Fresh Del Monte Produce Inc. has reported a 5% year-on-year increase in net sales in the first quarter of its financial year, primarily driven by favourable pricing.
The company added that its gross profit declined during the quarter due to higher costs.
Mohammad Abu-Ghazaleh, chairman and CEO of Fresh Del Monte, said, "During the first quarter, our net sales increased by $49 million compared with the prior-year period – a direct benefit of leading the industry in the implementation of inflation-justified pricing actions. However, our cost of product sold increased by $64 million due to across-the-board inflationary pressures, resulting in lower operating income.
"We remained focused on driving incremental operating leverage through product innovation, cost management, and operational efficiencies as reflected in the significant growth in our third-party freight services."
Fresh Del Monte benefitted from inflation-justified pricing actions implemented in the fourth quarter of 2021.
Conversely, sales were negatively impacted by fluctuations in exchange rates, mainly versus the euro and Japanese yen compared with the prior-year period.
The lack of availability of third-party shipping capacity on certain shipping routes substantially limited the sales of various products, the company noted.
Abu-Ghazaleh stated, "We made progress on our strategic initiatives effectively managing the business for the long-term despite [the] incremental deterioration of already unprecedented supply chain constraints and higher inflation compounded by the war in Ukraine."
"In keeping with our shareholder value accretion approach, our capital deployment in the first quarter concentrated on operational investments in data-driven technology and smart farming, a strategic investment, and on paying a higher dividend," he added.
First Quarter Performance
Gross profit for the first quarter amounted $89.8 million, down from $105.0 million in the first quarter of 2021.
Despite higher net sales, gross profit was negatively impacted by worsening inflationary and other cost pressures compared to the prior-year period.
Higher costs for the fruit and vegetable producer included packaging materials, fertilisers, ocean and inland freight, fuel, and labour combined to offset higher net sales.
Additionally, the company was also affected by unfavourable fluctuations in exchange rates.
Operating income for the first quarter was $39.8 million, down from $59.7 million last year, while adjusted operating income was $40.4 million compared with $57.7 million in the prior-year period.
The company attributed this decline to lower gross profit and disposal of property, plant, and equipment, and it was partially offset by lower administrative expenses.