Dole Plc Q1 FY2025 earnings call

Highlights of Q1 2025: - Group revenue increased 4.2% like-for-like to $2.1 billion, adjusted EBITDA decreased 2% to $104.8 million. - Dividend increased by 6.25% to $0.085 per share. - Completed $1.2 billion refinancing of a credit facility at favorable rates. ### Operational Review: - Fresh fruit had a robust performance in Q1 despite Tropical Storm Sarah's impact. - Diversified EMEA had strong like-for-like growth. - Diversified Americas had double-digit EBITDA growth on a like-for-like basis. - Fresh Vegetables business is undergoing ongoing strategic evaluation.

Fresh Fruit: Adjusted EBITDA was $63.3 million in Q1 2025, with North America showing good volume growth in bananas, pineapples, and plantains; European market had stable performance with volume growth in bananas and pineapples. Diversified EMEA: Reported revenue increased 4.5%, adjusted EBITDA increased 6.6% on a like-for-like basis, driven by strong performance in the UK, Spain, and Netherlands. Diversified Americas: Reported revenue was impacted by the disposal of progressive produce, but like-for-like EBITDA increased 10.4% due to strong performance in the North American market in kiwis, citrus, and avocados. Fresh Vegetables: Still undergoing strategic evaluation; the value-added business showed signs of strengthening with improved delivery quality, lower costs, and innovation.

• Target full year adjusted EBITDA of at least $380 million, up from prior range. - Maintenance level of CAPEX from continuing operations around $100 million, with increased CAPEX for Honduras reinvestment supported by insurance proceeds.

• Impact of Tropical Storm Sarah on fresh fruit production. - Foreign currency translation risks. - Potential deterioration of fresh vegetables business performance while marketing exit options. - Macroeconomic challenges such as tariffs, labor markets, and supply chains.

Q: Hi. Good morning and good afternoon. I just wanted to follow up on the EBITDA guidance. You're now setting a floor at the upper end of the prior range. I'm curious how much of that raise would you attribute to better underlying performance in the quarter, perhaps higher expectations over the balance of the year versus inorganic factors like the expected foreign exchange translation tailwinds at current rates? And then just related to that, does this updated outlook embed current tariffs in place in the U.S. market and is there any way to quantify what those tariff impacts might be on a gross basis and what actions you're taking to mitigate those?

A: Well thank you Christopher. So a range of interesting questions there. Yeah, I mean obviously doing forecasting in the current environment is a little bit challenging. So we've put all the factors into the mix including the current known scenario regarding tariffs and their impact, the likely impact on our business and that's our best shot at the target for the full year. A big element of that is obviously down to doing a little bit better in Q1 than we had anticipated, particularly with the headwinds that we had highlighted on Tropical Storm Sarah. And we have made some assumption that the translation over the remaining quarters given the Euro exchange rate to the dollar is facilitating a better translation on reporting in dollars. So to sum up all those factors, we are moving a little bit above our previous range. So I think putting it all together we're feeling positive about the balance of the year.

Q: Very good. And then just a follow-up around the fresh vegetables business. I understand you continue to evaluate potential exit options but I mean it's been over a year since the deal with Fresh Express was terminated. How do you guard against the risk that underlying business performance deteriorates as you continue to market that business and I guess like are you still committed to exiting the business or might it make more sense just to retain it, I mean performance was very strong last year and you're up against a tough compare this quarter but it seems like you're still net ahead, so I'm just curious how you're thinking about that business going forward?

A: Yeah, it's a good question Christopher and clearly we would have liked to have strategic certainty around this at an earlier stage than we have done. But the process is complex and we are trying to find a good strategic answer for all of the stakeholders, the employees, the management, customers, suppliers, the long-term future of the business. So putting the new deals together has been quite complex. I think continuing to disclose it as discontinued operations probably highlights where our position on it is. We think there is an appropriate exit. It will be a little bit different to the Fresh Express deal and we're still working on it. We're very actively working on that and I think it'll be a good outcome for all of the stakeholders if we can get to that position. We've worked very hard as well as to try and avoid any impact on the ongoing business. It's not perfect having it in discontinued operations but there are a lot of other competing businesses who are either private equity owned who are also for sale or will at some point in time be for sale. So it's a little bit the world we live in but businesses do change hands. You do have temporary owners and private equity owners and things like that so it can be challenging to manage in that environment and our management team has done well in working around those challenges.

Q: Hi, Rory, Jacinta, and Johan. Congrats on a strong start to the year. Just a few questions from my side just to kick things off. So you completed your refi post quarter. I think you noted that a driver there is more flexibility for growth initiatives. It'd just be good to get a run through of kind of how you envisage capital allocation policy on a go forward basis be it internal or external opportunities?

A: Thanks, Gary. I think as always we keep all of the capital allocation alternatives on the table. A big strategic issue at first is really getting to the end of the vegetable current process and whether it's keep or sale will have an impact on our future capital availability, our focus of our future capital. I think as well getting the facilities renewed which we just recently announced was helpful to give us the basis and having those facilities in place for the long term is a very good outcome and the terms negotiated with the finance team I think were more than satisfactory. We continue to look at acquisitions with the internal corporate finance department. We look at a lot of companies that are in different geographies whether it's in the U.S. or in Europe. There are a number of PE funds, for example, coming to their end of their life cycle and still some challenges around the price expectations of the private sector versus the public sector. We've seen some changes in the market. Greenyard, for example, being taken private at a decent premium to its quoted price. The dividend as well, you'll have seen, Gary, we've pushed up the dividends of 6.25% so we're in line with the long-term policy in total projects and try to build steadily over the years on the dividends. Then we've got a lot of internal development projects that we're doing a lot of work on at the moment. In our fresh food division, we're particularly focused on developing category-flat plantains and doing some extra production ourselves in two joint ventures. We're looking at some of our lines and we're expanding on some of our other JVs, particularly in our Alpaca JV in Chile. We have a number of projects in Northern Europe that can be very interesting but it's a lot of work to get them to a conclusion on that. If we can bring this conclusion, it could be good internal organic growth in terms of reinvesting, particularly in automation technology. Then around the business, we've got smaller but important add-on CAPEX projects and that can be expanding our facilities capacity in Ireland or in Spain. We're doing well in France in terms of building up our business, utilizing some facilities in the port of CEPI in the South of France. I think it can be good. Again, all of the options are on the table. We are still a little bit conditioned by the outcome of the fresh vegetable division and the strategic outcome there but it's an ongoing process.

Q: Okay. And then maybe just one final one, a bit of an anorak one, just on your CAPEX guidance. You've retained the 100 million, but just in terms of some of that additional incremental CAPEX that might be required for reinvestment in Honduras following the tropical storm, would it be possible just to get a bit of a quantum on how much that is above the insurance proceeds?

A: It's not a huge amount, Gary, but something in the order of $10 million to $12 million. But we're hoping that that will bring with it some incremental EBITDA. We're going to do a little bit in terms of improving hopefully the yields, improving the -- protections for the longer term as well. But it's not a huge amount of money, $10 million to $12 million.