Dole Plc Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Group revenue increased 14.3% to $2.4 billion, and adjusted EBITDA increased 9.3% to $137 million. Adjusted net income came in at $53 million and adjusted diluted EPS was $0.55, a growth of 12% compared to the prior year.
• On August 5, completed the sale of the Fresh Vegetable division to Arable Capital Partners, a strategic priority since 2023, enabling focus on core business activities.
• Fresh Fruit delivered strong performance in the second quarter with adjusted EBITDA of $72.7 million, exceeding expectations despite operational challenges. North America had strong volume growth in bananas and pineapples with higher pricing, but constrained by higher sourcing and shipping costs. European markets had higher volumes and pricing supported by tight sourcing and euro strengthening.
• Diversified EMEA segment had adjusted EBITDA increase by approx. 15% in Q2 to $49 million, driven by strong revenue growth in key markets. Like-for-like adjusted EBITDA growth was 8.7%.
• Diversified Americas segment had excellent second quarter, with North American market continuing growth and strong performance in Southern Hemisphere export side. Confident in long-term prospects of businesses within this segment.

Segment Performance

• Fresh Fruit: Revenue increased 14.2%, primarily due to higher worldwide volumes of bananas and pineapples sold as well as higher worldwide pricing of bananas, pineapple and plantains, partially offset by lower worldwide volumes of plantains sold. Adjusted EBITDA increased 3%, primarily driven by an improved performance in pineapples on a worldwide basis as well as strong growth in banana volumes, partially offset by higher fruit costs following Tropical Storm Sara and higher shipping costs.
• Diversified EMEA: This segment had a very strong start to the year. Adjusted EBITDA increased by approximately 15% in the second quarter to $49 million, driven by strong revenue growth in key markets including the Nordics, Ireland, the U.K., Spain and the Netherlands. On a like-for-like basis, adjusted EBITDA growth was 8.7%.
• Diversified Americas: This segment delivered an excellent second quarter. Reported revenue increased 8.5% or $30.3 million. Driving this increase was revenue growth in most commodities sold in the North American market, primarily due to volume growth as well as higher revenues in apples exported from South America. Adjusted EBITDA increased $3.3 million or 27%, primarily driven by strong performance in the Southern Hemi for export business, particularly in apples and citrus as well as continued good performance in the North American market in kiwi, citrus and avocados.

Guidance

• Full year adjusted EBITDA is targeted in the range of $380 million to $390 million, an upward tweak from previous guidance.
• Expect maintenance CapEx from continuing operations broadly in line with depreciation expense of approximately $100 million, with additional CapEx spend for rehabilitating Honduras farms damaged by Tropical Storm Sara, supported by insurance proceeds.
• Expect weaker Q3 in Fresh Fruit division taking account of tighter supply issues and disruption to sourcing platform.

Risks

• International trade complexity with changing tariff rates, causing volatility and challenging to manage against.
• Tight industry supply in Fresh Fruit division, including issues from Tropical Storm Sara, Black Sigatoka in Central America, and operational disruptions affecting sourcing.
• Foreign exchange fluctuations impacting costs and pricing.

Question and Answer

Q: Could you help us reconcile the updated outlook on EBITDA?

A: Yes, forecasting is difficult due to volatile international trade relationships, tariff changes, and supply issues. Took a conservative view, expecting weaker Q3 due to tighter supply issues in Fresh Fruit division.

Q: On the tight industry supply carrying into the third quarter, do you have line of sight beyond the third quarter?

A: Current supply disruptions in Q3, hopeful for improvement but uncertain on exact timing, looking over the course of the year.

Q: On the Fresh Veg disposal, get color on the deal timeline, retention of facilities?

A: Note is a $50 million PIK note payable in 5 years. Agreed 5-year rent-free usage of Yuma and Huron facilities, then will negotiate commercial rent or crystallize asset value.