Del Monte Corporation

Good day everyone and welcome to Fresh Del Monte Produce's first quarter 2022 earnings conference call. Today's conference call is being broadcast live over the internet and is also being recorded for playback purposes. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. For opening remarks and introductions, I would like to turn today's call over to Vice President, Global FP&A and Investor Relations with Fresh Del Monte Provost, Anna Miranda. Please go ahead, Ms. Miranda.

Thank you, Cheryl. Good morning, everyone. And thank you for joining our first quarter 2022 conference call. As Cheryl mentioned, I am Ana Miranda, Vice President, Global FP&A and Investor Relations with Freshland Monaco. Joining me in today's discussion are Muhammad Abu-Ghazali, Chairman and Chief Executive Officer, and Monica Vicente, Senior Vice President and Chief Financial Officer. I hope you've had a chance to review the press release that was issued earlier this morning via Business Wire. You may also visit the newly updated company's IR website at InvestorRelations.FreshZoneMonkey.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 the 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 provisions of the Federal Securities Law's safe harbor. In today's press release and in our SBC filings, we detail material risks that may cause our future results to differ from these forward-looking statements. Our statements are as of today, May 4th, and we have no obligation to update any forward-looking statements. During the call, we will provide a business update along with an overview of our first quarter 2022 financial results, followed by a question and answer session. With that, I am pleased to turn today's call over to Mohamed.

Thank you, Anna, and good morning, everyone. During the first quarter, our net sales increased by $49 million compared with the previous period, a direct benefit of leading the industry and the implementation of inflation-justified pricing actions. However, Our cost of products sold increased by $64 million due to across-the-board inflationary pressures, resulting in lower operating income. We have two very distinct narratives in our performance. First, we delivered healthy net sales. As a matter of fact, our first quarter net sales are near the same level realized in the first quarter of 2019 before COVID. Second, the increase in cost is truly unprecedented, negatively impacting flow through. Despite this narrative, our strong adjusted EBITDA margin of 5.5% is a testament to our nimble and agile management style. We remain focused on driving incremental operating leverage through product innovation, cost management, and operation efficiencies as reflected in the significant growth in our third-party trade services. We made progress on our 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. In keeping with our shareholder value accretion approach, our capital deployment in the first quarter concentrated on operational investments in data-driven technology and smart farming, strategic investment, and on paying a higher dividend. Last quarter, I updated you on the two exciting strategic investments with Pure Elizabeth and Good Culture. Our investment in Good Culture closed in the first quarter, while our investment in Pure Elizabeth closed at the end of last year. We are in the initial phases with Pure Elizabeth on the development of unique and innovative products and look forward to incremental performance as the collaboration continues to evolve. Additionally, the team is hard at work with our new product pipeline. So far this year, we launched our mini Honey Glow Pineapple, differentiated by its remarkable sweetness and small size, and Meslet Hummus in North America. Later this year, map packing is expected to execute new brand building packaging, and soon we plan to supplement our avocado category with an exciting new offering. Last month, we were recognized by Newsweek as one of America's most trusted companies of 2022. After being allies of customer trust, investor trust, and employee trust, We are honored to be among the companies recognized for this award and remain committed to maintaining the honesty and transparency Fresh Dalmatia is known for. Since our last sustainability update, we received high-level scores in the water security and climate change and forest categories by CDP, winning a 2021 SEAL Business Sustainability Award for our approach to farming while preserving biodiversity. Currently, two of our largest farming operations are certified carbon neutral, and we are actively working on amplifying those efforts elsewhere. Our sustainability efforts are the core of what we do as we work to build a food system where agricultural production and biodiversity thrive together. The war in Ukraine has created secondary effects, adding to the already unprecedented macroeconomic challenges, including incremental pressures on the cost of fertilizers, fuel, and shipping disruptions. Additionally, fluctuations in exchange rates are expected to go against us in key selling markets, given analysts forecast for a stronger U.S. dollar. We proactively hedged against movements in the Euro and the Japanese Yen to minimize the impact. Lastly, we do not yet see an environment of cross-normalization in the near future. Having said that, I'm confident in our team's ability to drive growth as they focus on a multifaceted approach grounded on driving organic and new product expansion. implementation of pricing actions to minimize margin erosion and operational efficiencies. We believe that our vertical integration is a key differentiator and that brings even through today. Because of it, we are relatively shielded from elevated shipping rates in certain key markets. Our vast network has allowed us to optimize our sourcing and distribution. Additionally, Our fleet of vessels has enabled us to expand our commercial cargo services in North America, benefiting from elevated demand given current ocean freight conditions. Now I will turn the call to Monica to talk about the first quarter financial results. It is Monica's first time presenting to our earning call. She has been an integral part of our finance organization for 25 years. I'm excited to have her in her new role as CFO. While I am certain she will continue to add significant contributions to our financial discipline as we continue to evolve our company.