Fresh Del Monte Produce reports sales gain for the first quarter but notes inflationary pressure

Despite worrisome inflation, Coral Gables, Fla.-based Fresh Del Monte Produce Inc. has reported its sales for the quarter ending April 1 were up 5% compared with a year ago.

Favorable pricing contributed to the sales gain, according to a news release. For fresh and value-added products, the release said sales were up 7% to $41.7 million as a result of higher pricing.

For bananas, Fresh Del Monte reported net sales for the first quarter of $406 million declined $12.2 million compared with a year ago, primarily as a result of lower sales volume in North America. That dip was partially offset by positive pricing, the release said. 

The company’s gross profit for the first quarter of 2022 decreased compared with the prior-year period, as the increase in net sales was offset by higher cost related to unprecedented inflation and supply chain constraints, the release said.

The company said higher cost across-the-board including packaging materials, fertilizers, ocean and inland freight, fuel and labor offset higher net sales.

Importantly, the lack of availability of third-party shipping capacity on certain shipping routes substantially limited the sales of various products, according to the release.

"During the first quarter, our net sales increased by $49 million compared with the prior-year period – a direct benefit of leading the industry in the implementation of inflation-justified pricing actions,” Mohammad Abu-Ghazaleh, chairman and CEO, said in the release. “However, our cost of product sold increased by $64 million due to across-the-board inflationary pressures, resulting in lower operating income."

In an earnings call to discuss the quarter’s results, company officials said crude oil prices have increased over 60% compared to the same period last year, container board was up approximately 50% and some key fertilizers more than doubled compared to a year-ago.

Abu-Ghazaleh also said that the company aims to operate with greater efficiency via product innovation, cost management, and operational efficiencies. That, he said, is reflected in the significant growth  of the company’s  third-party freight services.

The company has made progress on its strategic initiatives, effectively managing the business for the long-term “despite incremental deterioration of already unprecedented supply chain constraints and higher inflation compounded by the war in Ukraine," he added.

Highlights of first quarter results, according to the release:

• Net sales for the first quarter of 2022 increased by $48.6 million, or approximately 5%, compared with the prior-year period;
• Gross profit for the first quarter of 2022 was $89.8 million, 14% lower than $105.0 million in the prior-year period;
• Operating income for the first quarter of 2022 was $39.8 million, 33% lower compared with $59.7 million in the prior-year period; and
• Net income for the first quarter was $25.8 million, down about 40% compared with $42.7 million in the prior-year period.