Despite higher Q1 sales year-on-year, the group’s operating income was hurt by rising costs
Fresh Produce Del Monte has revealed its results for the opening quarter (Q1) of 2022, seeing higher sales on the same period of 2021 but a lower net income.
Net sales for the first quarter increased by US$48.6m, or approximately 5 per cent, up to US$1.14bn, benefiting from inflation-justified pricing actions implemented in the fourth quarter of 2021.
Conversely, Del Monte noted that sales were negatively impacted by fluctuations in exchange rates mainly versus the euro and Japanese yen compared with the prior-year period.
Importantly, it added, lack of availability of third-party shipping capacity on certain shipping routes ”substantially limited the sales of various products”.
Gross profit, however, came in at US$89.8m compared with US$105m in 2021, hurt by worsening inflationary and other cost pressures.
Higher cost across-the-board included packaging materials, fertilisers, ocean and inland freight, fuel and labour.
The company’s operating income fell to US$25.8m during the opening three months from US$42.7m in the prior-year period.
“During the first quarter, our net sales increased by US$49m compared with the prior-year period – a direct benefit of leading the industry in the implementation of inflation-justified pricing actions,” said Mohammad Abu-Ghazaleh, chairman and chief executive officer.
”However, our cost of product sold increased by US$64m due to across-the-board inflationary pressures, resulting in lower operating income,” he continued. “We remained focused on driving incremental operating leverage through product innovation, cost management, and operational efficiencies as reflected in the significant growth in our third-party freight services.
“We made progress on our strategic initiatives effectively managing the business for the long-term despite incremental deterioration of already unprecedented supply chain constraints and higher inflation compounded by the war in Ukraine.
“In keeping with our shareholder value accretion approach, our capital deployment in the first quarter concentrated on operational investments in data-driven technology and smart farming, a strategic investment, and on paying a higher dividend,” Abu-Ghazaleh added.