Del Monte Corporation Q2 FY2026 earnings call

Strategic Transformation Post-Acquisition

• The company completed its acquisition of Del Monte Foods in March 2026, rebranding as Monte Corporation and unifying the Del Monte brand under single ownership for the first time since the 1980s, creating a fully diversified global food platform with two complementary growth engines: fresh produce and shelf-stable prepared foods.
• Unified brand ownership enables cross-selling across fresh, refrigerated, and pantry retail categories, integrated procurement and logistics, and shared consumer insights to expand the brand into high-growth consumption occasions, creating a structural competitive advantage.

2026 Operational Priorities

• Drive operational rigor across the new Foods Division, maintain high service levels, deepen customer partnerships, and execute a successful pack season.
• Capture early cost synergy savings through efficiencies across procurement, logistics, SG&A, and trade spend optimization.
• Continue investing in growth of the fresh division, which remains the company's core revenue and operating cash flow engine.

Strategic Financial and Operational Initiatives

• Expanded the revolving credit facility from $750 million to $900 million with favorable terms through February 2029, strengthening liquidity to support seasonal working capital needs and future cash conversion.
• Optimized the global agricultural production footprint in Costa Rica, closing low-margin banana farms and repurposing high-value land to scale production of premium high-margin pineapple offerings aligned with strong global demand.
• Maintained a disciplined capital allocation framework: the board declared a $0.30 per share quarterly cash dividend ($1.20 annualized), and $16 million in common stock was repurchased during the quarter, reflecting commitment to shareholder value.

Overall company net sales for Q2 2026 were $1.22 billion, a 3% year-over-year increase (9% on an adjusted basis). Gross profit hit $121 million for a 9.9% gross margin, adjusted operating income was $49 million, adjusted net income was $34 million, adjusted diluted EPS was $0.72, and adjusted EBITDA was $72 million (6% margin). The combined fresh operations (fresh and value-added products and banana segment) saw robust demand for premium proprietary offerings like Del Monte Gold and Honey Gold pineapples, with strong per-unit pricing across global markets. Full-year 2026 target gross margins per segment are: 11%-12% for fresh and value-added, 3%-4% for bananas, 14%-15% for prepared products (Foods Division), and 10%-11% for other products and services. The newly acquired Foods Division (Del Monte Foods) delivered profitable performance in its first full quarter of ownership, with updated 2026 full-year guidance of $625 million in net sales (up from the prior $600 million) and $35 million in adjusted EBITDA (up from the prior $23 million).

• Full-year 2026 adjusted net sales growth is projected to be 13% to 15%, up from prior outlook driven by stronger-than-expected performance from the newly acquired Del Monte Foods segment.
• Del Monte Foods (prepared products segment) guidance was upwardly revised to $625 million in net sales (from $600 million) and $35 million in adjusted EBITDA (from $23 million), reflecting stronger early operational performance than expected.
• Expected external cost pressures were downwardly revised to $45 to $55 million, from the prior estimate of $60 to $70 million, driven by falling prices for bunker fuel, diesel, and fertilizer, as well as improved strategic sourcing practices.
• Full-year company adjusted EBITDA is targeted between $230 and $240 million, with gross margin targets held firm across all segments, supported by trade efficiency and sourcing flexibility.
• Full-year 2026 capital expenditures are projected to be between $85 and $95 million, focused on Central American expansion projects, European fresh-cut growth, Del Monte Foods integration, and technology investments.

• Persistent strength of the Costa Rican colón remains an ongoing currency headwind, increasing production costs for banana and pineapple operations in the country, with no expected near-term reversal of exchange rate trends.
• The banana segment is facing severe, unsustainable pricing competition, with some competitors selling bananas below farm production cost, forcing the company to rationalize low-margin volume to avoid unprofitable operations.
• Black Sigatoka fungal disease is worsening in growing regions, with increased spread fueled by higher rainfall this year, and is expected to continue spreading across Central America over the next 10 to 15 years, creating long-term production risk.
• Persistent macroeconomic headwinds continue to push up costs for transportation, logistics, fuel, and raw materials, pressuring near-term margins even as cost pressures moderate from prior expectations.
• Integration of the Del Monte Foods acquisition carries execution risk, with full synergy capture dependent on successful completion of supply chain rationalization and product line reorganization over the next 12 months.

Q: What early progress has the company made integrating Del Monte Foods in its first 100 days, and what are the remaining near-term priorities for the segment? Why is the 2026 full-year adjusted EBITDA margin lower than the expected long-term double-digit level? / A: The company resolved prior service and volume shortages, raising on-time delivery levels to over 95%. It has also started rationalizing SKUs, streamlining distribution and warehousing, and advancing new product development for launch by late 2026/early 2027. The lower 2026 margin reflects that Del Monte Foods was only owned for nine months of the year, combined with broad 2026 macro cost headwinds across transportation and supply chains; long-term EBITDA margins are expected to reach double-digits as integration completes and costs normalize.

Q: Why have banana volumes declined, and what is the company's strategy for the segment? What is the scale of the recent Costa Rican banana farm closures? / A: Volume declines are not driven by lower consumption, but by severe below-cost pricing from competitors and elevated production costs from the strong Costa Rican colón. The company is voluntarily rationalizing unprofitable volume to avoid a vicious pricing cycle, only sourcing from competitive origins. The four closed East Coast Costa Rican farms represent only ~5% of the country's total banana production for the company; the land is being repurposed for higher-margin premium pineapple.

Q: What top-line synergies from cross-selling and innovation are expected from unifying the Del Monte brand, and when will benefits appear from the Costa Rican footprint repurposing? / A: Cross-innovation between fresh and prepared food segments will deliver new innovative products starting in late 2026, with more launches planned for 2027. Near-term bottom-line benefits from footprint adjustments appear immediately, as losses from unprofitable banana operations are eliminated right after closure. New premium pineapple production from the repurposed land will take 2 to 4 years to come online, depending on transformation speed, but the land conversion delivers long-term value by allocating high-quality land to higher-margin products.

Q: What drove the reduction in expected full-year 2026 cost pressures, and how did pineapple perform in the quarter? / A: The downward revision to expected cost pressures is driven by falling market prices for bunker fuel, diesel, and fertilizer, combined with improved strategic sourcing practices for raw materials. Pineapple sales were strong in the quarter: volume was slightly lower year-over-year due to normal growing cycles, but pricing was higher, and demand for premium varieties remains robust.