Del Monte (FDP) Q2 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Wednesday, July 30, 2025, at 11 a.m. EDT

CALL PARTICIPANTS

Chairman and Chief Executive Officer — Mohammad Abu-Ghazaleh
Senior Vice President and Chief Financial Officer — Monica Vicente
Vice President, Investor Relations — Christine Cannella

Need a quote from one of our analysts? Email [email protected]

RISKS

Chairman Abu-Ghazaleh stated, "There is a global shortage in banana production," citing impacts from Black Sigatoka and the spread of Fusarium [Tropical Race 4], which are directly affecting supply in key growing regions.
Vicente reported, "per unit production and procurement costs, resulting from the adverse weather conditions already mentioned, along with higher distribution costs, including the impact of tariff-related charges in North America and ongoing industry-wide port congestion and logistical disruptions across our Central American ports."
Abu-Ghazaleh said, "Costa Rica alone is down over 20% in their export volume this year as we speak. And that tells you, and that's mainly because of the Sigatoka disease as well as other, you know, issues, you know, in the soil and the climate."
The Port of Caldera in Costa Rica experienced "severely limited vessel access," according to the CEO, due to unusually strong ocean swells, leading to three-to-five-day waiting times and higher costs across the industry.

TAKEAWAYS

Net Sales: $1.183 billion in net sales for Q2 2025, up 4%, primarily driven by higher per unit selling prices and favorable foreign exchange impacts, with additional support from tariff-related price adjustments in North America.
Gross Profit: $120 million gross profit for Q2 2025, an increase of 6%, reflecting higher net sales in fresh and value-added segments, partially offset by higher per-unit production and distribution costs.
Gross Margin: Gross margin was 10.2%, compared with 9.9% in the prior year, and up sequentially from 8.4% in the first quarter.
Fresh and Value-Added Segment Net Sales: $723 million in net sales for Q2 2025, up 4%, led by higher per unit selling prices of pineapple and fresh cut fruit, favorable exchange rates, and tariff-related pricing, partially offset by reduced fresh cut vegetable sales.
Fresh and Value-Added Segment Gross Margin: Gross margin for the Fresh and Value-Added segment was 11.7% in the second quarter, compared with 11.2% in the prior year, and improved sequentially from 10.1% in the first quarter of this year.
Banana Segment Net Sales: $410 million in net sales for Q2 2025, an increase of 4%, driven by higher per unit selling prices in all regions and favorable exchange rates. Increased Middle East volumes were offset by declines in Asia and North America due to disease and crop disruptions.
Banana Segment Gross Margin: Gross margin for the Banana segment was 7.3% in the second quarter, down from 7.6% in the prior year, as higher sales were offset by increased production, procurement, and distribution costs.
Net Income Attributable to Fresh Del Monte Produce Inc.: Net income attributable to Fresh Del Monte Produce Inc. for the second quarter was $57 million, compared with $54 million in the prior year. Adjusted FDP net income was $59 million, compared with $51 million in the prior year for the second quarter.
Diluted Earnings Per Share: Diluted earnings per share for the second quarter was $1.18, compared with $1.12 in the prior year. Adjusted diluted earnings per share for the second quarter was $1.23, compared with $1.06 in the prior year (non-GAAP).
Adjusted EBITDA: Adjusted EBITDA was $95 million, up from $89 million, maintaining an 8% margin as a percentage of net sales for Q2 2025.
Long-Term Debt: $201 million of long-term debt for the second quarter, a 29% reduction compared with the prior year and 18% compared with fiscal year-end 2024.
Cash Dividend: Quarterly cash dividend set at 30¢ per share, annualized to $1.20, yielding 3.3% based on current share price.
Full-Year 2025 Guidance: The company expects net sales growth of 2% year over year for full year 2025. Fresh and value-added gross margin of 10%-11%, banana gross margin at the low end of the 5%-7% range, and other products and services gross margin of 12%-14% for full-year 2025.
Capital Expenditures: Full-year 2025 CapEx forecast revised to $70 million-$80 million, down from previous guidance of $80 million-$90 million, due to updated project timelines.
Pineapple Supply: Management expects ongoing tight supply and very strong demand for premium varieties through 2026, with new acreage in Costa Rica projected to deliver a "little bit higher than the mid-single digits" increase by 2027.
Pink Glow Expansion: Costa Rican authorities recently granted acreage expansion, with increased Pink Glow pineapple supply expected in early 2027; all current supply remains fully prebooked and presold, with $30-$33 per unit pricing reported online in the UAE.
Fresh Cut Growth: Retail and convenience channels are leading demand growth globally, including in the UK and Middle East, with the fresh guacamole SKU experiencing more than double-digit growth month over month since launch.
Logistics Strategy: Transition from legacy break-bulk vessels to container shipping in Asia-Pacific is underway, with sale of two vessels planned and a stated goal of operational efficiency alignment.

SUMMARY

Fresh Del Monte Produce (FDP -2.00%) delivered measurable improvements across key financial metrics for Q2 2025, including gross margin expansion and growth in both fresh and value-added product lines. The outlook for 2025 remains consistent with prior guidance, as management highlighted stable demand, operational efficiencies, and continued discipline in capital allocation and logistics strategy. Supply constraints for pineapples and bananas—driven by weather events, disease pressure, and regulatory changes—continue to shape the company's growth trajectory and margin dynamics, with expansion initiatives and SKU innovation positioned to offset production challenges.

Chairman Abu-Ghazaleh said, "We will be starting our production in Brazil ... mainly for the Brazilian market in particular," indicating geographic diversification of sourcing in the medium term.
Recent regulatory approvals allow use of Pink Glow pineapple residues for frozen products, juices, and ice cream, expanding the monetization pathways for this high-value SKU.
Field testing of TR4-resistant gene-edited banana lines is scheduled to begin within months, representing a potential future safeguard against supply threats.
Abu-Ghazaleh stated, "We even have lowered our volumes over the last two years. In order to maintain profitability and make sense of this business." emphasizing focus on margin protection over volume at any cost.
The cost impact of the Costa Rican colón strengthening against the dollar, combined with persistent inflation over the past two to three years, is described as a "huge headwind" to profitability, partially offsetting foreign exchange gains elsewhere.
The digital and international expansion of Pink Glow continues, as units are sold online and in new geographies such as the Middle East, with high price points and consistently sold-out status.

INDUSTRY GLOSSARY

Black Sigatoka: A fungal leaf disease severely impacting global banana crops and driving down yields in Central America.
Fusarium (Tropical Race 4/TR4): A virulent soil-borne disease affecting banana plants, responsible for widespread production declines.
Pink Glow: Fresh Del Monte Produce Inc.'s proprietary pink-fleshed pineapple SKU, requiring regulatory approval for cultivation and export.
Adjusted EBITDA: Earnings before interest, tax, depreciation, and amortization, adjusted for certain items excluded in the company's reconciliation.
Adjusted Diluted Earnings Per Share (EPS): Net income per share after adjustments for specified items, reflecting company guidance basis.
SKUs: Stock keeping units; unique product variations tracked for inventory and sales.

Full Conference Call Transcript

Mohammad Abu-Ghazaleh: Thank you, Christine, and thank you for joining us for our second quarter 2025 earnings call. In 2025, we delivered another period of strong performance for Fresh Del Monte Produce Inc., continuing the momentum we have built through consistent execution and strategic discipline. This quarter, historically our strongest of the year, saw growth across key financial metrics. Net sales increased by 4%, gross profit rose 6% compared with the prior year period, and gross margin expanded to 10.2% from 9.9% compared with the same period last year. This quarter's positive results reflect the power of consistency and continuous improvement across our fresh cut business and ongoing demand for our pineapple portfolio.

Much of this growth reflects a long-term shift in the pineapple category, one we help lead. In the 1970s, Americans consumed less than a pound of pineapple per day per person. Today, that number is nearly eight times higher, according to the USDA. This transformation began with our 1990 launch of Del Monte Gold, the first widely available sweet pineapple, and continues through the strength of our proprietary offerings and value-added formats. We know that consumers are engaging more with pineapple according to Kantar Worldpanel, a leading provider of real household purchase insights. Demand for tropical fruit has risen 58% since 2017, outpacing overall produce growth and signaling the rising relevance of the category itself.

As a pioneer in this space, we are well-positioned to lead. Demand for our pineapple portfolio remains strong and continues to outpace supply, driven by trusted brands like Honey Glow and Pink Glow, which is the result of decades of agronomic leadership and targeted investments. We are managing global supply carefully, strengthening continuity, and taking steps to ensure consistent availability for our customers. We also launched Pink Glow in the United Arab Emirates during the quarter, marking our first sustained market entry for a fruit in the Middle East. While still early in scale, it reflects a strategic step in expanding our high-value portfolio into new international markets, where brand distinction and long-term potential align.

We also know that when it comes to pineapples, convenience matters. Demand accelerates when the product is fresh cut, prepared, and ready to enjoy. As more consumers around the world prioritize health, flavor, and ease, our ability to meet that demand with the right product mix and the operational agility to deliver it is driving meaningful growth across our fresh-cut business. We are also continuing to advance our efforts in high-margin value-added business ventures, particularly those focused on residues and specialty ingredients. These projects are still in their early stages, but we believe they represent real long-term opportunities. Like many in the industry, we are managing disruptions at the Port of Caldera in Costa Rica.

Unusually strong ocean swells, the worst that we have seen in decades, have severely limited vessel access. With minimal structural protection, the port has become a choke point, leading to wait times of three to five days and increased congestion. The result is higher costs and broader logistics impact across the industry. While the situation remains difficult, our teams are responding with urgency, adjusting schedules, reallocating shipments, and doing everything possible to maintain continuity for our customers. Before I go, I believe it's important to discuss an industry-wide situation regarding bananas, one that I have been predicting and warning about for years. There is a global shortage in banana production. The causes are clear.

Shifting climate patterns, particularly warmer temperatures combined with humidity, are accelerating the spread of disease in key growing regions, primarily Black Sigatoka. On top of that, a continued spread of Fusarium, well known as Tropical Race 4, is adding further pressure. These diseases are having a direct impact on supply. Black Sigatoka is affecting crops across Central America, while other countries are facing the compounded impact of both diseases. As we have shared previously, our R&D teams have been working to address the global threat posed by Fusarium Wilt, and we are pleased to report that field testing of TR4-resistant gene-edited banana lines is expected to begin in the coming months, a meaningful step toward long-term category resilience.

Meanwhile, global demand for bananas remains strong as they continue to be one of the most affordable and accessible fruits in the grocery aisle, and we anticipate this will remain a key industry dynamic in the quarters ahead. With that, I will turn it over to Monica Vicente to discuss our second quarter 2025 results in detail. Monica?

Monica Vicente: Thank you, Mr. Abu-Ghazaleh, and good morning, everyone, and thank you for joining us on today's call. I'll begin with our second quarter financial results, followed by our outlook for the rest of the year. As Christine mentioned, our press release and our call today include non-GAAP measures. Reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website. The second quarter is historically our strongest period. Having said that, this quarter reflects our continued efforts to expand our margins by focusing on improving our product mix. Now let's go through the financial results.

Net sales were $1.183 billion, compared with $1.140 billion in the prior year, an increase of 4%. The increase was driven by higher net sales in our fresh and value-added products and banana segments due to higher per unit selling prices and favorable impact of fluctuations in exchange rates, primarily related to the euro, Japanese yen, and British pound. The increase also reflects tariff-related price adjustments in North America. Gross profit for the second quarter was $120 million, compared with $113 million in the prior year.

The increase was driven by higher net sales in our fresh and value-added product segment, partially offset by higher per unit production and procurement costs, as well as increased distribution costs, including tariff charges in North America. Gross margin was 10.2% compared with 9.9% in the prior year. This also includes a sequential increase from 8.4% in the first quarter. Operating income for the second quarter was $68 million, roughly in line with the prior year. The slight increase was primarily driven by higher gross profit, partially offset by lower gain on disposal of property, plant, and equipment in the current year. Adjusted operating income was $69 million compared with $65 million last year.

Other income for the second quarter was a gain of $6 million compared with a gain of $2 million in the prior year. The change was due to equity earnings from unconsolidated companies within the food and nutrition sector. Net income attributable to Fresh Del Monte Produce Inc. for the second quarter was $57 million compared with $54 million in the prior year. And adjusted FDP net income was $59 million compared with $51 million last year. Our diluted earnings per share for the second quarter was $1.18 compared with $1.12 in the prior year. And adjusted diluted earnings per share was $1.23 compared with $1.06 in the prior year.

Adjusted EBITDA for the second quarter was $95 million, up from $89 million in the prior year. Both quarters reflected an 8% margin as a percentage of net sales. Let's now take a closer look at the financial performance for the second quarter across our business segments. Beginning with our fresh and value-added product segment. Net sales for the second quarter were $723 million compared with $694 million last year, an increase of 4%. The increase was primarily driven by higher per unit selling prices in our pineapple product line, as well as higher sales volume and per unit selling prices in our fresh cut fruit product line, both supported by continued strong market demand.

Additional contributions came from the favorable impact of fluctuations in exchange rates, as well as tariff-related price adjustments in North America. The gains were partially offset by lower net sales in our fresh cut vegetable and vegetable product lines, reflecting strategic operational reductions. Gross profit was $85 million compared with $78 million in the prior year. The increase was driven by higher net sales, partially offset by higher per unit production and procurement costs, as well as increased distribution costs, including the impact of tariffs in North America. Gross margin was 11.7% in the second quarter compared with 11.2% in the prior year. This also includes a sequential improvement from 10.1% in the first quarter of this year.

We are continuing to build on this momentum as we work toward our goal of sustaining double-digit gross margins in the long teens for this segment, supported by ongoing improvements in product mix, including growth in our premium pineapple varieties such as Honey Glow and Jet Fresh. Moving on to the banana segment. Net sales for the second quarter were $410 million compared with $394 million in the prior year, an increase of 4%. The increase was primarily driven by higher per unit selling price across each of our regions, combined with favorable impact of fluctuations in exchange rates, along with tariff-related price adjustments in North America.

We also saw higher sales volume in the Middle East as last year was impacted by shipment disruptions related to the Red Sea conflict. The increase was partially offset by lower sales volume in Asia, where an oversupply of local seasonal fruit weakened demand and persistent crop disease reduced available supply. In North America, sales volume was also impacted by crop disease, specifically the continued spread of Black Sigatoka, which has intensified by adverse weather conditions in our growing regions. Gross profit was $30 million in line with the prior year.

The benefit of higher net sales was mostly offset by higher per unit production and procurement costs, resulting from the adverse weather conditions already mentioned, along with higher distribution costs, including the impact of tariff-related charges in North America and ongoing industry-wide port congestion and logistical disruptions across our Central American ports. Gross margin was 7.3% in 2025 compared with 7.6% in the prior year. Lastly, our other products and service segments. Net sales for the second quarter were $50 million compared with $51 million in the prior year. The slight decrease was primarily due to lower per unit selling prices in our poultry and meats business.

Gross profit was $5 million compared with $6 million in the prior year as a result of the lower net sales. Gross margin was 10.4% in the quarter compared with 10.7% last year. Now moving to selected financial results. Our income tax provision for the second quarter was $14 million compared with $12 million in the prior year. The increase was primarily due to increased earnings in certain higher tax jurisdictions. Our effective tax rate for the second quarter was 20%. Net cash provided by operating activities for the six months was $159 million compared with $144 million in the prior year.

The increase was primarily due to higher net income and working capital fluctuations, mainly driven by higher levels of accounts payable and accrued expenses, partially offset by higher levels of inventory when compared to the prior year. We ended the second quarter with $201 million of long-term debt, an 84% or 29% reduction compared with the prior year, and an 18% reduction compared with fiscal year-end 2024. Our adjusted leverage ratio remains less than one times EBITDA. Our CapEx investment for the first six months was $22 million compared with $21 million in the prior year.

As announced in our press release, we declared a quarterly cash dividend of 30¢ per share payable on September 5, 2025, to shareholders of record on August 13, 2025. On an annualized basis, this equates to $1.20 per share, representing a dividend yield of 3.3% based on our current share price. With that, let's turn to our full-year outlook and strategic priorities. As we look ahead, we continue to expect full-year 2025 to be broadly in line with the outlook we shared during our first quarter call. Our outlook reflects our expectation for stable demand across our core products, ongoing operational efficiencies, and disciplined execution on our strategic initiatives.

As part of that execution, we're currently transitioning from legacy break-bulk shipping vessels to container vessels in the Asia Pacific region, and we plan to sell two older vessels later this year. This shift enhances operational efficiency and better aligns with our evolving logistic needs. As I mentioned earlier, historically, the second quarter has been one of our strongest, and this year was no exception. We are confident about our full-year trajectory, but we remain mindful of evolving external factors beyond our control. We believe our underlying business fundamentals are strong, and we are confident in our ability to deliver on our full-year 2025 objectives. We reiterate our expectation for the full year as follows.

We expect to see net sales growth of 2% year over year. And as far as gross margins by business segment, in our fresh and value-added product segments, gross margin is expected to be in the range of 10% to 11%. In our banana segment, gross margin is expected to be in the lower end of the historical range of 5% to 7%. For our other products and services segment, gross margin is expected to be in the range of 12% to 14%. Our selling, general, and administrative expense is expected to be in the range of $205 million to $210 million.

As it relates to CapEx, we now expect our full-year spend to be in the range of $70 million to $80 million, down from $80 million to $90 million previously communicated. This revision reflects updated project execution timelines. We remain committed to funding initiatives that drive long-term value. We expect non-cash provided by operating activities to be in the range of $180 million to $190 million. In closing, the second quarter delivered solid net sales and net income, consistent with our expectations and reflective of the seasonal strength we typically see this time of year. As we enter the second half, we're mindful of typical third-quarter dynamics, including increased availability of seasonal fruit and softer demand during the summer months.

We remain focused on executing our strategy, delivering value, and positioning Fresh Del Monte Produce Inc. for long-term success. This concludes our financial review. We can now turn the call over to Q&A.

Christine Cannella: Desiree?

Operator: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press 1 to join the queue.

Monica Vicente: And we have a question that comes from the line of Mitch Pinheiro with Sturtevant and Company. Your line is open.

Mitch Pinheiro: Good morning. Morning, Mohammad. So I did want to start. I have a bunch of questions. First on the pineapple business. So pineapple supply has struggled a little bit here, I guess, you know, weather-related. But I was wondering, Mohammad, if you could give us an update on where you think and how you know, we saw a lot of new pineapple growth and was wondering how you expect that to play out over the next six months and then what supply looks like for your pineapples into 2026. So are we going to see an increase that fast or are we not there yet in the cycle?

Mohammad Abu-Ghazaleh: We expect that continuing, you know, to the end of this year and going into next year, there will be, in our opinion, a shortage of supply. More or less, like this year or a little bit even more. So we expect very, very strong demand from our part, on our side. I cannot speak for the industry, but as Fresh Del Monte Produce Inc., we see a very strong pineapple market going forward, especially with our premium varieties that are unparalleled in the market. And our expertise and our seeds are definitely better than anything in the market. So I believe that in our case, I do not see any change to what is going on right now.

The dynamics in the market through 2026. In addition to that, you know, and I would say about a couple of years, two, three years, we will be starting our production in Brazil. I think we have announced that. But that will be another new area of production sourcing, and that would be mainly for the Brazilian market in particular.

Mitch Pinheiro: So once you get through 2026, you know, I guess like, what type of growth rate would you expect to see in your own business supply? Like, are we talking new plantings and things like that? Would mid-single-digit mean, are you or is it stronger than that?

Mohammad Abu-Ghazaleh: I would say in Costa Rica, we will have expansion. As we speak, we are expanding in our production areas that have not been planted before, already under plantation. And as I said, we are expanding also in other parts of the world, not concentrated in one location, but really across the world. But we would be having over the next two to three years, I cannot give you figures exactly, but I am telling you that we are already expanding our production capacity, and we expect there will be, and I would say it will not be like 20 million boxes additional, but there will be a meaningful increase in our production in the next two to three years.

Monica Vicente: And, Mitch, on the Costa Rica expansion specifically, you will see a little bit higher than the mid-single digits, and you know this is a long-term crop. So definitely, 2027, you know, from today compared to 2027, a little bit higher than the mid-single digits. Just Costa Rica.

Mitch Pinheiro: Okay. Thank you. And then, regarding Pink Glow, I am seeing more distribution. Where do you guys stand in terms of, like, you know, let's just talk about the US or North America, your ACV. Where is it today? How supply constrained is it? And what do you see the future as far as distribution growth for the Pink Glow in the next, say, year, two years?

Mohammad Abu-Ghazaleh: Actually, we were constrained by limited supply, you know, going to the market because up till recently, the authorities in Costa Rica were not allowing us to plant more pink pineapple because of the GMO issue and then the contamination risk. We have been granted, you know, recently to increase our acreage, and that's what we are going to be doing very soon. So supplies hopefully, you know, it will take about eighteen months for supplies to start coming in. Additional supplies, I mean. Right. So I will see, I would not say in 2026, early 2027, we will see more supplies coming into the market. Where the market is really the absorption or the reception is there.

It's that we do not have enough supply. Along with the other countries that we are not supplying yet. I mean, outside North America, which is as we said, we just been sending some pink pineapples by air, you know, to the Emirates. Just to give, I mean, it's being sold online as well. You know? I mean, it's not in the supermarkets and just to give you an idea of it's about, I would say, about $30 to $33 a piece that is being sold now online. On average. And everything that we said is prebooked and presold. So we are now trying to get into Saudi Arabia as well and cover other countries in the region.

But as I said, also supply remains constrained. We will evaluate which market pays more so, you know, we allocate where the money is.

Mitch Pinheiro: Quite an accomplishment to, like I mean, this Pink Glow just sells out everywhere. I go. And when I talk to the produce manager, it's you know, they sell everyone they can get and would like more. So it's a good situation for you guys. And they're selling it, you know, double-digit prices per pineapple, which is incredible. So anyway.

Mohammad Abu-Ghazaleh: Yeah. But, I mean, in addition to that, you know, Mitch, we used to have a lot of residues from the pink pineapple that we could not use as export quality, and we did not have the opportunity because we did not have the authorization from the Costa Rican authorities to turn them into juice or into other products. Thanks to God, recently for the last two months, we have been granted, you know, to freeze or to use this as frozen, and we are processing this, and this is a great addition to our SKUs. You know? I think also going into ice cream and juices and, you know, through the food service, industrial segment.

Mitch Pinheiro: Changing the subject, moving to fresh cut fruit. You're doing very well in fresh cut fruit. Obviously. Where specifically is the demand coming from? Is it retail versus food service? Is it equal across the board? Is there any one geography that's growing particularly strong for you guys? Can you talk a little bit about where that growth in demand is coming from and where you see it going?

Mohammad Abu-Ghazaleh: We see the demand mainly on the retail side. The biggest increase is on the retail side and the convenience stores. That's where we see the biggest advances as well as, you know, I mean, we are not talking only North America, but we are having the UK. We are having, you know, the Middle East region as well. So expansion and growth is actually across the world. And as we speak, you know, we are looking at different countries, new countries to initiate also fresh cut operations. Based on, you know, feasibility and return on capital. But that's the way going forward.

It's not only North America, but a global expansion, you know, with our expertise, know-how, and the vertical integration, the supply chain, you know, where we have the food, and the ability to supply each region closer to the markets. You know? The Fresh Del Monte Produce Inc. advantage is that it isn't it's not only in one continent. It's not only producing in Costa Rica. Let's say pineapple, which is the major SKUs in the fresh cut. You know? We produce it in three different four different continents.

So we are much closer to the markets logistically rather than just, you know, shipping it all the way from Costa Rica to, let's say, to I mean, you know, we have Africa which is closer. It's not edge. We play with logistics more than just the sourcing.

Mitch Pinheiro: And then, you know, your margins, you know, continue to march forward there as you leverage your capacity investments. Is that something I mean, we should con where do you see the top end of, like, you know, mean on the fresh cut?

Mohammad Abu-Ghazaleh: On the fresh cut, I think the margin would stay more or less in the same region that we see right now. What would be our niche is that we will be introducing, you know, more innovation. I mean, let's take guacamole, for instance. Fresh guacamole. I mean, we started this almost probably a year or less than a year ago, and we see more than double-digit growth month over month. I mean, in that category. And then we are the only one in the market that can produce fresh guacamole to the retail sector.

So that's the type of products that we and type of SKU that we would like to introduce and not just depend on the traditional, you know, type of fruit offerings or vegetables.

Mitch Pinheiro: Moving to banana. I was how your in your view, the Black Sigatoka that how much has that affected the banana supply in Costa Rica or in Central America? Is it definitely showing up as a drag on supply?

Mohammad Abu-Ghazaleh: Yeah. Well, I mean, Costa Rica alone is down over 20% in their export volume this year as we speak. And that tells you and that's mainly because of the Sigatoka disease as well as other, you know, issues, you know, in the soil and the climate. So I don't see that this is going away. This is getting worse as a matter of fact. As we speak. You know? I mean, it should be that, you know, the disease gets immunity. You know? I mean, the disease transforms itself against the kind of chemical that is being used and over time, that chemical doesn't help anymore efficacy. For treatment.

And, unfortunately, you know, in this space, there is only one supplier in the world that has this product. And it's becoming even so costly. That you know, it's adding more cost to the banana box because you have to apply more cycles and to do more applications, which cost you more money. And still, I don't think that there is a cure, in my opinion. Unless something, you know, kind of extraordinary. On our part, we are working on several fronts to find a solution to this Sigatoka. I cannot disclose at this time, but we are doing a lot of work now to find solutions for that.

Mitch Pinheiro: Okay. And then you know, over time here with this banana supply affected negatively. But I guess should be good for prices. You should be able to get I mean, bananas are obviously one of the lowest-priced items in the grocery channel. There seems to be some headroom, you know, for you to raise prices to offset, you know, the supply limitations. Would you see it that way?

Mohammad Abu-Ghazaleh: It's actually not our I mean, it's an industry. It's a supplier's issue. I mean, not our issue that still, you know, I mean, we are very much you know, we even have lowered our volumes over the last two years. In order to maintain profitability and make sense of this business. The problem is not with the I believe the problem is with the existing suppliers that they don't understand that going forward. They cannot survive with this such pricing, you know, in the market.

Mitch Pinheiro: Just a couple other quick questions. It was interesting. You're selling two of your older vessels as you switch over to sort of the legacy to the container ships. Are you going to would you consider buying two new ones like you have adding to the fleet, or are you happy with your current setup and will sort of lease vessels or however you know, for your capacity?

Mohammad Abu-Ghazaleh: No. But what Monica mentioned actually is only for Asia. These two vessels were, you know, were servicing Japan and Korea markets and that's what we are replacing. We are selling off these ships and using container shipping line now.

Mitch Pinheiro: Okay. To replace it. As far as North America, everything is also on the table. You know? I mean, we have we will do whatever is in the best interest of the company. Definitely.

Mitch Pinheiro: Okay. And, I mean, are you pleased? I mean, are you happy with the way your purchase of those six vessels is that working out as expected? It seems to be

Mohammad Abu-Ghazaleh: You can see our cash generation. I think that speaks for itself, Mitch. You look at our cash.

Mitch Pinheiro: Understood. I think. And then a couple other things. You had a $6 million, you know, equity earnings from unconsolidated companies. Can which companies are generating that type of profit for you?

Mohammad Abu-Ghazaleh: Well, actually, we have invested in several funds that are friendly funds that we have been very close with. And these are companies that are in the food industry? Food industry, let's say. And I think we have made the right choices and we made the right investments. And I think that this is just a beginning. I think these are very successful, extremely successful companies are already growing, you know, double-digit as we speak. So we are very, very pleased with what we invested.

Mitch Pinheiro: Okay. And then last question was just what was the I didn't see the queue yet. But the foreign exchange impact on revenue and gross profit, was there any can you give us those amounts?

Monica Vicente: Yeah. The euro has been getting stronger, which helped us. We do have part of our sales hedge. At a little bit lower rate, but it definitely helped. The British pound also was stronger. And the Japanese yen was stronger than last year even though it's kind of weakened a little bit now, but definitely those three currencies helped our net sales. But the local selling prices in these markets were also very strong. So it was both scenarios.

Mohammad Abu-Ghazaleh: But to add to what Monica said, that you have to think there is a tailwind on one side, and we have headwinds on the other side. I mean, Costa Rica by itself is a very, very difficult situation. You know? I mean, we used to have a colon, you know, exchange rate to the dollar three years ago for $610, $620. And today, we are barely at around $500, $506, $505. Which you can say, and increase, of course, inflation over the last two, three years. Continuous inflation, continuous increasing cost. And then the exchange rate is getting stronger and that's huge headwinds for us.

I mean, added a lot of cost on our production, be it on the pine nuts, melon, or bananas or whatever we do there. So really, you know, when you look at the tailwind, which is the euro and the that but you also have to look at the headwind. And then one offsets against each other. I wish the colon would have been, you know, normal as it used to be, then it would have been even much better picture than what we see today.

Mitch Pinheiro: Alright. Well, that's all I have. Thank you.

Mohammad Abu-Ghazaleh: My pleasure. Thank you.

Operator: And again, if you would like to ask a question, press star then the number one on your telephone keypad. There are no further questions at this time. I would like to turn the call back over to Mohammad Abu-Ghazaleh for closing remarks.

Mohammad Abu-Ghazaleh: Thank you, Desiree. And I would like to thank everyone for joining us on this call today and hope to talk to you on our next quarter with equally good news. Thank you. And have a good day.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.