Dole plc

Currently, all participants are in 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. Welcome, everybody, and thank you for taking the time to join our second quarter 2025 earnings conference call and webcast. Joining me on the call 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 to supplemental remarks, and these, along with our earnings release and other related materials, are available on the Investor Relations section of the DoLE POC website. Please note, our remarks today will include certain forward-looking statements within the provisions of the Federal Securities Safe Harbor Law. It will 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 press releases. 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 GAAP 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 second quarter results for 2025. So, turning first to the highlights for the second quarter on slide four. Well, we're very pleased to report another strong performance in the second quarter of 2025 and to have achieved an important step forward in our strategic evolution. Group revenue increased 14.3% to $2.4 billion, and adjusted EBITDA increased 9.3% to $137 million. The quarter saw very strong growth in our two diversified fresh produce segments, as well as good growth in fresh food, despite some of the expected short-term challenges that we continue to face. Adjusted net income came in at $53 million, and adjusted diluted EPS was 55 cents, a growth of 12% compared to the prior year. On August 5th, we were delighted to announce that we completed the sale of our fresh vegetable division to Arable Capital Partners. The sale of this business has been a strategic priority for us since 2023, and its completion will now enable us to concentrate our efforts and investments on our core business activities. I would like to take this opportunity to thank the dedicated management and employees of the Dole Fresh Vegetables business for their valuable contributions and commitment, and in particular over what has been a complex transaction process over the last number of years. We believe the deal is a great outcome for all stakeholders in this division. So turning now to the operation review and starting with fresh fruit on slide six. Fresh Fruit delivered a strong performance in the second quarter, with adjusted EBITDA of $72.7 million, for results which exceeded our expectations, taking account of anticipated operational challenges. In North America, our underlying operations once again performed well, with strong volume growth in bananas and pineapples, as well as higher pricing. Growth in adjusted EBITDA was constrained by the anticipated higher sourcing costs following the impact of Tropical Storm Sarah and due to the generally tight sourcing market that has developed. In addition, we experienced higher shipping costs in the quarter as we managed the additional logistical complexities of the current sourcing environment while also addressing the temporary vessel operational issue that we flagged on our last earnings call. Trying to see European market. We had a strong quarter with higher volumes about bananas and pineapples, as well as higher pricing across our products, supported by the impact of tight sourcing on the open market price, as well as a strengthening of the euro. In both our core markets, we continue to see very robust demand for our products and expect this to continue over the course of the full year. As noted earlier, industry supply was tighter throughout the second quarter than was previously anticipated, and that dynamic has continued into the third quarter. In addition to our own impacts from tropical storms, there are some other industry-specific challenges and less favourable weather conditions in much of Central America, as well as strong market demand, have all but put pressure on industry supply and sourcing costs. Our production and sourcing teams are continuing to do an excellent job mitigating these challenges, but we do expect to have some higher costs in the second half as we work to continue to meet the strong demand that we're seeing from our customers. Turning now to diversified EMA segment. This segment had a very strong start to the year. Adjusted EBITDA increased by approximately 15% in the second quarter to $49 million, driven by strong revenue growth in key markets, including the Nordics, Ireland, the UK, Spain, and the Netherlands. The segment benefited from the strengthening of the euro in the second quarter. However, on an underlying basis, the performance has also been strong with a like-for-like adjusted EBITDA growth of 8.7% in the quarter. in the second quarter we continue to see similar operation trends for those of the first quarter in particular we continue to see sales into retailing retail outperforming food service and wholesale channels in most markets overall we see the segment moving in a very positive direction while still having a range of internal and external investment opportunities to drive further growth in the future turning now to diversity in america's on slide eight This segment delivered an excellent second quarter, building on the strong momentum we saw in the first quarter. While the good growth we saw in the North American market continued in the second quarter, it was also supported by a very good performance on the southern hemisphere export side due to a stronger than anticipated conclusion to the season for certain categories, as well as a strong start in some of our winter products. Although we expect the rate of growth in the first half of the year to stabilize in the second half, we are confident in the long-term prospects of our businesses within this segment. We believe they're well positioned and will look for other opportunities to continue the strong momentum established this year in the years ahead. With that, I'll hand you over to Jacinta to give the financial review for the second quarter.

Thank you, Rory, and good day, everyone. Turning firstly to the group results on slide 10, we are very pleased to report a strong result for the second quarter of this financial year. Revenue of 2.4 billion was 14.3% higher on a reported basis, with good growth in our three segments. On a like-for-like basis, revenue increased 12.1%, demonstrating the strong underlying growth and momentum within the group. Operating income increased 20% to 103 million, driven by higher revenue and gross profit and a higher gain in asset sales, partially offset by higher SMG&A expense. Net income for the second quarter was 18 million and was impacted by a loss of 35 million in discontinued operations, which was primarily due to a non-cash adjustment to the carrying value of the fresh vegetable division. We also booked an unrealized foreign currency loss of 19.1 million, which is offset by gains in other comprehensive income. In the quarter, we achieved further asset sales and realized a gain on assets of 9.3 million. Looking now at the non-GAAP performance measures, adjusted EBITDA increased 9.3%, with strong growth delivered across the group. On a like-for-like basis, predominantly excluding a positive impact from foreign currency translation of 2.2 million, the increase was 9 million, or 7.2%. Adjusted net income increased 6.1 million, or 13%. predominantly due to the increase in adjusted EBITDA, as well as lower interest expense. Adjusted diluted EPS was 55 cents, an increase of 12.2% compared to the prior year. Turning now to the division updates for continuing operations and starting with fresh fruit. Revenue increased 14.2%, primarily due to higher worldwide volumes of bananas and pineapples sold, as well as higher worldwide pricing of bananas, pineapples and plantains partially offset by lower worldwide volumes of plantains sold. Adjusted EBITDA increased 3%, primarily driven by an improved performance in pineapples on a worldwide basis, as well as strong growth in banana volumes. These improvements were partially offset by higher fruit costs following tropical storm Sara, as well as higher shipping costs due to a short-term operational disruption that has since been resolved. The diversified EMEA segment delivered another very strong result in the second quarter. Reported revenue increased 16.5% or 155.9 million, primarily due to strong performance in the UK, Spain, Scandinavia, and the Netherlands, as well as the 57.7 million favorable impact from FX, partially offset by a net negative impact from M&A of 9.6 million. Excluding these impacts on a like-for-like basis, Revenue increased 11.4% or 107.8 million. Adjusted EBITDA increased 14.7% or 6.3 million, primarily driven by increases in the UK, Spain and the Netherlands, as well as a 2.5 million favourable FX impact. These increases were partially offset by lower earnings in South Africa. On a like-for-like basis, adjusted EBITDA increased 8.7% or 3.7 million. Diversified Americas had an excellent second quarter. Reported revenue increased 8.5% or 30.3 million. Driving this increase was revenue growth in most commodities sold in the North American market, primarily due to volume growth, as well as higher revenues in apples exported from South America. On a life-for-life basis, revenue increased 8.8%. Adjusted EBITDA increased 3.3 million, or 27%, primarily driven by strong performance in the southern hemisphere export business, particularly in apples and citrus, as well as continued good performance in the North American market in kiwi, citrus, and avocados. On a life-for-life basis, adjusted EBITDA increased 26.6%. Now turning to capital allocation and our balance sheet. Cash capital expenditure from continuing operations was 19.4 million in the second quarter, and an additional 14 million of assets were acquired by way of finance leave. The combined total includes the Honduras farms rehabilitation, which is supported by insurance proceeds, logistics and warehouse investments, primarily in EMEA, and ongoing reinvestments in farming and transport infrastructure. In line with our typical seasonal working capital trend, we continue to build investments in working capital through the end of Q2. However, the trend was accentuated this year by the strong volume and revenue growth being seen across the business, and in particular in the fresh fruit segment. As in previous years, we expect to see this unwind as the year progresses, while noting that we do expect to see a working capital outflow on a full year basis in 2025 to support the revenue increase we're seeing across the business. The combination of these factors resulted in free cash flow from continuing operations being an outflow of 1 million for the quarter and the increase in net debt to 789 million. We generated cash proceeds from asset sales of 5.3 million in the second quarter. This was primarily related to water infrastructure assets in Hawaii. We have continued to benefit from a downward trend in interest costs and under the assumption that base rates will remain broadly stable for the remainder of 2025, and having factored in the benefit of our debt refinancing and the additional fresh vegetable proceeds, we expect interest expense to be approximately 67 million. Finally, we are pleased to declare an 8.5 cent dividend for the second quarter, which will be paid on October 6th to shareholders on record on September 15th. Now, I'll hand you back to Rory, who will give an update on our full-year outlook.

Well, we're very pleased with our performance in the second quarter, continuing our positive momentum and putting us in a good place to achieve our full-year targets, and what continues to be a dynamic macroeconomic environment. Overall, we're happy with how our business, industry, customers and suppliers have adapted to the additional complexity being seen in international trade and the macroeconomic environment. While short-term disruptions may persist, we remain confident in the resilience of our diversified business model and, in particular, the resilience of the international fresh produce industry. Forecasting in this dynamic environment remains complex, so we are pleased to tweak our guidance upwards and are now targeting full-year adjusted EBITDA on the range of $380 million to $390 million. Turning to investments. We expect, as a baseline, to have maintenance capex from continuing operations broadly in line with our depreciation expense of approximately $100 million. Additionally, we will have some increased capex spend to rehabilitate our farms in Honduras damaged by Tropical Storm Sarah last year, albeit significantly supported by insurance proceeds. Circling back to the disposal of the fresh vegetables division, This was a key strategic priority with the move and its completion provides us with enhanced strategic clarity as we move into the remainder of 2025 and start to look further ahead. Our core operations are performing well with good momentum and additionally with important opportunities for both internal and external development. We are excited to refocus our efforts as we look to further grow our business and create value for our stakeholders. I want to conclude by once again thanking all our outstanding people across the group for their ongoing commitment and dedication to driving our group forward. Additionally, I would like to give a special mention to our former colleagues in the fresh vegetables business who worked tirelessly to support our corporate team in bringing this transaction to its successful conclusion. As always, we really appreciate all our essential partners from suppliers, customers, and all of the stakeholders for the continued support. And with that, I'll hand the call back to the operator to open the line for questions.

Opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your first question comes from the line of Christopher Barnes. of Deutsche Bank. Your line is now open.

Good morning. Good afternoon. A very strong quarter across divisions and regions. But, Rory, to start, could you just help us reconcile the updated outlook on EBITDA? I understand your commentary about the dynamics and complexity of forecasting this environment, You also noted that tight supply conditions and fresh fruit are expected to continue and have continued into the third quarter, and you're positioned well in the diversified businesses. So I'm just trying to reconcile that with the implied decline of 12% to 6% in the back half on EBITDA. So any additional color would be helpful. Thanks.

Yeah, thanks, Christopher. Yeah, I mean... Obviously, the first thing to say is we had a really strong 2024 and we finished, in particular, the latter part of 2024 in a very strong way. We started out the year with the impact of the storms there on Honduras. There's been a fair bit of evolution in terms of weather issues in Central America in particular and that's switched a lot of sourcing for the, I suppose, the safety valve volume. Chiquita had an issue in Panama that's meant that they've had to source more What that has done is it's driven up the price in Ecuador, the export price out of Ecuador for spot purchasing has gone up extremely highly and that impacts on the sourcing cost and the disruption from your collational sources if you've got lower volumes. It does have a negative impact on your EBITDA. I think, you know, forecasting, It is just very, very difficult. There is, you know, until we get, you know, greater, I suppose, transparency or greater settling of the US's international trade relationships with so many trading partners, the world will continue to be volatile. It's very difficult and challenging to manage against that backdrop with, you know, tariff rates changing up and down. Uh, so, you know, I think with that, uh, we probably have taken a conservative view to our, our guidance. Um, we do our best as ever to beat it, but putting all the factors into, into, into the mix in particular, we do think we're going to have a weaker Q3 taking account of those tire supply issues and the disruption that that's causing to our own sourcing, uh, platform. So I hope that gives you some color on it, Christopher. I mean, we're feeling good about life, but we do need to be a little bit cautious in the context of those supply issues in the fresh fruit division.

No, that is helpful. I guess maybe just to follow up around that, I mean, you mentioned tariffs moving up and down. Pricing in the quarter was very strong. Is there any way to disaggregate how much of that pricing is – Is tariff-driven or tariff-related that if we do get relief on tariff in the future, given the lack of commercially available cultivation of pineapples and bananas domestically, if you have to unwind some of that pricing, but then just... how to how to marry that with the fact that sourcing costs are just higher like I know you mentioned the Chiquita issue in Panama and Del Monte last week or two weeks ago called out yeah uh Costa Rican volume and Black Sigatoka like so I'm just trying to marry all of that like are you able to are you are you able to push their incremental pricing given this given the strength of volumes you've seen or just any any any additional thoughts there would be helpful thanks yeah I mean obviously

you know we live in a very we operate in a very dynamic world, Christopher. So, you know, it's not just a mathematical case of taking one variable and being able to adjust the pricing so yields can go down. Some ticker token issues in Central America and production inputs can go up while they can have an input. We've seen great volatility on the foreign exchange. We've seen some disruption on shipping flows. So duty and tariffs are just another variable to cope with in that equation and It goes into the mix of trying to determine our ultimate pricing. So there are a lot of variables at play as ever and at the moment. Luckily, we've got a very experienced team who have been able to successfully manage their way through all of those variables with the ups and downs that all of those can bring at any given point in time.

Justin Cappos- got it that's helpful Rory and then one one final one for me, if I may just on the fresh vegetables like congratulations on completing the transaction. Justin Cappos- I know it's been discontinued for for a while, but now that it's officially changed hands like how quickly, can you start to eliminate some of the stranded overheads and. Justin Cappos- associated costs, now that that business is no longer part of your organization and. of the 90 million of cash proceeds that you received? Is your thinking still to utilize the majority of that for debt pay down or has that thinking changed?

yeah i mean obviously in the short term the 19 million will be abused to pay down debt and i think what it does is it gives us um you know a clearer picture and a clearer strategic focus so you know in terms of capital allocation and what we do now that we've got certainty around the outcome of the vegetable division uh i think it allows us to refocus you know it's a long process complex process i'm not that it was completed um you know it was a lot of uncertainty typically we got there and i dragged on a long time and you know we did have to have you know plan b in place in the event that we weren't going to be able to get it over the line so um i think all of the issues that you raised there in terms of capital allocation and obviously it does give us a clearer path now to measure what the appropriate cost structure is for the the the business that we currently operate and we will do that as quickly as we can great very helpful i'll pass it on thank you christopher

Your next question comes from the line of Peter Galbo of Bank of America. Your line is now open.

Hi, good morning. Thanks for the question. Maybe just a couple of follow-ups to Chris's questioning. I think, you know, on the tight industry supply carrying into the third quarter, it makes sense, at least on the pineapple and banana side. I'm just curious if you have line of sight kind of beyond the third quarter at this point? You know, do you have a point in time where you're kind of back to bright, at least on the supply side? Is that Q4? Is that early next year? Just any additional comments there would be helpful.

Yeah, I mean, I suppose one of the key things that I have said to, you know, our investors and our analysts is we actually don't look at this business on a quarter by quarter basis. You know, the minimum period we would look at is over the course of a year. And just as an aside, I suppose the overall outcome for our fresh food division over the course of the year, we think will be more than satisfactory. I think the current supply disruptions will Certainly, they're real and having an impact in Q3. We think they'll go into Q4. But it's amazing how this industry writes itself very quickly. So we're hopeful going into next year with contract price negotiation, and I will think about if they persist, that we'll be able to adjust all of the right variables to continue the underlying financial performance in this division.

Okay, helpful. And then on the tariff front, I know that we talked a little bit about the rates moving around a bit, but just have you had any more discussions, whether with local governments, administration, anybody who will frankly listen to you on exclusions for items that obviously can't be grown in the U.S.? I mean, seemingly, I think you've had some peers that have maybe had that conversation progress a bit, but just curious if there's anything new on your front. Thanks very much.

Yeah, I mean, obviously we've been saying from the outset that we think our industry is actually a very good example of the huge positives of international trade. Year-round supply of healthy products really goes into the concept of making America healthy again, or indeed making the world happy again. We really don't believe that the tariffs are focused on our sector. We have heard some public statements by the US administration where they've confirmed that products like tropical produce that can't be actually produced in the US will ultimately get exempted. I think there's a process whereby it hopefully will form part of the individual trade deals that ultimately are concluded with the source countries that we operate with. It'll be some short-term disruption. We'll work our way through it in a satisfactory way, and then hopefully over time, it settles down in a constructive and positive way for everybody.

Thank you.

Your next question comes from the line of Gary Martin of Davey. Your line is now open.

Hi, Rory, Jason, and Johan. Congrats on another strong set of results and the recent sale of fresh veg. Just a few questions on my side. I'll start on the fresh veg disposal. It'd be good to get a bit more colour on the deal overall, potentially just maybe getting some colour on the timeline of the seller note repayment and the earn out, and also maybe just a bit of background on the retention of the two facilities. Is there a plan there? Is it a lease back? Is it going to be a... Is there potential there for a further sale? Is it going to get a bit of colour around that just to start with?

Yeah, the note is a $50 million pick note with interest accruing at 5% and it's payable at a fixed maturity rate in five years' time. On the facilities, yeah, it just evolved as part of what was a complex negotiation and a very complex transaction where and horrible and organic girl had to acquire Braga and then once that was done simultaneously acquire our business. So as you can imagine, with those kind of complexities, it was a complex transaction. We have agreed to give a five year rent free usage of Yuma and Heron and thereafter we negotiated a commercial rent or we will be able to crystallize the value of those assets and valuations we've got are something of the order of $40 million.

That's really helpful. And then just as a kind of second order question, just around the future internal and external development opportunities off the back of it. I know that you've talked about internal projects within Dole before, but I mean, it'd just be good to get maybe a bit of incremental color on what to do with the kind of additional balance sheet freedom. And also on top of that, I think you'd mentioned in your preferred remarks that you were seeing additional investment opportunities across fresh produce, diversified EMEA. Is there anything that you'd go into in color there, in extra detail there? Is there any color that you'd potentially give on the M&A market as a whole? Has it slightly recovered versus where it was previously?

Yeah, I mean, we do keep, as you know, Gary, we keep a very close eye and we look at lots of acquisition opportunities. We've seen quite a few, quite a lot of approaches, particularly from the private equity sector looking for exits and There is certainly a valuation gap for interesting companies compared to the public market valuation. So it's taken a little bit longer than I would have liked for perhaps our share price to move up a little bit to narrow that gap. So we will only do acquisitions that's being fair for the criteria that they give an added value to our shareholder base. So I think the whole question of capital allocation is a good opportunity for us to refresh now that we have the veg deal out of the way and we've got here a strategic path. We're in the middle of studying a number of interesting projects in Scandinavia, both on interesting developments to our existing facilities in Spain and Ireland. We're looking at a couple of add-on projects in Chile, Peru, A fresh fruit business site, you know, we're always looking at add-ons, whether it's in plantains or limes or maybe even some sourcing in bananas. We're developing in France. We may upgrade our facilities in France. Lots of projects spread across different elements of the group. Obviously, the smaller projects that make sense to continue our core organic growth, we pretty much always support. Then we keep a close eye on all of the other capital allocation opportunities that are out there as well.

Perfect. maybe just to pivot towards trading more generally, and I don't want to labor on the issue, but just on the tariff side of things, it's challenging to distinguish how much has actually been passed through at the minute. But I mean, it would just be good to get any degree of color on any perceived elasticity to date.

Yeah, I think the good thing about most of our products is that certainly bananas are very cheap on a per kilo or a per pound base compared to pretty much any other fruit. So we think there's plenty of scope if the price needs to move either through tariffs or either through short sourcing or complex sourcing issues or foreign exchange or other issues that arise in it. And the price could go up, I believe, by a reasonable percentage and have no impact on consumption. You know, other products, you know, import products, be it grapes or apples, pears, kiwis, you know, depending on supply demand over a long period of time, there's been quite a bit of volatility on the price. So I think consumers are, you know, on seasonal sourcing, so that's, you know, European sourced versus South African or Chile sourced, it can be quite a difference in price. So I think, you know, we're not seeing any impacts that are having an unduly negative impact on the demand for our products.

That's really, really helpful. And perhaps just one final one, just on diversified fresh produce in America and the rest of the world. It was a strong like-to-like performance, but it was particularly robust adjusted EBTA performance. I think the differential there is almost 20% in terms of performance. Would you be good to get a bit of color on what drove that additional, that 27% increase in adjusted EBTA in that particular division? Was it mixed benefit? What's the best way to think about it?

Yeah, I think, you know, most of the individual underlying businesses within that division performed very well. You know, we've got strong footing through our 65% ownership of Oppy and the great management team there have really managed to develop that business very well and it's performed very solidly in the first half of the year. Our South American business, as we called it, you know, I think we managed significantly really well, you know, how we close out our cherry season, how we close out our grape season. We've done well on apples, we've done well on kiwis. We added in a few new pieces on the avocado front. They've also performed strongly. Our import activity was a little weaker and we're working on a solution to try and improve that going forward. just one of those periods where you know good management focus on all aspects of the business from south america to north america um you know leadership team there have done well and bringing together in a good synergistic way all the activities within that division and we're seeing the benefits coming from the numbers that's really really helpful and i just said one one final one one final one i promise um

just around the uh just color on the uh on the capex guide i see that you've held uh maintenance at 100 mil but uh it'd just be good to kind of parse um just the additional capex from uh the uh development uh following the storm sara and honduras um versus where we were at q1 has there been too much change in terms of the expected

additional comments required there. No material change, Gary, on that from the Q1.

Perfect. Excellent. I'll pass it on. Thanks so much.

Thanks, Gary. Thank you. I'd now like to hand the call back to Rory Byrne for final remarks.

Thank you. Well, thanks everybody for joining us today. We're very pleased with the second quarter and the first half of the year. I think it's a great outcome against a backdrop of a very complex macroeconomic environment. We've nudged or pushed up the dividend to 6.5%. We've pushed up our guidance a little bit. We've made some really strong strategic progress in terms of getting clarity around and a good outcome for the vegetable business. So Thank you all, and we believe we're well positioned for continuing further work. Thank you.

Thank you for attending today's call. You may now disconnect. Goodbye.