Fresh Del Monte Produce CEO Discuses Q3 2010 Results - Earnings Call Transcript
Fresh Del Monte Produce Inc. (
)
Q3 2010 Earnings Call
November 02, 2010 11:00 am ET
Executives
Christine Cannella - Assistant Vice President of IR
Mohammad Abu-Ghazaleh - Chairman and CEO
Richard Contreras - SVP and CFO
Analyst
s
Heather Jones - BB&T Capital Market
Scott Mushkin - Jefferies & Company
Bill Chappell - SunTrust
Eric Larson - Soleil Securities
Jonathan Feeney - Janney Montgomery Scott LLC
Vincent Andrews - Morgan Stanley
Presentation
Operator
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Fresh Del Monte Produce Q3 2008 Earnings Call Transcript
Good day, ladies and gentlemen. Welcome to the Fresh Del Monte Third Quarter 2010 Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct the question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded.
I would now like to introduce your host for today’s conference call, Christine Cannella, for opening remarks.
Christine Cannella
Thank you, Melanie. Good morning everyone, and welcome to Fresh Del Monte Third Quarter 2010 Conference Call. I’m Christine Cannella, Assistant Vice President of Investor Relations. Joining me today are Chairman and Chief Executive Officer, Mohammad Abu-Ghazaleh; and Senior Vice President and Chief Financial Officer, Richard Contreras, who will discuss our results for the third quarter.
Fresh Del Monte issued a press release this morning via Business Wire, e-mail and FirstCall. You may visit our website at www.freshdelmonte.com to register for future distributions. This conference call is being webcast on our website, and it will be available for replay, approximately two hours after conclusion of this call.
Our press release includes reconciliations of any non-GAAP financial measures we mention today to their corresponding GAAP measures. The press release may be found on our website.
This morning, Mohammad will review our operating performance during the quarter, along with recent developments and our future outlook. Richard will then review our financial performance for the third quarter of 2010.
Please let me remind you that much of the information that we will discuss this morning, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the Safe Harbor provisions of the Securities laws.
Our actual results may differ materially from those in the forward-looking statements as a result of various factors, including those described under the heading “Description of Business Risk Factors” in our Form 10-K for the year ended January 1, 2010. This call is the property of Fresh Del Monte Produce. Redistribution, retransmission or rebroadcast of this call in any form without our written consent is strictly prohibited.
With that, I would like to turn this call over to Mohammad Abu-Ghazaleh. Mohammad.
Mohammad Abu-Ghazaleh
Thank you, Christine. Good morning everyone and thank you for joining us today. For the third quarter despite the prolonged global economic slowdown and difficult market conditions, we achieved higher sales growth in our banana and gold pineapple businesses in North America along with continuous sale growth in our Middle East region. We’ll also continue expand our market reach through new and existing distribution channel as a means of promoting our global growth and brand awareness.
For example, we made strong progress with our expansion and the vending machine and convenient store channels, where our products have been well received. Delivery points such as these allow us to further capitalize on the convenient ready to eat health snack and quick service categories.
During the quarter, we continue to transform our melon strategy. This strategy includes changing our product mix and volume to be more in line with current market demand. We also closed on the sale of our South African fruit canning business in October, a move that would favors the in line production and lower cost in our prepared food business by consolidating to our facility in Greece.
We believe initiatives such as our melon strategy and the consolidation of our canning operation and expansion into new markets and new channels offer excellent opportunities for improved efficiencies, greater balance in today’s economic environment and enhanced profitability over the long-term.
During the quarter, we generated strong cash flow from operations, which enabled us to purchase additional share as part of our repurchase program and yet still maintain all of the strongest balance sheets in the industry. While we are pleased with our top-line performance, ongoing improvements in many of our business lines as strong cash flow during the third quarter, we were totally appointed with our bottom line.
Our achievements were countered by a number of challenging events which resulted in our missing several key targets. These challenges included heavy rains in our Guatemala banana sourcing areas and to a lesser extent drought conditions in our Philippine sourcing areas, negatively impacted our banana and pineapple production volume.
These adverse events were compounded by stronger currencies versus the dollars in several our producing countries along with increased fuel and carton prices. Together, these factors led to significantly higher cost during the quarter compared to last year at this time.
In addition to higher production cost, we were challenged with ongoing complex market conditions in Europe, weak consumer demand and an industry wide banana supply imbalance kept the average price of bananas suppressed negatively impacting our profitability. As you may have heard, the Iranian authorities stopped granting banana import licenses at the end of September.
Upon hearing the news, we immediately took steps to redeploy fruit to other markets in the area. However, I’m happy to inform you today that as of this week, licensees have been issued and we have started loading to that destination.
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