COVID-19 pandemic continues to hurt Fresh Del Monte sales
Business conditions associated with the COVID-19 pandemic cost Coral Gables, Fla.-based Fresh Del Monte Produce Inc. more than $70 million in net sales for the quarter ending Sept. 25.
Net sales for the third quarter of 2020 were $989.7 million, off 8% compared with $1,07 billion a year ago, according to a news release.
The decline in net sales of $80.5 million was tied to lower net sales in all business segments.
The COVID-19 pandemic hurt net sales during the third quarter by an estimated $73 million, according to the release, mainly in the fresh and value-added products and banana business segments.
The release said lower sales were linked to volatile supply and demand conditions resulting from the pandemic, as well as reduced demand in the company’s foodservice business and shifting demand at retail. Continued government-imposed mandatory restrictions and social distancing initiatives associated with the pandemic changed normal demand patterns, according to the release.
Gross profit for the third quarter was $67.3 million, off 12% compared with $76.2 million a year ago. The decrease in gross profit was mainly due to lower gross profit in the company’s banana and other products and services business segments, which the release said was partially offset by higher gross profit in fresh and value-added products.
Gross profit was hurt by incremental costs, according to the release, related to other product-related charges of $2.3 million.
The charges, the release said, primarily consist of inventory write-offs due to volatile supply and demand conditions caused by the COVID-19 pandemic. Another factor was costs related to cleaning and social distancing protocols.
“We were especially pleased to see an improvement in our fresh and value-added products business segment, through rapid adjustments to all aspects of our business, from farm to customer to meet the challenges caused by the pandemic disruption, particularly to adapt to the restaurant and foodservice markets during the third quarter,” Mohammad Abu-Ghazaleh, chairman and CEO, said in the release. “Swift implementation of working capital measures led to improved cash flow and our ability to reduce our debt.”
During an earnings call with analysts Oct. 28, Abu-Ghazaleh said 2020 is shaping up to be one of the most challenging periods ever for Fresh Del Monte.
“The difficulties we experienced in the third quarter of 2020 were driven by the continuing impact of the COVID-19 pandemic, which continued to hinder our performance with decreased demand as a result of mandatory government shutdowns, including schools, restaurants, foodservice and business closures being our biggest headwind,” he said in the call. “These challenges continued to hamper our ability to achieve our financial targets for the third quarter.”
Abu-Ghazaleh said the company’s three Mann Packing facilities and Fresno, Calif., fresh-cut facility are now operating under one roof, which he said will enable the company to improve gross profit in fresh and value-added by about $10 million a year.
Diversifying its product range, he said Fresh Del Monte recently launched Pinkglow Del Monte Pineapple, a variety grown in Cost Rica.
The company has identified assets that it plans to sell over the next 12-18 months. Abu-Ghazaleh said the total anticipated cash proceeds from the sales should be approximately $100 million. The company will double its dividends in the fourth quarter, according to the release.
“I’m confident that the decisions made in 2020 will be a driving force behind our future performance,” Abu-Ghazaleh said in the earnings call. “In the third quarter, we demonstrated the value of our business model and generated improved cash flow and continue to reduce our debt in order to better position us to weather this pandemic and emerge stronger.”
He said the company added new containerized vessels to its fleet that will reduce the company’s carbon footprint. Fresh Del Monte also published an update to its 2019-20 corporate social responsibility report.
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