.m. Eastern Time today to discuss the second quarter 2018
financial results and to review the Company's progress and outlook. The
webcast 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 website
approximately two hours after the conclusion of the call.

About Fresh Del Monte Produce Inc.

Fresh Del Monte 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 125 years.

Forward-looking Information

This press release contains certain forward-looking statements
regarding the intent, beliefs or current expectations of the Company or
its officers with respect to the Company's plans and future performance.

These forward-looking statements are based on information currently
available to the Company and the Company assumes no obligation to update
these statements. It is important to note that these forward-looking
statements are not guarantees of future performance and involve risks
and uncertainties. In this press release, these statements appear in a
number of places and include statements regarding the intent, beliefs or
current expectations of us or our officers (including statements
preceded by, followed by or that include the words "believes",
"expects", "anticipates" or similar expressions) with respect to various
matters, including our plans and future performance.
These
forward-looking statements involve risks and uncertainties.
Fresh
Del Monte's actual plans and performance may differ materially from
those in the forward-looking statements as a result of various factors,
including (i) the uncertain global economic environment and the timing
and strength of a recovery in the markets we serve, and the extent to
which adverse economic conditions continue to affect our sales volume
and results, including our ability to command premium prices for certain
of our principal products, or increase competitive pressures within the
industry, (ii) the impact of governmental initiatives in the United
States and abroad to spur economic activity, including the effects of
significant government monetary or other market interventions on
inflation, price controls and foreign exchange rates, (iii) the impact
of governmental trade restrictions, including adverse governmental
regulation that may impact our ability to access certain markets such as
uncertainty surrounding the recent vote in the United Kingdom to leave
the European Union (often referred as Brexit), including spillover
effects to other Eurozone countries, (iv) our anticipated cash needs in
light of our liquidity, (v) the continued ability of our distributors
and suppliers to have access to sufficient liquidity to fund their
operations, (vi) trends and other factors affecting our financial
condition or results of operations from period to period, including
changes in product mix or consumer demand for branded products such as
ours, particularly as consumers remain price-conscious in the current
economic environment; anticipated price and expense levels; the impact
of crop disease, severe weather conditions, such as flooding, or natural
disasters, such as earthquakes, on crop quality and yields and on our
ability to grow, procure or export our products; the impact of prices
for petroleum-based products and packaging materials; and the
availability of sufficient labor during peak growing and harvesting
seasons, (vii) the impact of pricing and other actions by our
competitors, particularly during periods of low consumer confidence and
spending levels, (viii) the impact of foreign currency fluctuations,
(ix) our plans for expansion of our business (including through
acquisitions) and cost savings, (x) our ability to successfully
integrate acquisitions into our operations, (xi) the impact of
impairment or other charges associated with exit activities, crop or
facility damage or otherwise, (xii) the timing and cost of resolution of
pending and future legal and environmental proceedings or
investigations, (xiii) the impact of changes in tax accounting or tax
laws (or interpretations thereof), and the impact of settlements of
adjustments proposed by the Internal Revenue Service or other taxing
authorities in connection with our tax audits, and (xiv) the cost and
other implications of changes in regulations applicable to our business,
including potential legislative or regulatory initiatives in the United
States or elsewhere directed at mitigating the effects of climate
change. All forward-looking statements in this report are based on
information available to us on the date hereof, and we assume no
obligation to update any such forward-looking statements.
The
Company's plans and performance may also be affected by the factors
described in Item 1A. - "Risk Factors" in Fresh Del Monte Produce Inc.'s
Annual Report on Form 10-K for the year ended December 29, 2017 along
with other reports that the Company has on file with the Securities and
Exchange Commission.

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