Fresh Del Monte (FDP) Q3 2025 Earnings Transcript

Image source: The Motley Fool.

DATE

Wednesday, Oct. 29, 2025, at 11 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Mohammad Abu-Ghazaleh
• Senior Vice President and Chief Financial Officer — Monica Vicente
• Vice President, Investor Relations — Christine Cannella

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Chairman Abu-Ghazaleh stated, “Fusarium wilt tropical race 4, which is known as TR4, was confirmed in Ecuador, one of the world's largest banana producers, marking a serious escalation in Latin America after previous detections in Colombia, Peru, and Venezuela. It is a highly contagious soil-borne disease with no cure, and it's already destabilizing the region.”
• As of August 2025, banana production in Costa Rica declined 22% year over year, or approximately 18 million boxes, primarily due to Black Sigatoka, which directly impacted supply and increased industry-wide costs.
• Gross margin in the banana segment decreased to 1.3%, with CFO Vicente citing “higher per unit production and procurement costs due to adverse weather conditions in our,” indicating sustained profitability pressure.
• CFO Vicente reported an operating loss of $22 million, driven by $56 million in impairment and exit charges related to the Mann Packing divestiture and underperforming banana farms in The Philippines.

TAKEAWAYS

• Net Sales -- $1.22 billion in net sales, up due to higher per unit selling prices in the banana segment and favorable euro exchange rates, but partially offset by lower sales volume in fresh-cut vegetables following operational reductions.
• Adjusted Net Sales -- $960 million in adjusted net sales, which excludes the Mann Packing divestiture impact and provides a clearer view of core operational performance.
• Gross Margin -- 7.9% gross margin, down from prior periods due to rising production, procurement, and distribution costs in bananas.
• Adjusted Gross Margin -- 9.2% adjusted gross margin, showing margin compression even on a streamlined portfolio basis.
• Operating Loss -- $22 million operating loss, reflecting significant impairment and exit charges, including $18 million related to the Mann Packing divestiture and $37 million from abandoning banana farms in The Philippines.
• Adjusted Operating Income -- $40 million adjusted operating income, excluding impairment impacts, showing underlying profitability absent non-recurring charges.
• Net Loss Attributable to Fresh Del Monte Produce -- Net loss attributable to Fresh Del Monte Produce was $29 million, with adjusted net income of $33 million after accounting for non-core charges.
• Adjusted Diluted EPS -- Adjusted diluted earnings per share was $0.69, contrasted with a reported loss per share of $0.61.
• Adjusted EBITDA -- Adjusted EBITDA was $58 million, expected to improve with future gross margin recovery and expense discipline.
• Fresh and Value-Added Segment Gross Margin -- Increased to 11.2%, with adjusted gross margin up to 13.9%, driven by improved product mix, higher selling prices in pineapples, and strong fresh-cut fruit performance.
• Banana Segment Gross Margin -- Fell to 1.3% and 1.2% (adjusted, non-GAAP), as higher production and disease management costs and weather disruptions outpaced realized price increases.
• Other Products and Services Gross Margin -- Gross margin decreased to 14.8%, with lower poultry and meat selling prices offsetting freight-service gains.
• Divestiture of Mann Packing -- Agreement to sell to Church Brothers Farms for $19 million plus inventory; expected to improve capital efficiency and segment margin profile.
• Impairment Charges -- $56 million total; $18 million for Mann Packing, $37 million for underperforming banana farms in The Philippines, reflecting strategic reallocation efforts.
• Capital Expenditures (YTD) -- $36 million for the first nine months of 2025, with investments focused on banana and pineapple upgrades across Central America, North America, and Kenya.
• Share Repurchases -- Over 200,000 shares repurchased for $7 million at an average price of $35.55; $135 million remains on the buyback authorization.
• Dividend -- Quarterly cash dividend of $0.30 per share announced ($1.20 annualized), representing a 3.4% yield at the current share price, payable on Dec. 5, 2025, to shareholders of record on Nov. 12, 2025.
• Net Cash From Operations (YTD) -- Net cash provided by operating activities was $234 million for the first nine months of 2025; the company now forecasts $190 million to $200 million for the year, above prior guidance of $180 million to $190 million, driven by working capital improvements.
• Long-Term Debt -- $173 million with an adjusted leverage ratio well below one times EBITDA by year-end 2025.
• Guidance for Net Sales Growth -- Management expects net sales growth of approximately 2% year over year.
• Segment-Level Margin Outlook -- Fresh and value-added expected to achieve an 11%-13% gross margin, while banana margin is guided below the historical 5%-7% range, approaching 4%, for 2025; other products and services gross margin is expected to be in the range of 10% to 12% for 2025, slightly below prior expectations.
• CapEx Outlook -- Full-year 2025 capital expenditures forecast revised to $60 million-$70 million, down from the prior $70 million-$80 million range due to updated project timelines.
• Selling, General, and Administrative (SG&A) Expense Guidance -- Selling, general, and administrative expenses are expected to be in the range of $205 million to $207 million for the full year 2025, reflecting current spending trends.

SUMMARY

Fresh Del Monte Produce (NYSE:FDP) announced a strategic divestiture of Mann Packing, aligning the business toward higher-margin categories and capital efficiency. The results reflect severe operational pressures in the banana segment, with disease impact and weather-related disruptions driving margin compression and impairment charges. Management expects to benefit from a more resilient and profitable mix, underpinned by strong pineapples and value-added products, with future margin improvements anticipated as divestiture and cost controls take hold. Executives provided updated full-year 2025 guidance, reducing capex expectations, projecting near-full recovery of operating cash flows, and committing to dividend and buyback policies despite near-term volatility.

• Chairman Abu-Ghazaleh described the banana supply outlook as “losing battle,” due to escalating TR4 and Black Sigatoka, confirming a likely industry-wide cost surge.
• CFO Vicente stated, “We expect adjusted EBITDA margin to improve due to continued gross margin momentum in our fresh and value-added product segment and disciplined cost management.”
• Fresh-cut fruit and pineapple were singled out as key margin contributors, with segment leadership “very confident and comfortable actually with our pineapple business going forward in the future," acording to management.
• Avocado pricing halved from $70-$80 to approximately $30-$50 per box year over year, compressing top-line sales, while CFO Vicente clarified, “our margin is not impacted as much” for the period.
• New banana segment guidance indicates persistent compression, with gross margins approaching 4% for 2025 amid ongoing adverse trends.

INDUSTRY GLOSSARY

• Fusarium wilt TR4 (Tropical Race 4): A highly contagious soil-borne fungal disease fatal to banana crops with no commercially viable cure, threatening supply stability.
• Black Sigatoka: A major fungal leaf disease impacting bananas, increasing production costs and reducing yields.
• Break Bulk Vessel: Ships designed for cargo that is loaded individually rather than in containers, relevant to legacy logistics in produce shipping.
• Adjusted Results: Financial figures excluding non-recurring or non-operational items (e.g., divestiture, impairments) to provide a normalized view of ongoing performance.

Full Conference Call Transcript

Christine Cannella: Thank you, Regina. Good day, everyone, and thank you for joining our third quarter 2025 conference call. Joining me in today's discussion are Mr. Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer, and Ms. Monica Vicente, Senior Vice President and Chief Financial Officer. I hope that you have had a chance to review the press release that was issued earlier via BusinessWire. You may also visit the company's IR website at investorrelations.freshdelmonte.com to access today's earnings materials and to register for future distributions. This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non-GAAP measures.

Reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website. I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward-looking statements within the Safe Harbor provisions of the federal securities laws. In today's press release and in our SEC filings, we detail risks that may cause our future results to differ materially from these forward-looking statements. Our statements are as of today, 10/29/2025, and we have no obligation to update any forward-looking statements we may make.

During the call, we will provide a business update along with an overview of our third quarter 2025 financial results followed by a question and answer session. With that, I will turn today's call over to Mr. Mohammad Abu-Ghazaleh. Please go ahead.

Mohammad Abu-Ghazaleh: Thank you, Christine, and thank you for joining us for our third quarter 2025 earnings call. We delivered another quarter of steady progress supported by strong execution across our portfolio. We saw continued gross margin expansion in our fresh and value-added product segment, and our pineapple program continues to perform well. Overall, our third quarter results reflect our ongoing shift towards higher-margin value-added categories, a key driver of profitable growth. We also took important steps this quarter to enhance long-term productivity and strengthen our financial performance. Most notably, we entered into an agreement to divest the operations of Mann Packing, a business that has not met our profitability expectations.

We believe this divestiture will strengthen our overall margin profile and enhance capital efficiency going forward. While these decisions are never easy, they underscore our disciplined approach to managing performance and ensuring that every part of our business contributes meaningfully to our bottom line. I would like to discuss a challenge facing the entire industry: demanding pressure on global banana production, which I addressed last quarter and has since then only intensified. Fusarium wilt tropical race 4, which is known as TR4, was confirmed in Ecuador, one of the world's largest banana producers, marking a serious escalation in Latin America after previous detections in Colombia, Peru, and Venezuela.

It is a highly contagious soil-borne disease with no cure, and it's already destabilizing the region. In Peru, where TR4 was first detected in 2021, the impact is noticeable in the Piura region, the country's leading producer of organic bananas. A recent study found that 45% of farms are already infected and about 10% have been completely eradicated. Small growers are under mounting pressure as Black Sigatoka spreads and TR4 reaches new countries. With already thin margins across the sector, rising disease control costs are making survival increasingly difficult. At Fresh Del Monte, we have been preparing for these challenges for years.

We are advancing work on TR4-resistant banana varieties, an essential step toward long-term resilience, but solutions of that scale take time. In the meantime, growers large and small are taking every possible measure to control these diseases. Each year, these efforts are becoming more demanding as the situation further deteriorates, placing new financial strains on growers across the industry. We are seeing the impact clearly in Costa Rica. As of August 2025, production in the industry has declined 22% year over year, which is roughly 18 million boxes lost, with most of that loss stemming directly from Black Sigatoka.

For a country long recognized for its agricultural efficiency, that's a significant and concerning decline, one that inevitably drives costs higher across the industry. Demand for bananas remains strong. What's shifting is the balance between supply and demand and the underlying economics of the category. Understanding that shift is essential for everyone involved. Sustaining this category over the long term will require closer alignment across the value chain, ensuring that pressures in the fields are understood and shared throughout the supply chain. The farmer can no longer absorb these rising costs. It is easy to take bananas for granted: simple, familiar, always there. But behind that simplicity lies one of agriculture's most coordinated and collaborative supply chains.

Protecting it is our shared responsibility. And if we don't act collectively to support growers and stabilize this supply chain, we risk seeing this fruit and the livelihoods behind it disappear before our eyes. That reality weighs heavily on me and drives much of our focus today. With that, I will turn it over to Monica Vicente, our CFO, to discuss our financial results.

Monica Vicente: Thank you, Mr. Abu-Ghazaleh, and good morning to everyone, and thank you for joining us today. Before reviewing our quarterly financials, I'd like to highlight several strategic actions we took during the quarter to strengthen our portfolio and drive long-term value. We took important decisions to streamline operations and reallocate capital toward higher-performing areas, which resulted in an impairment charge totaling $56 million. $18 million relates to the planned divestiture of Mann Packing, which Mr. Abu-Ghazaleh already mentioned. This supports our strategy to simplify operations and prioritize higher-growth, higher-margin categories. We acquired Mann Packing in 2018 and have now entered into an agreement to sell the business, including substantially all operating assets.

The buyer, Church Brothers Farms, will acquire machinery and equipment and customer lists for $19 million plus the value of inventory at closing. The transaction excludes certain real property, including our Gonzales, California facility, which we've agreed to lease under a five-year agreement with renewal and purchase options. This divestiture is expected to close during 2025, subject to customary closing conditions. Mann Packing contributed $174 million in sales during the first nine months but was a headwind to our strategic margin targets for the fresh and value-added product segment. We had previously pursued streamlining efforts; however, after further evaluation, we determined that a full divestiture better aligns with our long-term strategy.

During the quarter, we also recorded $37 million in impairment and other charges related to underperforming banana farms in The Philippines, which served our Asia and Middle East markets. Despite efforts to improve yields and manage costs, the farms continue to underperform, impacting profitability. After reassessing performance, we made the decision to abandon operations at these farms. This move enables us to reallocate resources to more productive supply channels. Continuing with our broader efficiency efforts, we sold a break bulk shipping vessel from our fleet during the quarter and recently completed the sale of a second vessel.

This reflects our continued shift away from legacy break bulk vessels, and we remain committed to our vertically integrated logistics model and operate six modern vessels supporting our global supply chain. Let's now review our financial results for 2025, including adjusted results which exclude the impact of the Mann Packing divestiture. As Christine mentioned, reconciliations are available in today's press release and earnings presentation on our website. Net sales were $1.22 billion. The increase reflects higher net sales in our banana and other product services segments, primarily driven by higher per unit selling prices in our banana segment.

Contributing factors included the impact of tariff-related price adjustments in North America and the favorable impact of fluctuations in exchange rates related to the euro. The increase was partially offset by lower sales volume in our fresh-cut vegetable product line due to operational actions taken during 2024. Adjusted net sales were $960 million. Gross profit was $81 million. The decrease was primarily driven by higher per unit production and procurement costs in the banana segment, along with increased distribution costs. Gross margin decreased to 7.9%. Adjusted gross profit was $88 million, and adjusted gross margin decreased to 9.2%.

Despite margin compression, this quarter reflects the resilience of our core business strength and early progress from our shift toward higher-margin value-added categories. We expect margin recovery and improved efficiency ahead, supported by the Mann Packing divestiture and continued cost discipline. We reported an operating loss of $22 million, which reflects higher asset impairment and exit charges related to the underperforming banana farms in The Philippines and the impairment charges associated with the divestiture of Mann Packing, along with lower gross profit in the current period. On an adjusted basis, operating income was $40 million. Net loss attributable to Fresh Del Monte was $29 million, while on an adjusted basis, net income attributed to Fresh Del Monte was $33 million.

Our diluted earnings per share was a loss of $0.61, and adjusted diluted earnings per share was income of $0.69. Adjusted EBITDA was $58 million. We expect adjusted EBITDA margin to improve due to continued gross margin momentum in our fresh and value-added product segment and disciplined cost management. Let's take a closer look at the financial performance of our business segments, starting with our fresh and value-added product segment. Net sales were $611 million. The decrease was primarily due to lower per unit selling prices in our avocado product line, driven by increased industry supply and lower net sales in our fresh-cut vegetable product line, following the operational reductions implemented during 2024 previously mentioned.

Offsetting factors included higher sales volume and per unit selling prices in our fresh-cut fruit product line and increased per unit selling prices in our pineapple product line, along with tariff-related price adjustments in North America. Adjusted net sales were $548 million. Gross profit was $68 million. The increase was driven by higher per unit selling prices in the pineapple and fresh-cut fruit product lines. Gross margin increased to 11.2%. Adjusted gross profit was $76 million, with adjusted gross margin increased to 13.9%. We aim to sustain gross margins in the low to mid-teens for this segment, driven by continued improvements in our product mix within this segment. Now moving to the banana reporting segment. Net sales were $358 million.

The increase was driven by higher per unit selling prices across all regions, including the favorable impact of fluctuations in exchange rates, combined with the tariff-related price adjustments in North America and higher sales volume in The Middle East. These gains were partially offset by lower sales volume in Asia and North America, reflecting softness in market demand during the quarter. Gross profit was $5 million, and the decrease was driven by higher per unit production and procurement costs due to adverse weather conditions in our growing regions in the first half of this year, increased distribution costs, along with an allowance recorded on our receivable from an independent grower in Asia. Gross margin decreased to 1.3%.

Adjusted gross profit was $4 million, and adjusted gross margin decreased to 1.2%. Lastly, our other products and services segment. Net sales were $53 million. The increase was a result of higher net sales in our third-party freight services business, partially offset by lower per unit selling prices in our poultry and meats business. Gross profit was $8 million. The decrease was due to lower net sales and higher production costs in our poultry and meats business. Gross margin decreased to 14.8%. Now moving to selected financial results for 2025. Our income tax provision was $4 million. The decrease was primarily driven by lower earnings in certain higher tax jurisdictions.

Net cash provided by operating activities was $234 million for the first nine months. The increase was primarily due to working capital fluctuations, mainly lower accounts receivable driven by timing of collections and reduced finished goods inventory. At the end of 2025, our long-term debt stood at $173 million. Our adjusted leverage ratio remains well below one times EBITDA. Capital expenditures for the first nine months of 2025 totaled $36 million. Investments during the quarter focused on enhancing our banana and pineapple operations in Central America, upgrading operations and production facilities in North America, along with improving our pineapple operation in Kenya.

As announced in our press release, we declared a quarterly cash dividend of $0.30 per share payable on 12/05/2025 to shareholders of record as of 11/12/2025. On an annualized basis, this equates to $1.20 per share, representing a dividend yield of 3.4% based on our current share price. During the third quarter, we repurchased just over 200,000 shares of our common stock for $7 million at an average price of $35.55 per share. We still have $135 million available under our share repurchase program. Taken together, these actions reflect our commitment to delivering long-term value, supported by a strong sustainable dividend and a balanced capital allocation strategy that includes opportunistic share repurchases.

With that, let's turn to the outlook for the remainder of the year and the strategic priorities. We continue to expect net sales growth of approximately 2% year over year, consistent with our prior guidance. As far as gross margins by business segment, in our fresh and value-added product segment, excluding the impact of the divestiture of Mann Packing, gross margin is expected to be in the 11% to 13% range, primarily driven by strong performance in our pineapple product line and favorable product mix.

While the divestiture of Mann Packing is scheduled to close on December 15, we expect to begin realizing the benefits of the streamlined portfolio in 2025, with a more pronounced impact on profitability and margin performance in 2026. In our banana segment, gross margin is expected to compress below the historical 5% to 7% range, approaching 4%, due to lower industry-wide supply and cost pressures from disease treatments, as well as weather-related disruptions, which continue to cause shipping delays and port congestions. Both factors have significantly increased our costs.

It's important to remember that with the banana segment, our focus remains on margin discipline over volume, and we continue to prioritize product quality and reliability for our customers, even in the face of these extraordinary challenges. Bananas remain a foundational part of our product portfolio, essential for meeting customer expectations and supporting our broader commercial strategy, even if it's not a driver of growth. For our products and services segment, gross margin is expected to be in the range of 10% to 12%, slightly below prior expectations. This reflects lower selling prices in our poultry and meats business, which are pressuring margins.

Selling, general, and administrative expenses are expected to be in the range of $205 million to $207 million. Regarding CapEx, we now expect our full-year spend to be in the range of $60 million to $70 million, down from $70 million to $80 million previously communicated. This reflects updated project timelines. Net cash provided by operating activities is expected to exceed the previously guided range of $180 million to $190 million, coming closer to $190 million to $200 million. In closing, we continue to actively manage external pressures, including elevated operating costs and macroeconomic uncertainty.

The strategic actions we've taken this year—streamlining our portfolio, reallocating capital, and enhancing supply chain resilience—position us to navigate the rest of the year with agility and focus. These actions reflect our commitment to disciplined execution and long-term value creation. This concludes our financial review. We can now turn the call over to Q&A. Regina?

Operator: We will now begin the question and answer session. Our first question will come from the line of Mitch Pinheiro with Sturtevant and Company. Please go ahead.

Mitch Pinheiro: Yes. Hey, good morning. Good morning, So, I want to start out with the look at the fresh and value-added segment. So the adjusted gross margin was kind of eye-opening at 13.9%. And I know you're sort of guiding 11% to 13% as sort of your gross margin expectation. But is, I guess, 13% the new normal for this business?

Monica Vicente: I think we're getting there, Mitch. I think we'll be getting very close to that margin consistently. So, yeah, you can see that the adjusted gross margin this quarter was very, very, like you said, it's an eye-opening, now that we've excluded Mann. So we do expect to be very close to the 13%. We're still being cautious. We're doing the 11% to 13%. We feel confident about this segment. And, you know, so I haven't seen the queue yet, but you know, I'm curious. Pineapples, obviously, the supply has been down. Net right now, but you're getting some pricing. Are your costs up in pineapples as well?

Like, you talked about the bananas and more cost for on the on the you know, the farm level. But is there and actually at the port you know, shipping. But is are pineapple you know, margins still going to be your strongest of your in that segment?

Mohammad Abu-Ghazaleh: Yes. That's a fact. And, you know, when it comes to cost, cost the pineapple, thanks God, doesn't have the same diseases or same you know, kind of plagues that is happening to the bananas. So we don't see, you know, increases in terms of applications of certain chemicals to our farms, you know, in the pineapple business. So pineapple does not definitely, there is, you know, inflation, adjusted increases, which is normal, you know, on the labor side or other services. But all in all, it's it's a normal kind of environment. So we don't expect significant cost increases on pineapples. And you are right.

I mean, the pineapple category is volumes are more or less static And the demand is in general, outstripping supply. So as we speak today, we don't have enough to allocate to every customer that we have. So it's more selective today than being in the past.

Mitch Pinheiro: Yeah. I've noticed, you know, you were obviously the leader in sort of innovation in pineapples and the marketing around it, but I'm also seeing some of your competitors start to, like, I guess, Dole start to try to emulate some new product varieties. And I was wondering if you know, it's essentially raising the value of the of the of the fruit with continued innovation and improved quality. Is that do you get the sense consumers notice that?

Mohammad Abu-Ghazaleh: Well, yes. Of course. I mean, we yeah, I mean, the better kind the better fruit that you deliver to the market, the more ripe the more higher sugar content, better you know, sweetness or taste, definitely have an influence on the consumption and the and the buyer kind of appetite to buy it. I mean, there is no question that, you know, we I think as the month that we have been, you know, pioneer and at the forefront of innovation and development. You know? And I wish everybody else good luck with whatever they are doing. But, I mean, Del Monte has a history of being you know, the forefront into this.

And I think that would have been in place.

Mitch Pinheiro: And you still see, from a from a point of view, when what's your best, estimate for when you start to see demand supply recover?

Mohammad Abu-Ghazaleh: I don't think that supply is going to you know, as we go forward years ahead. Know, there is not too much land left I mean, in Costa Rica, we cannot double production, for instance. It's impossible. Or let's say, 20 or 30% more than what is happening right now. And Costa Rica is the major producing country in all Latin America, I think. So and it's it's not easy to grow pineapples anywhere you want. You know?

Land is restricted Environment as well concerns are part of this you know, restrictions on additional acreage or additional blood you know, production So I believe prod consumption on a global level is going to increase, and we see that not only in North America, but we see that in Europe, we see that in The Middle East, we see that in Asia. It's a growing let's say, commodity. It's it's it's becoming more fashionable for people to eat more pineapples. And especially because of the good quality of these pineapples today. So I can tell you, you know, The Middle East, we are almost 100% almost 100% in the market.

I mean and because of our proximity from Kenya into the onto these markets. Our Brazilian plantations are in progress right now. And then about three years from now, we will we will start having production out of Brazil, you know, which will be the only company anywhere in the world that has production of MD2 gold pineapple in Brazil. So that will kick in. You know? It may take some time, but I think that will be very significant for us going forward in the future. And we're looking at other areas of expanding as well as we speak.

So and in terms of our positioning, you know, in the pineapple, a very confident and comfortable actually with our pineapple business going forward in the future, Mitch. Okay. And then just two more questions on the fresh and value-added. Avocados, I know supplies is strong and, pricing's been down. Do you see that kind of reversing here in the you know, the next six months? As you see a pricing firming, I should say.

Mohammad Abu-Ghazaleh: It could happen, you know, because, actually, you know, with Peru increasing volumes, with Colombia increasing volumes, and other countries, Chile and California and, you know, the Mexicans did not have that opportunity. I mean, if you look at the prices, year over year, I think that period, you know, we were talking about $70.60, $70.80 dollars a box of avocado. Now it's selling for almost half of that. So you can see the impact on the revenue itself. I mean, for as a seller ourselves, of course, that will impact our revenue you know, selling the same volume for 80 or 70 or 60 rather than selling at 30 or 35. Makes a huge difference.

But, there could be maybe a pickup, you know, during the next two, three months because Mexico will be more or less exclusive in one way in terms of supply. To North America, but think it will not be long term kind of escalated, you know, escalation in prices. I think that prices will remain more or less in the region that we are seeing right now between maybe 30 and $50, but not more.

Monica Vicente: And remember, Mitch, we buy the product from the grower, so we the margin based on what we buy and sell. So even though the sale price is much lower, our cost is lower as well. So our margins have stayed pretty, you know, More pretty more or less even from last year. So, unfortunately, impacts our sales. But our margin is not impacted as much.

Mitch Pinheiro: Yeah. And then, so but with buy with pricing coming down, shouldn't that you expect to see stronger volumes consumption

Mohammad Abu-Ghazaleh: Well, I don't see the prices of the retail to be really reflecting that adjusted

Monica Vicente: Yeah. I'm a big buyer of avocados, and I'm still paying the same.

Mitch Pinheiro: Okay. So I just switching gears to well, did want to ask about how your fresh cut fruit business is doing. I didn't see any comments around that.

Monica Vicente: They're doing yeah. No. Fresh cut is doing, I as well. Like you like you know, we view that together with the pineapple as one of the primary products. And it's, it performed very well during the quarter, and we expect to continue with the with a strong performance.

Mohammad Abu-Ghazaleh: I don't I don't remember if I mentioned, you know, earlier last year that we started fresh guacamole, you know, offering fresh guacamole in the market. You know? And we started this new category with the which is 100% fresh guacamole. And it was, like, we started from zero. And today, I think we will end at the end of this year with about $8 million in revenue. On that category alone. So you where our innovation is and where we are going. K. And with reasonably good margins.

Mitch Pinheiro: I just wanted to move on to the banana business. So you know, pretty you laid out the issues pretty well. From a category. What I was curious about was why banana volume or consumption in North America I'm not sure what it is in Europe. But why consumption is down? I've asked before, we really don't know, I guess, but I was wondering if you have any recent insights as to banana consumption.

Mohammad Abu-Ghazaleh: Well, it's seasonal, I would believe. Mitch, you know, during the summer with all the summer fruits availability, you know, and people usually during the summer would go for more let's say, like watermelon and melons and grapes and So I think it's it's it's not a trend. I think it's a hiccup. Bananas more or less consumption wise will be will be stable. I don't believe that we will see a huge drop into banana consumption in terms of consumer appetite. But the problem is that the costs are going up and the prices are not moving in the same direction. So and that is the dilemma here. You know? I mean and the diseases are not going away.

The is continuing and spreading. And intensifying as a matter of fact. So I if you remember, a few years back, I said that we will see by then as a $20 a box. We're almost there. You know? I mean, today, you know, if you look at Ecuador, just the fruit alone is around $12.11 to $12 the per box. Just the fruit. Aside from all the other cost of packaging and services. So if you add up everything, you know, you're talking about would be $16.15, $16.17 dollars and even more. Per box.

So we are talking about, you know, I mean, substantial increases And most important thing which people do not really focus on is the Saratoga spread in Central America as well as I mentioned earlier, the TR4 disease, which it's it's it's not if, it's when. It's it's just a matter of time when it's going to be spread And we saw that in The Philippines, and the write off or that we took, you know, in the Philippine as we saw yesterday, it was because of that. I mean, we became I mean, the disease has matter what you do, it's like losing battle, you know, against that disease. You know?

I mean, you can replant, and then three years later, four years later, you lose a tree again. So this is really don't understand and realize, you know, how serious this issue is. And this is going to happen be it, tomorrow or after a year or two or three is going to happen. It's going to come. And I can assure you that disease does not stop. Its spreads. It's just a matter of time. And, Mitch, you know, you see our margin for the banana suffered this quarter, and we're projecting closer to 4% for the year.

The impact of the Sigatoka very significant, not only because you have lower volume coming out of the ground, but the cost to protect the you know, the farms from Sigatoka is very high. So it's very obvious based on our results, the impact of these diseases.

Mitch Pinheiro: So the one thing, you know, the NAN is obviously you know, I guess the you know, largest category of fruit I guess, The United States and maybe apples or but certainly hugely important And with all these added costs and the margins have always been kind of thin, you'd expect pricing to rise. But there's always been some element of irrationality you know, among all the major players and in pricing. Maybe you excluded, but like, my question is, I noticed that the four largest banana producers formed a new organization v a BANA, you, Dole, feast and the other chick the other one, whatever it is. Yeah. I understand. Pizza, of course.

And then you know, does that is this level of cooperation maybe assigned down the road that there's going to be a little more rationality to the quarter and banana pricing relative to the increase in costs and lower supply?

Mohammad Abu-Ghazaleh: I don't think that association or that kind of gathering by the four banana companies was mainly to streamline the business better and not nothing to do with actually influencing volumes of pricing in the market. It's it's rather than to understand the business better and trying to find solutions, you know, in terms of hopefully, you know, agricultural practices and other logistical issues. But the point here, Mitch, people don't understand and don't get it that all of a sudden, one day, everybody will wake up and all of a sudden, there is not enough bananas to and we keep we see that in other countries in the world. You know? I mean, I see that in The Philippines.

I saw that in Africa. All of a sudden, you know, over years, the banana production is totally lost. And or 50, 60% down on the previous I mean, on the normal trend. This is going to happen. You know? I mean, I would get see that actually as we speak right now at Ecuador. Ecuador is the largest producer of bananas in the world. And right now, you can see that the production is not picking up as it used to be. And that's an indication of what's going on in the industry, and people don't understand that. You know, I've been all my life in this, in this business.

And I know, and I can I can anticipate, you know, things? And I believe that there will come a time that there will be a huge drop in production And as you can see, as a company ourselves, we are very careful We are very stringent, and we're very we calculate our steps. I mean, we not here to lose money. You know? I mean, we are here to make money to our shareholder. And we will do whatever is necessary to our business in the best way we can. Be it on bananas or any other item.

And I think for bananas in particular, there will come a time that people realize that there is not enough bananas in the market, and the prices will shoot up. In a way that will be a shock to the market. And that's the reality, you know, that if people really take this into consideration, it's better to really improve conditions for the growing side of bananas on supply side, in order to maintain stability and continuity. But it's it's a short term in my opinion, short term vision and short term kind of strategy that is happening right now.

It's just like Monica mentioned a few minutes ago, you know, I mean, the chemical that we apply to Sykatoga, which is the black It turns the leaves into totally black, you know, and then we lose the bunches on the on the tree. The price of this product, the chemical, which is the only one in the world, don't have a choice. You only have one product that you need to use. And that product has increased over the last two years by over percent 40, 50% and still going up and you have no choice. Either you spray and the problem that the disease is getting immunity. I mean, that disease, they it's becoming adapting to that chemical.

So you need to apply more to try to prevent it or control it. It's it's a vicious circle. Know, if you don't apply, or if not apply enough, you will lose more truth. But if you're going to apply more cycles, into the field, that means more cost to you. So it's it's really I mean, if you look at the our cost, it's about dollar 30, dollar 40 today, that $10. Just for this chemical alone applications. So I think that's that's the reality of the of this Jewish

Mitch Pinheiro: So one of the questions is about the Black Sigatogah is one other, mitigation effort can be, you know, fewer trees, more less canopy, more sunlight. Yeah. But that's

Mohammad Abu-Ghazaleh: that's is exactly what I said earlier. 18 million boxes down Costa Rica production on a national level. That's mainly because of Cicatogia. It's not because of anything else. Mainly because of.

Mitch Pinheiro: Right. So okay. Okay. I got you. Is it If this happens in Ecuador, if this happens in Guatemala, if this happens in Panama, same story.

Operator: K.

Mitch Pinheiro: And then just one other one other question, and tariffs, across your entire portfolio how much did tariffs add to the top line?

Monica Vicente: We haven't given that number, Mitch. But, you know, we did. We were able to pass on the tariff in North America. We haven't given the number.

Mohammad Abu-Ghazaleh: Okay. It's really minimal. It's not much. It's minimal. Okay.

Mitch Pinheiro: Alright. And that's that's all I have. I, I appreciate the time.

Mohammad Abu-Ghazaleh: Pleasure. Thank you, Mitch.

Monica Vicente: Thank you, Mitch.

Operator: Once again, for any questions, press 1 on your telephone keypad. And that will conclude our question and answer session. I will now turn the call back over to Mr. Abu-Ghazaleh for closing remarks.

Mohammad Abu-Ghazaleh: Thank you, everyone. I appreciate joining us today and hope to talk to you in the next call. Have a good day.

Operator: That will conclude today's call. Thank you all for joining. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.