Dole plc

Welcome everybody, and thank you for joining our first quarter 2022 earnings conference call. Joining me on the call today are Rory Byrne, Chief Executive Officer, Joanne Linden, Chief Operating Officer, and Frank Davis, Chief Financial Officer. This conference call is being webcast live on our website and will be available for replay after the call. During this call, we'll be referring to presentation slides and supplemental remarks, and these are available on the investor relations section of the Dole PLC website. Please note our remarks today will include certain forward-looking statements within the provisions of the Federal Securities Safe Harbor Law. These reflect circumstances at the time they are made, and the company expressly disclaims any obligation to update or revise any forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings and news releases. Our earnings release, financial report, and related materials for the first quarter can be found on our website. And information regarding the use of non-GAAP financial measures may also be found in the notes section of the release, which also includes the reconciliation to the most comparable GAAP measures of adjusted EBITDA, adjusted net income, adjusted earnings per share, and net debt. The details of our statutory forward-looking statements disclaimer can be found in our SEC filings and the presentation slides, which we'll be discussing today. With that, I'm pleased to turn today's call over to Rory.

Thank you, James, and welcome, everybody, and thank you for joining us today as we discuss our results for the first quarter of 2022. I'm joined today by Johan, who will give you an update on operations, and by Frank, who will take you through the financial review. Our 6K, which was filed at the SEC this morning, contains reported financials for the first quarter for Dole PLC. Our earnings press release and investor presentation also reference pro forma comparative financial information. This pro forma information illustrates Dole PLC's results for the first quarter of 2021 as if the merger, IPO and refinancing had occurred on January 1, 2020. This is consistent with the pro forma financial information presented in the form F1 filed at the SEC in connection with the IPO. So turning to slide six, Well, the group has delivered results in line with plan, with the exception of the loss incurred in fresh vegetables as a result of the value-added salads recall, which we discussed and flagged on our full-year earnings call back in March. Revenue more than doubled on a reported basis to $2.2 billion for the quarter, following the acquisition of the remaining 55% of Dole Food Company in 2021. On a pro forma comparative basis, revenue declined marginally. However, excluding the 16% reduction in revenues in fresh vegetables due to the impact of the value-added salads recall, on a like-for-like basis in other divisions, revenue actually increased by some 4%. We have implemented price increases in our business in response to the increase to operating costs driven by inflation and supply chain disruption. Adjusted EBITDA of $81.5 million was ahead of last year on a reported basis, and behind versus the pro forma comparative. Again, the reduction was predominantly due to the impact of the value-added salads recall. Fresh fruit was also behind last year, as anticipated, against a very strong comparative, which had the benefit of favourable market conditions arising from tight product supply following hurricanes Eta and Iota. This reduction in EBITDA was also the primary reason for the reduction in adjusted EPS in the quarter. Looking at our net leverage, there's a seasonal working capital outflow during the first quarter of the year at the outset of growing seasons. This has been higher this year due to the increased cost of inputs due to supply chain disruption, leading to higher inventory levels in fresh fruit. This, together with the exceptional one-off cash costs of the product recall, has led to an increase in leverage to 3.75% at the end of the quarter. As I mentioned at the outset, aside from the challenges in fresh vegetables, the results are in line with their expectations as outlined in our last market update. And we are therefore pleased to announce a dividend for the quarter of eight cents as part of our continuing focus on returning value to shareholders and our belief in the strong fundamentals of our business. Building on this strong foundation, we had plenty of positive operation developments during the quarter. Our commercial cargo business continues to deliver excellent results, benefiting from a strong market for our backhaul services. Our sector in general continues to benefit from its affordability and inherent sustainability credentials, as well as continued tailwinds from the macro trend of health and wellness. We've made further strides and synergies on the integration of Legacy Total Produce and Dole Food Company with the rebrand of operations in Ireland and Denmark. We launched Dole Exotics and Bee Exotic and the Bee Exotic brand with a focus on the growing, procurement, ripening and marketing of avocados, mangoes and other exotics primarily for the European market. And the FDA closed its product recall investigation and all our solid plants were back up running at normal capacity by the end of the first quarter. I'll now pass you over to Johan who can elaborate further on these in the operational review.

Thanks, Rory, and good morning, everyone. Turning to slide eight. On our last call, we confirmed that all our value-added salad plants following the recall had returned to normal operating capacity. While this was a positive step, as we turn to the rest of the year, we now anticipate that the turnaround in vegetables will take more time than previously expected. While we have been successful in pushing through significant price increases and have been able to recover most of the volume also clear that inflationary pressures remain very high and customers are looking to mitigate their own inflationary pressures. The financial impact of the vegetable recall is a major driver of our Q1 results compared to the prior year. However, from an adjusted EBITDA perspective, the more significant deviation in Q1 is seen in our fresh fruit business. As anticipated, our fresh fruit quarterly profit dynamics are different in 2022 compared to 2021. In Q1 2021, the market benefited from very tight supply of fruit in the high demand season following the hurricanes in Honduras and Guatemala in November of 2020. Q1 2022 shows a more normal supply position. While Q2 will continue to show a challenging comparison for the same reason, The comparatives become more favorable in the second half of the year. Our diversified business has performed well in Q1, in particular on a constant currency basis, again demonstrating the importance of a broad earning space. global logistics have become increasingly challenging over the last 24 months, this business has provided help in offsetting some of the significant increased costs we have incurred in the third-party shipping market. Once Q1 has performed in line with expectations, the operating environment has shifted significantly as a result of the ongoing geopolitical situation and its economic consequences. Overnight, due to supply chain difficulties, what is ordinarily a tighter supply window in the banana market at this time of the year has transitioned to one that was significantly oversupplied, which had an impact on market pricing. Critical inputs have also shown significant inflation because of the geopolitical situation, including rising fertilizer costs, paper costs, and fuel costs. While the marketplace is challenging, both in the fresh fruit segment, but also across other businesses, I am pleased to say that we have been proactive in developing important mitigation actions to protect the business. We have already made important strides in adjusting our own banana supply for the year by working with our suppliers to align supply and demand. We have worked with our customers to increase prices where possible in all fruits, and we have also worked with our suppliers securing continuity of supply in packaging and agricultural inputs. presents unusual challenges, we also strongly believe that we are positioned to perform well in difficult environments. Fresh produce continues to benefit from its affordability and sustainability, two aspects that we increasingly see driving consumer behavior. As a leader in our industry, we remain in an excellent position to capitalize business, we see potential consolidation opportunities as well as strategic opportunities to develop in growth areas such as organic and controlled environment agriculture. For our banana business, we expect the current market dynamics to improve the long-term supply-demand balance within the industry. And across our business, we see opportunities as one of the largest players in our market to succeed in complicated situations and both renew businesses and make strategic acquisitions. Finally, I want to touch on our continued activity in developing our synergy plan and integrating our business. At the start of April, we officially launched our new special subdivision, Dolexaltics, with a focus on the growing, procuring, ripening, and marketing of avocados, mangoes, and other exotics, primarily for the European market. This is an exciting development that specifically brings together an existing total produce presence in the marketplace and complements it with additional sourcing opportunities from within Dole. Dole Exotics will also have an expanded sales team with additional experience in servicing major customers with tropical products such as pineapples and plantains. Elsewhere in the group, we have also seen growth in our avocado business with new supply agreed out of Mexico, as well as our first exports out of Peru and South Africa. In Q1, we also complemented the rebrand of our Ireland and Danish business, creating Dole Ireland and Dole Denmark. A small but important step in enhancing our brand presence in the European market, and give you the financial review.