Foodservice

COVID-19 clips Fresh Del Monte Produce Q2 sales, income

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August 3, 2020

Fresh Del Monte Produce Inc. took a hit from COVID-19 in the second quarter, with sales falling to $1.09 billion versus $1.23 billion last year. Net income fell to $18.1 million from last year's $39 million, driving net income per share from 78 cents to 38 cents, according to an earnings report.

Adjusted net income was 54 cents for 2020 compared to 2019's 72 cents for the quarter ending June 26.

"As a global business that operates in over 100 countries around the globe, each of our locations were impacted by COVID-19 in different ways to different degrees and at different times based on mandatory government shutdowns, including restaurants, schools, foodservice and business closures," Mohammad Abu-Ghazaleh, chairman and CEO, said during an earnings call.

"While we did benefit during the quarter from gradual re-openings in certain regions globally, in North America we continued to experience reduced demand from our customers in the restaurant and foodservice industries as well as ongoing shifts in demand at retail that suffered our quarterly financial performance," he said.

Looking to the third quarter, Abu-Ghazaleh said foodservice continues to be impacted severely and is currently down 50% to 60%.

"The decrease in net sales was primarily the result of lower net sales in our fresh-cut food and vegetables, avocado, pineapple and prepared food product line," Eduardo Bezerra, senior vice president and chief financial officer, said during the earnings call. "As compared with our original expectation, the COVID-19 pandemic affected our net sales of fresh and value-added products by an estimated $117 million during the quarter when compared with our original expectation, driven by reduced demand for and price competition in the retail channel."

"Our transformation is expected to continue in the quarters ahead as we look to improve our asset utilization around the globe, create efficiencies in our operations and position our company to deliver stronger long-term performance," Abu-Ghazaleh said.

Gross profit for the second quarter of 2020 was $78.7 million, compared with $97.6 million in the second quarter of 2019. Adjusted gross profit was $89.3 million, compared with $98.2 million in the second quarter of 2019.

The decrease in gross profit was principally due to lower gross profit in the company's fresh and value-added products segment, partially offset by higher gross profit in the company's banana segment.

Gross profit was also impacted by incremental costs, mainly related to other product-related charges of $10.6 million, primarily as a result of reduced demand in the company's foodservice business and shifting demand at retail, as a result of government imposed mandatory restrictions and social distancing initiatives associated with the COVID-19 pandemic, and volatile supply and demand conditions, along with higher ocean freight costs, partially offset by lower production and procurement costs.

The company's board of directors declared an interim cash dividend of 5 cents per share, payable on Sept. 4, 2020 to shareholders of record on Aug. 12, 2020.

For an update on how the coronavirus pandemic has affected convenience services, click here.