Higher input costs and labor shortages influence bottom line, Fresh Del Monte reports

Higher input costs and labor shortages have dented the bottom line for Coral Gables, Fla.-based Fresh Del Monte Produce, the company reported Nov. 3 in its quarterly earnings update.

For the quarter ending Oct. 1, Fresh Del Monte said net sales were $1.004 billion, up slightly from $989.7 million compared with the same period last year. Gross profit for the quarter decreased to $48.9 million, off 28% compared with $67.3 million in the prior-year period. 

The company’s net income for the quarter was reported at $1.3 million, significantly off compared with $17.4 million in the prior-year period. Performance was hurt by inflationary and cost pressures, which resulted in higher per unit production and distribution costs including packaging materials, fertilizers, inland freight, labor and fuel costs, according to the report.

“While we continue to operate in one of the most challenging macroeconomic environments in recent history, impacted by inflationary and cost pressures across our supply chain, we remain focused on growth by managing our business for the long term and on continuing to provide reliable, quality service to our customers,” Mohammad Abu-Ghazaleh, chairman and CEO, said in a news release. 

“In terms of seasonality, the second half of the year is typically more challenging due to industry-wide excess supply and shifts in demand towards seasonal fruits. During the third quarter, we continued to experience significantly higher input cost and labor shortages, which impacted our margins and profitability. To offset this impact, we are implementing inflation-justified price increases in an effort to maintain our continuous supply and service levels.”

Abu-Ghazaleh said Fresh Del Monte’s recent capital investments in the automation of production facilities will leverage its vertical integration.

In addition, he said the company’s addition of six new refrigerated container vessels to its fleet, optimization and consolidation of operations and product rationalization will put Fresh Del Monte in a strong position going forward.

Fresh and value-added net sales for the third quarter of 2021 increased approximately $1 million compared with the prior-year period, the company said, mostly as a result of increased net sales of pineapple and avocados. 

Partially offsetting the increase, according to the company, were decreases in net sales of vegetables, prepared food products and non-tropical fruit. The primary drivers of the variance in net sales:

• Pineapple net sales increased in most regions driven by higher sales volume, partially offset by lower per unit sales prices;
• Avocado net sales increased primarily in North America driven by higher per unit sales prices, partially offset by lower sales volume;
• Vegetables net sales decreased primarily in North America, including the company’s Mann Packing operations, driven by lower sales volume related to lower demand from the foodservice channel, partially offset by higher per unit sales prices;
• Prepared food products net sales decreased primarily in Europe driven by lower availability, mainly of canned pineapple products; and 
• Non-tropical fruit net sales decreased, primarily in the Middle East.

Banana net sales for the third quarter of 2021 increased $3.5 million compared with the prior-year period, the company said. That is mainly due to higher net sales in Europe primarily related to higher per unit sales prices, according to the report.

Banana gross profit for the third quarter of 2021 was $2.4 million, down from $10.8 million in the prior-year period, primarily driven by Asia and North America. The consolidated decrease was driven by excess industry supply, the company said, which lowered per unit sales prices coupled with higher per unit distribution and production costs impacted by inflationary and cost pressures.