Fresh Del Monte's Q1 results impacted by Covid-19
Fresh Del Monte Produce has posted a year-on-year decline in sales and net income for the first quarter, resulting from the impacts of the Covid-19 pandemic.
However, the company says that the financial consequences were limited thanks to its ability to quickly adapt to the situation.
“We were challenged across our global operations during the first quarter of 2020 as we navigated through the headwinds created by the COVID-19 pandemic,” said Mohammad Abu-Ghazaleh, chairman and CEO.
He explained that beginning in January in Asia and ramping up in March, the Fresh Del Monte's sales were impacted across all markets.
"However, the Company's global presence in the retail fresh produce industry, the diversity of our product portfolio and the efficiency and flexibility of our operations enabled us to quickly adapt to the COVID-19 pandemic," he said.
"Near-term demand in our foodservice distribution channel, net sales of higher price point products such as pineapples, avocados and fresh-cut fruit and vegetables remain challenging, but we remain committed to serving our customers without interruption.
"In terms of liquidity, we believe our cash on hand, availability under our credit facility and cash flows from operations will be sufficient to manage our operations."
Net sales for the quarter fell to US$1,118m from US$1,154m in the first quarter of 2019. Fresh Del Monte has estimated that the Covid-19 pandemic impacted sales by around US$27 million in its fresh and value-added and banana business segments.
In addition, the impact of the voluntary product recall at subsidiary Mann Packing in the fourth quarter of 2019 continued to impact net sales during the quarter as volumes have not returned to pre-recall levels.
Gross profit dropped to US$68.5m from US$95.1m, principally due to lower gross profit in the fresh and value-added and banana business segments, partially offset by higher gross profit in the other products and services business segment.
Gross profit was also impacted by inventory write-downs of US$8m, mainly related to reduced demand in the foodservice distribution channel as a result of government-imposed mandatory closures and social distancing initiatives associated with the pandemic, along with higher ocean freight and production and procurement costs.
Meanwhile, operating income fell to US$17.8m from US$41.3m, while net income dropped to US$13m from US$36.1m.
Fresh Del Monte says it expects that volatility in the supply and demand for its products will continue to "adversely impact its results of operations in the second quarter of 2020".
The extent of the impact of the Covid-19 pandemic on the financial performance, including the ability to execute on the strategic initiatives, will depend on future developments, including the duration and spread of the pandemic and related government restrictions, all of which are uncertain and cannot be predicted, it said.