Del Monte's Q1 net income more than triples despite lower sales
Fresh Del Monte Produce has posted stellar financial results in the first quarter of 2021 despite lower net sales and weather-related headwinds.
The company's net income in the three months ended April 2 more than tripled to $42.7 million from $13.0 million in the prior-year period.
Gross profit rose by 53 percent year-on-year to $105 million for the quarter, and gross profit margin increased to 10%, up from 6%.
Net sales decreased by $29.7 million to $1,088 million, primarily due to lower net sales in the company's fresh and value-added and banana business segments, partially offset by higher sales in the other products and services business segment.
The overall decrease in net sales was driven in part by the continued negative effect of the Covid-19 pandemic on the company's foodservice distribution channel which Del Monte estimates reduced net sales by $19.4 million in the first quarter of 2021.
The other main factor was the negative impact on fruit supply due to hurricanes Eta and Iota which drastically impacted Del Monte's production areas in Guatemala in the fourth quarter of 2020.
“Despite slightly lower net sales resulting from the continued impact of COVID-19 restrictions on our foodservice customers, and the reduced supply of fruit due to the two hurricanes in Guatemala in the fourth quarter of 2020, we generated strong results,” said Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer.
“We remained focused on creating greater efficiencies and controlling costs throughout our operations.”
Operating income increased $41.9 million and Adjusted Operating income increased $33.7 million. The increase in operating income was primarily due to higher gross profit and lower selling, general and administrative expenses.
Gross profit in the company's fresh and value-added products segment rose to $51.6 million from $45.5 million, while the banana segment gross profit increased to $49.2 million from $24.5 million.
In the fresh and value-added products segment, the primary drivers of the variance in gross profit were:
- Increased gross profit in the melon product line, primarily in North America due to higher per-unit sales prices and lower ocean freight costs, partially offset by higher per unit product costs as a result of lower volumes due to the two hurricanes in the fourth quarter of 2020.
- Increased gross profit in its prepared food products line, primarily due to higher net sales.
- Increased gross profit in the avocado product line, primarily from lower per unit procurement and production costs from its Mexico packing plant.
- Increased gross profit in its pineapple product line, primarily due to higher sales volumes.
- Decreased gross profit in the fresh-cut vegetable and vegetable product lines, primarily in its Mann Packing business driven by higher per unit product costs as a result of lower sales volume.
- Decreased gross profit in the non-tropical fruit product line, primarily due to severe rainstorms in Chile, resulting in $3.1 million in inventory write-offs.
In the banana segment, the primary drivers of the variance in gross profit were:
- Higher per-unit sales prices in North America and Europe and lower per-unit ocean freight costs.
- Insurance recoveries of an additional $2.5 million associated with the storms in Guatemala.