Fruit and vegetable producer Fresh Del Monte has posted gross profit of $80.7 million (€78.9 million) in the second quarter of its financial year.
Mohammad Abu-Ghazaleh, chairman and chief executive officer, commented, "We delivered strong net sales during the second quarter, marking the fifth consecutive quarter of net sales growth compared with the prior-year periods — demonstrating the resilience of our iconic brand."
The group added that it faced steep cost pressures and suffered a drop in profit despite an increase in sales as a result.
Abu-Ghazaleh added, "We continue to operate in one of the most volatile and uncertain macroeconomic environments in recent history. As a result, the cost of product sold increased by $100 million, driven by broad-based inflationary, supply chain, and logistical headwinds.
"Despite these headwinds, we generated positive earnings — all while maintaining our debt balance in line with last year, generating strong cash flow from operations and continuing our dividend payout."
Net sales for the second quarter increased by $70.3 million, or 6%, compared with the prior-year period.
The company benefited from 'inflation-justified' price increases, which were partially offset by fluctuations in exchange rates, primarily versus the Japanese yen and euro compared with the prior-year period.
Gross profit for the quarter amounted to $80.7 million, down from $110.0 million in the same period last year, due to multilayered cost pressures.
Higher costs across the board including costs of packaging materials, fertilisers, ocean and inland freight, fuel, and labour, offset the higher net sales, the company noted.
Operating income declined to $34.3 million from $59.3 million in the second quarter of 2021, and adjusted operating income amounted to $33.4 million, down from $60.6 million last year.
The company attributed the decline in operating income to lower gross profit, which was partially offset by lower administrative and advertising expenses.
Fresh and value-added products saw net sales increasing by $58.4 million, or approximately 9% year on year, driven by higher pricing in most product categories.
Gross profit declined to $49.4 million from $58.3 million in the prior-year period, primarily driven by non-tropical fruit products, which were negatively impacted by lack of availability of third-party shipping capacity on certain shipping routes, and avocados due to market volatility.
For bananas, net sales decreased by $5.1 million compared with the prior-year period, due to lower sales volume and the negative impact of fluctuations in exchange rates in Asia.
Gross profit generated by the division amounted to $22.2 million as it was impacted by higher per unit distribution costs, including ocean and inland freight, and higher production costs.
Net sales in the other products and services unit increased by $17.0 million, or 42%, compared with the prior-year period, mainly due to higher net sales of third-party freight services.
The Fresh Del Monte fleet of vessels enabled the expansion of commercial cargo services, which are benefiting from increased shipping rates and demand due to logistical constraints in the market.
Gross profit in the division increased by $5.5 million as a result of higher net sales of third-party freight services, the company added.
Abu-Ghazaleh said, "As we move forward, I am confident in our team's dedication to drive profitable sales. We plan to do that by focusing on our sustainable growth strategy and delivering against its key elements — organic expansion, product innovation, investments in technology, best-in-class customer relationships, and sustainability."