Dole plc

Welcome to the Dole PLC fourth quarter and full year 2024 earnings conference call and webcast. Today's conference is being broadcast live over the internet and is also being recorded for playback purposes. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. For opening remarks and introductions, I would like to turn the call over to the head of investor relations with Dole PLC, James O'Regan.

Thank you, John. Welcome, everybody, and thank you for taking the time to join our latest earnings call. Joining me today is our Chief Executive Officer, Rory Byrne, our Chief Operating Officer, Johan Linden, and our Chief Financial Officer, Jacinta Devine. During this call, we'll be referring to presentation slides and supplemental remarks, and these, along with our earnings release and other related materials, 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. Information regarding the use of non-GAAP financial measures may be found in our press release which also includes a reconciliation to the most comparable gas measures. With that, I'm pleased to turn today's call over to Rory.

Thank you, James. Welcome, everybody, and thank you for joining us today as we discuss our results for the fourth quarter and full year 2024. So turning firstly to slide four and your recap of key developments in 2024. Well, 2024 was another year of great progress and development for Dole PLC, with the business growing its position as the leading provider of fresh produce in the world. From a financial perspective, we delivered a strong financial performance, exceeding our most recent adjusted EBITDA guidance by some $12 million and continuing our solid growth trend over the last number of years. We've grown organically this year with group revenue and adjusted EBITDA increasing on a like-for-like basis, driven by growth across our core business areas and categories. Throughout the year, we continue to place a high priority on capital allocation and managing our invested capital. We do take a disciplined but also strategic and flexible approach to our investments. In the first quarter, we took the decision to capitalize on an opportunity to realize an excellent return on an investment at the disposal of our 65% equity share in progressive produce for net cash proceeds of the $100 billion, which we used entirely to repay debt. Then in the third quarter, we agreed to deal to expand our shipping fleet with the addition of two vessels to service our East Coast operation and provide a pathway for additional growth. This approach, combined with our strong operating performance, allowed us to deliver significant cash generation in 2024, driving a reduction in our net debt of over $180 million. Now, looking more closely at the full year figures for 2024 in slide 5, on a like-for-like basis, group revenue increased for the full year by 6.7% to $8.5 billion, and adjusted EBITDA increased 6.7% to $392 million. This was driven by a very strong performance in diversified fresh produce in America, as well as growth in our fresh fruit segment, offsetting a very small decline in diversified fresh produce in May, which had been our strongest performing segment in 2023. On an adjusted basis, net income was $120.9 million, and adjusted diluted EPS was $1.27 per share, and an increase of 2.4%. Finally, following another year of robust cash generation, we ended 2024 with net debt of $637 million and net leverage of 1.6 times, putting us in a very strong financial position for 2025 and beyond. Turning now to slide 7 for our operational highlights and starting with the fresh fruit segment. A strong close to the year, delivering $31.9 million of adjusted EBITDA in the fourth quarter, to finish with a full year of $214.8 million. This was an increase of $5.9 million compared to 23, and a result that was ahead of our own expectations. In North America, our business delivered good volume growth in bananas and plantains, in particular in the fourth quarter, continuing a very positive year-long trend and obviously supported by the increase in our shipping capacity from our recent investments. Additionally, in the European market, we continued our positive momentum and concluded an excellent year, driven by the high volumes of bananas as well as by lower shipping costs. While we formed well in the marketplace in 2024, we were also faced with higher shipping costs into the US due to the planned dry dockings of two of our vessels, as well as logistical issues of ports, both in Latin America and the US, and some continuing price pressure in the commercial cargo space. On the supply side, our route remained in a relatively good supply-demand balance throughout 2024. The relative tightness of the route has continued to put upward pressure on sourcing costs. This was accentuated for us at the end of the year by the impact of Tropical Storm Sarah, which affected an important acreage within our Honduran operations, and which we do anticipate having a notable short-term financial impact on our operations in the first part of 2025. As we look out into 2025, while the underlying fundamentals of the division continue to be in excellent shape, we will face some headwinds in the year to come. Very active competition, as well as sourcing issues, supply chain and foreign exchange movements. As always, our very experienced and knowledgeable management team are keenly focused on dealing with all of these challenges, while also working to capitalise on further growth opportunities as they arise. So moving on to the Diversified EMEA segment. This segment had a stable final quarter, ultimately delivering adjusted EBITDA of $131.5 million for the full year, a robust performance which was in line with their expectations and consolidating the excellent growth achieved in 2023. Diversified EMEA delivered good like-for-like revenue growth at 24.4%. However, over the course of the year, the segment did also face some headwinds due to supply challenges, weather events and some entity-specific issues that mitigated growth at the margin level. More positively, as we look forward into 2025, we anticipate continued revenue growth and, coupled with targeted investments and the benefit of ongoing integration within this segment, we will We believe we're well positioned to increase profitability again on a like-for-like basis going into 2025. Turning to our diversified America segment, this segment delivered a stable find of water, consolidating a very strong year growth on a like-for-like basis. Including the impact of the progressive produce disposal in the first quarter of 2024, this segment delivered a $22.3 million increase in adjusted EBITDA for the full year. A fantastic performance. Early in 2024, the segment had seasonal timing benefits within the Southern Hemisphere's summer export season, and particularly in the important Chilean cherry business. However, as the year progressed, this segment consistently outperformed as our export business in particular continued to perform very well across a wide range of product. And as I note, American businesses continue to deliver strong growth, especially in some of the important growth categories such as avocados. Looking ahead, as I heard, the turn of the year in the diverse Latin America segment coincides with the high point in activity in the southern hemisphere, summer export season. And so far, while the very strong profitability seen in the Chilean cherries in recent seasons may not persist at the same levels this season, it's also clear that the business remains in a good position to deliver on our expectations. As we look further out into the year, both for our exports and North American businesses, we believe we can further consolidate the strong revenue growth we had in 2024 and build our base for further growth in the years to come. So turning to the the fresh vegetables business. As we have noted on our most recent earnings calls, we are continuing to work on delivering the best strategic alternative for our vegetables business and that process remains ongoing. On the operational side, the improved results we've consistently seen in 24 continued in the fourth quarter. While we recorded an accounting adjustment carrying value of discontinued operations at year end. On an underlying basis, our vegetable business concluded an encouraging turnaround year in 2024, delivering positive cash flow on a full year basis. Overall, as we head into 2025, We are pleased that our corporate and divisional management teams have been successful in reestablishing an improved foundation for this business, and in doing so allows us to continue with the patient approach to ultimately deliver the best long-term outcome for all our stakeholders. With that, I hand you over to Jacinta to give the financial review for the fourth quarter and full year.

Thank you, Rory, and good day, everyone. Firstly, turning to the group results on slide nine. Fourth quarter group revenue increased 4.6%, with this growth driven by strong operational performance across all of our segments. On a like-for-like basis, excluding the impact of FX and the sale of progressive produce, the increase was 10.8%. For the full year, reported revenue increased 2.8%, and on a like-for-like basis, revenue increased 6.7%. Adjusted EBITDA decreased 2.9% in the quarter, However, on a like-for-like basis, increased 3.7% or 2.8 million. Fresh fruit was the driver of growth in the fourth quarter. For the full year, we are very pleased to deliver 392.2 million of adjusted EBITDA, an increase of 1.8% on 2023 and an increase of 6.7% on a like-for-like basis. This result was ahead of our initial and revised guidance issued during 2024. Looking at net income, the decrease in the fourth quarter was due to a loss of $61.2 million in discontinued operations, with significantly improved operating results offset by a non-cash write-down of the carrying value of the fresh vegetables division of $78.2 million net of tax. As the fresh vegetables division is accounted for under the health for sale accounting guidance, we were required to cease depreciation and amortization from March 31st, 2023 up to December 31st, 2024. The impact of this cessation of depreciation and amortization was 78.1 million and was the primary reason for the non-cash write-down. On a full year basis, net income of 143.4 million was 12.3 million lower than the prior year. The decrease was primarily due to non-cash write-down of the carrying value of the fresh vegetables division, as well as higher tax expense. These decreases were partially offset by higher operating income due to strong underlying performance across the group, higher other income and lower interest expense. On an adjusted basis, adjusted net income increased 3% to 15.3 million in the fourth quarter, and adjusted diluted EPS was 16 cents per share. The increase was predominantly due to lower interest and depreciation expense, partially offset by lower adjusted EBITDA and higher tax expense. For the full year, we are pleased to report a 2.4% increase in adjusted net income to 120.9 million, primarily due to the increase in adjusted EBITDA as well as lower interest and depreciation expense partially offset by higher tax expense. Adjusted diluted EPS for 2024 was $1.27 compared to $1.24 in 2023. Turning now to the divisional updates for the fourth quarter of our continuing operations. Starting with fresh fruit on slide 11, The fresh fruit division delivered another strong result in the fourth quarter to round out a good year with the revenue increasing 9.4% and adjusted EBITDA increasing 10.8%. The increase in revenue was due to higher worldwide volumes of bananas sold, higher worldwide pricing of pineapples and higher pricing and volume for plantains in North America. These increases were partially offset by lower worldwide volumes of pineapples sold lower worldwide pricing for bananas and lower pricing and volume for plantains in Europe. The adjusted EBITDA increase was primarily driven by higher revenue in bananas, as well as lower fruit sourcing and shipping costs in Europe, partially offset by higher shipping costs in North America due to dry docking. For the full year, revenue increased 5% and adjusted EBITDA increased 2.8%. Now turning to EMEA on slide 12, This segment delivered 5.5% revenue growth in the fourth quarter, driven by a strong performance in the UK, Spain and the Nordics, partially offset by a net negative impact from M&A activity of 7.4 million. On a like-for-like basis, revenue increased 6.5%. Adjusted EBITDA decreased 0.5%, primarily due to decreases in the Czech Republic, South Africa and Ireland. as well as an unfavorable impact from foreign currency translation of 0.2 million, partially offset by a stronger performance in Spain and the UK. On a like-for-like basis, adjusted EBITDA increased 0.3%. Overall, a solid performance in 2024 from the EMEA segment, with like-for-like revenue increasing 4.4% and adjusted EBITDA increasing 1.9% on a like-for-like basis. Now finally turning to diversified fresh produce, Americas and rest of the world. As in previous quarters this year, reported revenue decreased primarily due to the disposal of progressive produce in Q1. On a like for like basis, revenue increased 16.1% due to higher export volumes in cherries and grapes, as well as strong trading performance across categories in the North American market. Again, most of the decrease in adjusted EBITDA can be explained by the progressive projects divestiture. On a like-for-like basis, adjusted EBITDA decreased 2.2% or 0.3 million, primarily due to a lower profitability in the Chilean cherry business, partially offset by continued good performance in North America, particularly in kiwi, grapes and avocados. The segment delivered a very strong full-year result on a like-for-like basis, with the revenue increasing 13% or 233.3 million and adjusted EBITDA increasing 52.3% or 22.3 million. Now turning to slide 14 to discuss our capital allocation and leverage. We remain ever focused on capital allocation and managing our leverage. and are pleased that our leverage reduced further in the quarter to finish the year at 1.62 times. The reduction was driven by a 95 million decrease in net debt compared to Q3. Interest expense has continued to decrease compared to the prior year due to lower debt levels as well as lower base rates and was 18.1 million in the fourth quarter and 73.8 million for the full year. Under an assumption that base rates will remain broadly stable in 2025 and not assuming any exception on cash proceeds, we expect full year interest for 2025 to be approximately 70 million. Net cash provided by operation activities from continuing operations was 262.7 million in 2024. As anticipated, we continued to see a positive inflow in working capital in the fourth quarter, and this was accentuated by some seasonal timing benefits at the year end. Cash capital expenditure from continuing operations was £25.6 million for the quarter, and we added a further £4.6 million of assets by way of finance lease. For the full year, total capital addition were £135.7 million, which was in line with our latest guidance. This was made up of cash capital expenditure of 82.4 million, and we added a further 53.3 million of assets by way of finance lease, including the two shipping vessels mentioned on our last earnings call, and which we purchased outright in early 2025. Free cash flow from continuing operations was 180.3 million for the full year. Free cash flow benefits from strongly adjusted EBITDA performance and good working capital management across the group. over the course of the year. Continuing with our commitment to return cash to shareholders, we are pleased to declare a dividend of 8 cents for the fourth quarter, which will be paid on April 3rd, 2025, to shareholders on record on March 20th, 2025. Now I'll hand you back to Rory, who will give an update on our full year outlook.

Thanks, Jacinta. So we're very pleased with the group's exceptional performance in 2024, delivering $392 million of adjusted EBITDA for continuing operations, a result that exceeded our own expectations and a result that we believe gives us a strong platform to continue our momentum in the 2025 financial year. As we take a more focused look at 2025, while we continue to see excellent opportunities for our business, we will also face some challenges and uncertainties this year. For most multinational businesses, the quickly evolving geopolitical environment is adding increased uncertainty in areas including regulation, foreign exchange rates, and of course the potential impact of any tariffs or other changes to international trade structures and sourcing costs and supply chains. In this regard, our management teams are keenly focused on preparing for as many eventualities as possible while also continuing to promote the critical benefits of the fresh produce industry and supporting shared global goals towards enhancing health and wellness. For our own operations, we will face a known short-term headwind in 2025 following the impact of Tropical Storm Sarah on our Honduran operations in November. With that in mind, given our excellent finish to the 2024 financial year, which did exceed our expectations, at this early stage of the 2025 financial year, our goal is to deliver a full year adjusted EBITDA in the range of $370, $380 million. Turning to the investment side, we are pleased that we were able to make some important strategic investments in 2024. For 2025, we expect as a baseline to have a maintenance level of capex for routine operations, broadly in line with our depreciation expense of approximately $100 million. In addition, we continue to explore a range of development opportunities which, if executed, will strengthen our business and continue to drive further growth in the years to come. In conclusion, we're very pleased to continue to enhance our track record with another year of strong financial results. We have an excellent group of people right across the group and a huge thank you to everyone for their ongoing commitment and dedication to drive Dole PLC forward, as well as to our important suppliers and customers for all their ongoing support. With that, I'll hand you back to the operator and we can open the line for questions.

Thank you. We will now begin the question and answer session. If you are dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening to the allowed speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking the question. Your first question comes from the line of Christopher Barnes with Deutsche Bank. Please go ahead.

Good morning, good afternoon. Thanks for the questions. First, could you just unpack the EBITDA guidance? You're calling for a 4% decline at the midpoint, but just wondering how much of that decline is attributed to known headwinds like the impact from SARA and difficult comparisons versus 24 versus just added conservatism in the context of the macro geopolitical climate. And just any color you can share by segment and cadence first half or second half would be particularly helpful. Thanks.

Yeah, thanks, Chris. And obviously it's a couple of big things and the thresholds very early in the year to be giving full year guidance. And I think secondly, we're in a world that's increasingly difficult to predict. And while we haven't built in anything specific around the potential major macro geopolitical or economic issues that can arise, I think they do create a little bit of uncertainty and negativity around the world generally. I think you look back over the last few years, we've had a really, really strong track record in, you know, right post IPO or continuing operations in 22, 23 and now 24. I've shown, you know, ability to weather whatever storms are thrown at us and, you know, we come out at the end of the year with a pretty good result. 2024, as you know, Chris, we took the number down to 360 on the basis that we simply subtracted off the piece of the business that we sold in progressive produce to come in with a 392 result for 24. It was a really, really strong record year for us and a really, very positive year. I know from an analyst perspective, sometimes that's a benchmark that people would like to grow from. But the way we look at it is we've had a good year. We take the opportunities that are there and it was a little bit better than we might have expected. We do have the specific headwinds that we have referred to Honduras in particular. It just creates complexity around how we source alternative food from the shortfall in Honduras, it causes some dislocation in our shipping schedules and dislocations in containers, so it's a little bit more complex than just losing short-term food. We had a ship breakdown on the west coast as well, it was a little bit unhelpful. We've had So we've got some fruit on the mask ship that broke down on its way to China. It's probably 65 containers of cherries on that. Although we believe that's between insurance proceeds that it will be covered too. Certainly there are some short-term headwinds, not any different or greater than we've replaced over the past and we work our way through them. I don't think they're structural or they're not fundamental to our business, but we have to work our way through them. Foreign exchange, as well, has also been complicated. The dollar, as you know, strengthened quite radically post the election. The timing of when that happened wasn't perfect for us in terms of some contract negotiations and taking a guess at what the price might be based on specific exchange rates. The dollar strengthened even further from some of those negotiations. the rest of the world and the Americas divisions have highlighted to dispose of the progressive business of $24 million and come in with a full year result ahead of the 23-year number is really an exceptionally good performance. So it's just in that division, everything went particularly right for us. And we're very pleased with that, although we do expect the 25 will be a more normal year with the normal ups and downs. products like cherries and grapes. I think the phasing will be a bit different as you've asked for how it will unfold. I think most of the headwinds that we place will certainly impact the early quarters, in particular quarter one. So I think you'll see over the course of the year a slower start to the year and a more balanced phasing over the completion of the full year of 2025. So I think that's all about your guidance, Christopher, unless you've got any follow-up questions.

No, that's helpful. My follow-up is just around tariffs. I know it's a shifting target, but maybe you could just help us think about some of the mitigation strategies and contingencies you guys are evaluating, putting into place. Do you guys have any ability to I know you mentioned the contract renegotiations post-election with the dollar movement were not necessarily favorable, but if tariffs get in place, do you have ability to go back to those contracts or take additional pricing? Do you have alternative sourcing? You could look at productivity. I'm just trying to think through the levers that you guys have at your disposal to...

Yeah, I think in macro terms, what we supply into the North American market is healthy food, food and veg. Generally speaking, the products that the U.S., can't produce themselves or can't produce at that particular time. So you look at bananas and pineapples, for example, they're a tropical climate which the US doesn't have. So we believe that bananas and pineapples will continue to be consumed in appropriate quantities by Americans and I think everybody will want that to be the outcome. Some of our other export sources are complementary to US sources. So again, we think that people will want to have grapes all year round or have green peppers, red peppers, tomatoes, whatever it might be, all year round and not have gaps in the market. So we think ultimately, you know, we hope that the tariffs don't come into play on basic day-to-day positive products like fresh fruit and veg, and that they can and somehow there'll be exceptions to products that don't have any particular impact on the American economy. But ultimately, you think it can go to price. It has to. We've got any kind of material impact of tariff when people want to continue to consume the products, it will have to go to price. But there are so many variables and it's so difficult to predict. We can control some things. We lived through a previous Donald Trump regime and we managed our way through that perfectly well. So let's take

Very good. Thank you very much.

Thank you, Christopher.

Your next question comes from the line of Gary Martin with Davey. Please go ahead.

Hi, all. Congrats on a strong set of results. Just a few from me, kind of related. Just maybe starting on capital allocation and your viewpoint there. I mean, you made some really solid progress with regards to the leveraging during the year. Is the idea to kind of continue to focus on the leveraging or is there some degree of flexibility for, we'll say, you know, kind of targeted M&A and a go forward basis?

Yeah, thanks, Gary. I mean, obviously, the whole question of capital allocation is very high up on our agenda when we examine all the potential alternatives around us. We have a couple of big strategic questions that we'd like to get answered first before we make any major different or unusual steps in relation to capital allocation. Obviously, the potential disposal of the badge division is at the top of the list in terms of what the outcome of that can change our focus, our perception, our ability to reallocate capital in a different direction. We'd like to get that off the table quickly. And we also are in the process of renewing our facilities, so when we follow the normal approach to do that, we want to ensure that that gives us the long-term platform to have the appropriate financial flexibility to deal with future opportunities that we have as well. acquisitions, we have our own internal corporate finance department. We continue to look at the opportunities that are out there. There is no doubt, though, that there continues to be a differential between the private markets expectation in terms of value. We are seeing in some cases the cycles of you know, PEs trying to exit. You continue to be a lot of inter-fund trading taking place and the lasso between funds and trade buyers. So, you know, keep our eyes on that and there are some interesting opportunities in that space, but it very much depends on achieving prices that will add to our business and add value to our shareholders. The dividend is something that's constantly under review and we'll have a look at that again in the 2025 context. And then interestingly, and from a very positive perspective, we do actually have a lot of internal development projects on the agenda. We're always looking at projects, whether it's expanding some of our plantain production system or important JVs and in Guatemala and in Ecuador. Our Chilean JV El Parque is looking at some interesting expansion in certain products and we're looking at supporting that as well. Our core business, we've been slowly developing a significant logistics capability up in Scandinavia and then maybe some further interesting opportunities that might involve the reasonably significant investment and we've been open minds looking at those. And then with some smaller investments in our existing business, expanding our Irish footprint, expanding our Spanish footprint, looking at building our export business and strengthening our position in Peru and other grapes or avocados or berries, our fresh fruit businesses, slowly building up its footprint directly in plantains and mangoes and limes. And then some of our food service businesses across Europe. So we've plenty of internal projects on that we think will give us the right level of return. And, you know, we do ultimately benchmark those investments against the potential of a buyback. You know, and the buyback is, you know, something that we go back to our previous life and total projects we, you know, did periodically undertake buyback programs. And, you know, we keep an open mind. We keep an open view on the context of those issues. And, you know, we will take the appropriate decisions

Excellent. A very, very thorough answer. And I think you beat me too. I was going to ask about some of the internal projects as a follow-on, but maybe just as a second question, just to focus on Diversified EMEA for a second. I mean, you call that some degree of profit weakness just across the Netherlands, just across some of mainland Europe, effectively. And I believe Jacinta was part of your remarks. I mean, it was kind of deemed company specific issues. But I mean, it'd be good to get a little bit further color on whether you expect this to persist.

Yeah, I think you look at our EMEA division and, you know, it covers, you know, from Spain to Italy, Germany, Netherlands, Czech Republic, Scandinavia, Ireland, the UK. And there's different, you know, wholesale businesses, food service businesses, retail businesses, writing businesses. So we've a range of activities and you do get some ups and downs within those businesses with some interesting opportunities of looking at developing a little bit more in the country like France, for example, who are doing the integration process between the legacy donor and legacy token projects is working very well and the manager teams are combining very well to build on the combined strengths. So, you know, there's a few ups and downs there and we've called them out, but I don't think, you know, strategically there's nothing that we've got anything there that have any great concern to us and probably more opportunity than challenge.

It's really, really helpful. And then maybe just one final question just on diversified Americas and rest of the world. You call that strong performance, particularly across Kiwis, grapes and avocados. And maybe just listening to the peers, it seems as though avocado pricing has actually gone up quite a fair bit. And maybe with tariffs in mind as well, is there any degree of elasticity risk if there's further pricing across some of those higher value product categories? Thanks.

Yeah, I mean, you can be negative and say yes, you know, we've got, you know, some tariffs going on, but obviously Mexico is a huge supplier of avocados into the North American market. But I don't think that the U.S. is really going to focus on products that have no impact on American production. If you don't have meaningful avocado production in the U.S., again, it needs a minimum of subtropical flours, which the U.S. is very limited in its subtropical production capabilities. I think that will find an acceptable balance over time as well.

Excellent. That's really, really good, Colette. I'll pass it on.

As there are no further questions at this time, I would like to turn the call back over to Rory Byrne for closing remarks.

Thank you. Yeah, well, we look back at 2034, it was a really strong record year for us. It adds to a very, very strong record now, post-IPO in the middle of 2021. So we've three full financial years in 22, 23, 24, where we've consistently grown and strengthened the businesses. You know, sure, there's lots of challenges and complications out there in the world, but we've got a very experienced management team who've lived through ups and downs of many challenges over the years and, you know, in many cases, seen plenty of opportunities for us for the future. We have a good focus on all aspects of our business, operationally, financially, strategically, and we think we're well positioned to move forward in a good way. So thank you very much, everyone, for joining us today.