Welcome to the Dole plc Second Quarter 2024 Earnings Conference Call and Webcast. Today's conference is being broadcast live over the internet and is also being recorded for playback purposes. Currently, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session.

For opening remarks and introductions, I would like to turn the call over to Head of Investor Relations, James O'Regan. James, please go ahead..

Thank you, Krista. Welcome, everybody, and thank you for taking the time to join our Second Quarter 2024 Earnings Conference Call and Webcast. Joining me on the call today is our Chief Executive Officer, Rory Byrne; our Chief Operating Officer, Johan Linden; and our Chief Financial Officer, Jacinta Devine.

During this call we'll be referring to presentation slides for supplemental remarks and these along with our earnings release and other related materials are available on the Investor Relations section of the Dole plc website.

Please note, our remarks today will include certain forward-looking statements within the provisions of the Federal Securities Safe Harbor Laws. These reflect circumstances at the time they are made and the company expressly disclaims any obligation to update or revise any forward-looking statements.

Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings and press releases.

Information regarding the use of non-GAAP financial measures may be found in our press release, which also includes the reconciliation to the most comparable GAAP measures. With that, I'm pleased to turn today's call over to Rory..

Thank you, James, and welcome everybody. So thank you all for joining us today as we discuss our results for the second quarter of 2024. So turning first into Slide 4 and the financial highlights for Q2. While, the second quarter of 2024 was another strong quarter for our business continuing our positive momentum.

Group reported revenue was in-line with last year and on a like-for-like basis, when the impact of the progressive produce disposal is excluded, revenue increased by 4.3%. Adjusted EBITDA increased by 2.2% to $125.4 million, and on a like-for-like basis, increased by 8.2%.

The growth in adjusted EBITDA from continuing operations on a like-for-like basis was driven by strong performances in both our fresh fruit and diversified fresh produce America segments and supported by continued good stable performance in our diversified fresh produce EMEA segment.

Our fresh vegetables business also delivered a strong quarter, contributing the increase in absolute net income to $88.1 million compared to $52.3 million in the prior year. On an adjusted basis, net income was $47 million and adjusted diluted EPS was $0.49 per share.

As ever, cash management and capital allocation continue to be a strong focus for us. And with that, we are very pleased to see our leverage continue to reduce and falling to 1.9 times at the end of Q2 and resulting in a lower interest charge in the quarter compared to the prior year.

Turning now to Slide 6 for our operational highlights and starting with our Fresh Fruit segment. Our larger segment delivered a very strong performance in the second quarter, with adjusted EBITDA of $70.6 million, 7.3% ahead of the prior year.

Looking at the European market, we continued with our positive momentum through the second quarter of 2024, driven by higher volumes in bananas, as well as by lower sourcing and shipping costs.

In North America we also continued with a solid performance with higher banana volumes and pricing and an increase in overall revenues but offset in part by anticipated higher shipping costs due to the scheduling of dry docking activities for a number of our vessels. Most of this additional cost will be seen in the second half of the year.

The lower seasonal sales volumes allowed for a better scheduling opportunity to complete the necessary work. Looking ahead to the remainder of the year for both the North American and European markets, we believe we are well-placed. The banana supply remains tight on an industry-wide basis.

While despite a recent depreciation of the dollar against the Costa Rica Cologne in particular, the strength of some key currencies on the sourcing side remains a challenge.

However, with our diversified supply base and experience team, we have been proactively implementing initiatives to control our cost base, enabling us to continue to service our customers competitively. Overall, we continue to anticipate another strong financial performance for the fresh fruit division on a full year basis.

Our diversified EMEA segments delivered another good stable performance in Q2, consolidating its strong start to the year after an excellent first quarter.

Revenue growth remained positive and continued to be driven by higher pricing, whereas volumes for the quarter were impacted by supply shortages of several products typically sourced out of South America.

On an adjusted EBITDA level, good contributions continue to come from all regions with a particularly positive performance in the Nordics, Spain and South Africa.

Looking out to the rest of the year, we remain confident that we'll continue to leverage our strong market positions, operational integration and investment opportunities that we will deliver another satisfactory financial result for the full year.

Our diversified America segment delivered another very strong quarter and on a like-for-like basis taking out the impact of the progressive produce disposal.

The strong result was driven again by positive underlying performance and the benefit of some seasonal variations, which had had several export seasons extending further into Q2 than in prior years.

From a volume standpoint, we had higher grapes volumes, in particular in Q2, but additionally saw a good overall marketplace for several products leading to better margins.

[Excluding] (ph) some of the seasonal timing factors, the quarter was also positive and consistent on an underlying basis with strong pricing and small volume increases across most of our North American business. On the South American export side, the transition to winter season products has started well.

Looking at the second half of the year, after an excellent first half, we are expecting to consolidate our excellent performance year-to-date and deliver a strong full year results on a like-for-like basis, driving [conscious of] (ph) seasonal timing may again have an important impact in the fourth quarter.

So turning to the fresh vegetables business, and as noted on our last call and since the termination of the sale agreement with Fresh Express. We have been actively exploring strategic alternatives to this business. We continue to seek the best possible outcome in the interest of all stakeholders.

Operationally, we are maintaining a keen focus on the day-to-day running of the business, I've been very pleased to see the hard work of our committed management team paying off so far in 2024.

While the standout performer in the vegetables segment has been our fresh-packed business, which has benefited from favorable market conditions in 2024, our value-added business has also made important progress on an underlying basis.

The combined businesses have generated operating income in both quarters of 2024 and will also contribute positive cash flow to the group in the first half. And with that, I'll hand you over to Jacinta to give a financial review for the second quarter..

Thank you, Rory, and good day, everyone. Firstly, turning to the group results on Slide 8. We are pleased to have delivered another strong performance in the second quarter of this financial year.

Reported revenue was in-line with prior year and on a like-for-like basis excluding the impact of FX and the sale of progressive produce, revenue increased 4.3%. Adjusted EBITDA increased 2.2% and 8.2% or $10 million on a like-for-like basis. The like-for-like increase was driven by the fresh fruit and diversified fresh produce Americas segments.

Interest expense decreased year-on-year due to lower debt levels. The increase in income taxes due to changes in our jurisdictional profit mix. Net income was $88.1 million in the second quarter and an increase of $36 million from Q2 2023.

The increase was driven by strong trading performance across the group including the fresh vegetables business which is captured within discontinued operations. For the first six months income from discontinued operations increased to $25 million from a loss of $26 million in the first half of 2023.

This income converted to net cash from discontinued operations of $16.7 million for the first six months compared to an outflow of $8.3 million in the first half of 2023. Diluted EPS was $0.84 compared to $0.44 in the second quarter of 2023.

On an adjusted basis predominantly excluding discontinued operations, adjusted net income and adjusted diluted EPS decreased 3% to $47 million and $0.49 respectively. The year-on-year decrease was mainly due to higher income tax expense driven by the jurisdictional earnings mix.

Turning now to the divisional updates for the second quarter for our continuing operation and starting with fresh fruit on Slide 10. The fresh fruit division delivered another strong consistent results with revenue increasing 1.5% and adjusted EBITDA up 7.3%.

Increase in revenue was primarily due to higher banana volumes in Europe and North America, higher worldwide pricing of bananas and higher volume of plantains sold, partially offset by lower volumes and pricing for pineapples.

The $4.8 million increase in adjusted EBITDA was driven by higher revenue and lower fruit sourcing costs, partially offset by higher shipping costs. Turning to diversified fresh produce EMEA on slide 11, the second quarter saw another consistent result from this segment continuing its good momentum over the last number of quarters.

Revenue increased 3.2% primarily due to a strong performance in Ireland, the UK and Spain. Adjusted EBITDA was in-line with prior year, driven by strong operating results in Spain and South Africa. Finally, diversified fresh produce Americas and Rest of World on slide 12. This segment was impacted by the sale of progressive produce in March.

On a like-for-like basis, predominantly excluding the impact of this sale, the segment produced a strong result. Revenue increased 11.3% or $47 million on a like-for-like basis, primarily due to seasonal timing benefits, as well as positive underlying revenue growth in most commodities in North America.

Adjusted EBITDA increased 36.4% on a like-for-like basis, primarily due to the benefit of continued seasonal timing differences in South America and an improved performance in our North American diversified business. Now turning to Slide 14 to discuss our capital allocation and leverage.

We remain very focused on capital allocation and managing our leverage and are pleased that our leverage reduced further in quarter to 1.9 times. The reduction was driven by both our strong EBITDA in the quarter, as well as a small decrease in our net debt.

Net cash provided by operation activities from continuing operations was $40.2 million in the quarter. As usual, at this time of year, we have a higher investment in working capital due to the typical seasonal peaks for our business. And we expect that this will reverse over the course of the second half of the year.

Cash capital expenditure from continued operations was $17.5 million in the second quarter and included spend on shipping containers, efficiency projects in our warehouses and ongoing investments in other assets. For the full year, we continue to expect total capital expenditure in the range of $110 million to $120 million.

Along with the schedule of dry docking of some of our vessels, our other investments in the second half of the year will include further efficiency projects in our Nordic warehouse assets, vehicle additions and the expansion of processing capacity in some of our Chilean facilities.

Following the sale of progressive produce in March, we used the proceeds to repay 100 million of our term loans in April. This contributed to lower debt levels compared to the prior year, leading to a decrease in interest expense.

For the full year, we continue to expect our interest expense, inclusive of discontinued operations, to be in the range of $75 million to $80 million.

Continuing with our commitment to return cash to shareholders, we are pleased to declare a dividend of $0.08 for the second quarter, which will be paid on October 3rd, 2024, to shareholders on record on September 11th, 2024. Now, I will hand you back to Rory, who will give an update on our full year outlook..

Thank you Jacinta. So, we are very pleased to consolidate our strong start to the year with another very good performance in the second quarter which really puts us in an excellent position to deliver a strong result in the full year. Our forecasting obviously remains complex.

We are raising our full year adjusted EBITDA target to at least $370 million for 2024.

In conclusion, we are pleased to have added another quarter of stable, strong, and consistent earnings to our track record, and are now keenly focused on delivering on our enhanced full year target while also advancing on our strategic priorities for the remainder of the year.

I want to finish by once again thanking all our excellent people across the group for their ongoing commitment and dedication to continue to drive Dole plc forward, as well as to our suppliers, our customers for all their [on-going support] (ph). So with that, I'll hand you back to the operator and we can open the line for questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Adam Samuelson with Goldman Sachs. Please go ahead..

Hi, thank you. Good morning, everyone. Hi. So, Rory, since I just -- maybe the first question, as we think about kind of the outlook over the balance of the year you raised, the full year guidance, you also had a strong first half.

Can you just calibrate for us how much of the increase in the full year outlook really reflected second quarter or first half performance and maybe how the second half of -- your expectations for the second half of the year have changed if at all from where you were three months or six months ago. Thank you..

Yeah, thanks Adam. So, you know, having forecasting is clearly not an exact science as I said, and I think a diversified range of activities across geographies, across sources, customer basis, customer profiles does give us a good balance to cope with a lot of things which we've done over the last number of years.

And I think the profile of earnings between first half and second half might just vary a little bit this year compared with the last number of years. Certainly on the fresh fruit side of the business is no doubt that we have overperformed in the first half of the year.

And we have anticipated, particularly with the dry docking of the ships and the knock-on cost consequences of that, that the Q3 in particular and the second half of the year will be a little bit below last year's numbers.

We'll measure the fresh fruit division, like all other divisions, on a full year basis, so we're not unduly worried about switches between one quarter or the other. We looked at some of the other major issues or some of the other contributors EMEA in particular had a really strong finish to the year.

Just a lot of things went right for us, so we don't necessarily budget for that repeating itself this year. But overall, we put everything into the mix. And we're comfortable with the target we set ourselves for the remainder of the year..

Okay, that's helpful, Rory. And I guess just with the leverage where it has gotten to, the fresh vegetable business showing some good earnings in disc.

ops and hopefully a divestiture and sale process there kind of progresses, can you help us think about kind of the need to deploy incremental cash and cash proceeds towards further debt reduction from here or how you would evaluate share repurchase versus organic growth prospectively? Just what would seem like there doesn't need to be as much of an emphasis on deleveraging incrementally from here and I'd just love to hear how you reassessing that as a....

Yeah, I mean it's as you know -- it's a very dynamic process Adam. You know we constantly look at our level of debt, our profitability, we look at the growth opportunities through acquisition that are available to the group.

And I think I have pointed out that some of the private deals have actually been significantly higher valued than the public rating attributable to also that's made it a little bit challenging, but we do keep our eyes on that [world] (ph) and we hope that that gap narrows at some point in time.

There are some investment opportunities within our existing business to continue to consolidate and grow our business.

And then obviously we're looking at the macroeconomic situation as well and looking at, you know, we've seen a lot of volatility in the stock markets over the last couple of weeks and a lot of speculation as to what might happen with interest rates.

And then as you say, we've got the veg question is still work in progress in terms of where we end up in that. So all of those go into the mix to determining what the final outcome and over the years we've been so we've adapted to utilize pretty much every one of those capital allocation levers in the appropriate circumstances.

That will be the approach we will continue to take going forward..

Okay, and I guess -- one more quick one.

And just by looking at the updated full-year guidance for the $370 million of continuing [operations regarding the] (ph) capex and interests, how do we think about the free cash flow conversion that would net out of that, presumably also subtracting up to 30 odd million of dividends and how controlling that you're likely to have..

Jacinta?.

Yeah, hi Adam. So I suppose last year we had very strong working capital inflow at the end of the year and while we expect very strong inflow this year, maybe not quite at the same level, you remember I talked about the seasonal impacts of the Chilean business and also the impact of the unwind of the stocks we had built up in 2022.

So in overall terms, I suppose we consider a free cash flow conversion of 30% to 35% to be a normal type. I think that's a reasonable approximation..

Okay, that's very helpful. I will pass it on, thank you..

Thank you, Adam..

Your next question comes from the line of Gary Martin with Davy. Please go ahead..

Hi, Rory, Jacinta and Johan. First of all, just congrats on a strong set of results. So just a couple from me. Just going to jump into the divisionals, just on fresh fruit, just first of all, I mean it's been another strong quarter just in terms of volumes across Europe and North America.

I mean I'm sure square the circle on this, I mean is this better sourcing from Dole, is this market share growth, is this just a general demand dynamic? What's the best way to think about this? And is it going to persist, do you think?.

Johan?.

We are working on making it persist. And First of all, the overall team has done a very good job when it comes to focusing on quality and service, and that's on the back of the very good sourcing network that we have, the good shipping setup that we have. But we also have some very high quality customers.

We can see some of the retails we're having gaining market share. So of course we are gaining then some volume on the back of that, but we have also been able to take some new customers. And yes we are hoping and working on continuing that into the future..

Excellent. Good color. And then just maybe secondly, just on I know you'd spoken previously just about the kind of bridge into the second half of the year. And I think you'd mainly kind of focus on the negatives. But I think in the statement, you kind of gave -- good momentum into H2.

I mean, just some of this may be the unwinding of some of the volume shortages that you've noted in diversified EMEA, and maybe just -- are there -- is there an expectation for some of the seasonal timing upside that you noted in America's and the rest of the world to potentially persist? Or what's the best way to think about the second half just across being diversified businesses?.

Yeah, I think if you look at the diversified EMEA, it's had a strong first half of the year. But a few ups and downs and some of them are interlinked.

If you look at say America's business where pricing and margins on some of the key products, some of which get exported into Europe have been very, very strong and that gives those markets opportunities to sell to Far East or other locations that are not Europe. So we can see less food maybe coming into Europe and some of our divisions.

I think what we're seeing is over the back half of the year we're expecting the profile to be a little bit different but not dramatically different.

Obviously we are very pleased that within the America side of us, taking out despite taking out progressive produce and disposing of progressive produce, we're going to have a very strong year within that division as well on an overall full year basis..

Excellent color. I'll pass it on..

Thank you, Gary..

[Operator Instructions] And that concludes our question-and-answer session. I will now turn the call back over to Rory Byrne for closing comments..

Thank you. Well, as I was following on from what we thought was a very good 2023. We are really pleased to such a strong start to 2024 and the outcome for the full -- the first half of 2024. That adds to a very strong sequence of good strong quarterly performance going back over quite a number of quarters at this point in time.

Huge amount of dedication, work thoughts going into all aspects of our business, and we believe we are well-positioned for continued growth. So thank you once again to all of our hugely committed people and to all of you for joining us today. Thank you..

This concludes today's conference call. Thank you for your participation and you may now disconnect..