Fresh Del Monte's Q3 2025 Earnings Call: Emerging Contradictions in Pineapple Supply, Avocado Pricing, and Banana Disease Impact

Date of Call: October 29, 2025

Financials Results

• Revenue: $1.022 billion net sales (adjusted net sales $960 million); increase vs prior year driven by higher per-unit selling prices in Banana and Other Products (no YOY % provided)
• EPS: Reported diluted loss of $0.61 per share; adjusted diluted earnings per share of $0.69 (adjusted net income $33 million vs reported net loss attributable of $29 million)
• Gross Margin: Reported gross margin 7.9% (gross profit $81M); adjusted gross margin 9.2% (adjusted gross profit $88M); gross margin decreased vs prior period
• Operating Margin: Operating loss of $22 million (adjusted operating income $40 million); adjusted EBITDA $58 million

Guidance:

• Net sales expected to grow approximately 2% year-over-year.
• Fresh & value-added segment gross margin expected ~11%–13% (excluding Mann Packing), aiming for low- to mid-teens sustainability.
• Banana segment gross margin expected to compress to ~4% (below historical 5%–7%) due to disease and cost pressures.
• Other Products & Services gross margin expected 10%–12%; SG&A expected $205M–$207M.
• FY CapEx now $60M–$70M (down from $70M–$80M); operating cash flow expected ~$190M–$200M.
• Mann Packing divestiture expected to close mid-December; benefits begin Q4, more pronounced in 2026.

Business Commentary:

* Strong Financial Performance in Pineapples: - Fresh Del Monte's pineapple segment showed strong performance with a notable adjusted gross margin of 13.9%. - The growth was driven by stable supply and high demand, with limited impact from inflationary cost pressures compared to other segments.

• Banana Segment Challenges and Strategic Decisions:
• The banana segment faced a 45% decrease in production in Costa Rica due to Black Sigatoka and other diseases, impacting profit margins.

• The company decided to divest the Mann Packing business, expecting this strategic move to enhance overall margin profile and capital efficiency.

• Disease Impact on Global Banana Production:

• Tropical Race 4 (TR4) has now spread to Ecuador, intensifying global pressure on banana production.

• The advancing disease is contributing to reduced supply, increased costs, and threatens the stability of the banana market in the long term.

• Cost Management and Efficiency Initiatives:

• Fresh Del Monte sold a break bulk shipping vessel during the quarter to streamline operations and reallocate capital.
• This move aligns with their efforts to enhance supply chain resilience amid elevated operating costs and macroeconomic uncertainty.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted 'steady progress' and portfolio actions (Mann divestiture) while reporting an operating loss of $22M and impairments (total $56M). They expect modest revenue growth (~2% YoY) and improved margins in fresh/value-added but warn banana margins will compress to ~4% due to disease-driven costs and supply disruptions.

Q&A:

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): The adjusted gross margin in the fresh & value-added segment was 13.9% — is ~13% the new normal for this business?
  Response: CFO: We expect to be close to ~13% consistently; guidance maintained at 11%–13% while remaining cautiously confident.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): Are costs up in pineapples similar to bananas, and will pineapple margins remain the strongest in the segment?
  Response: CEO: Pineapples aren't facing the same disease pressures as bananas; normal inflationary cost increases only (labor, services), demand outstrips supply, and pineapple margins remain strong.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): With competitors imitating new pineapple varieties and innovations, do consumers notice and does that raise fruit value?
  Response: CEO: Higher-quality fruit (ripeness, sweetness) clearly increases consumption; Del Monte believes its innovation leadership sustains its premium position.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): When will pineapple supply/demand recover?
  Response: CEO: Structural limits (land, environment) constrain rapid supply growth; Brazil production in ~3 years will help, but recovery is gradual—company confident in positioning.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): Avocado prices have fallen—will pricing firm in the next ~6 months?
  Response: CEO: Possible short-term pickup in 2–3 months, but prices likely to remain in the ~$30–$50 range; CFO: margins held up because our buy costs fell too.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): How is the fresh-cut fruit business performing?
  Response: CFO: Fresh-cut is performing very well and is a primary product alongside pineapple with continued strong performance expected.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): Why is banana consumption/volume down in North America and elsewhere?
  Response: CEO: Some seasonality, but main issue is rising costs from diseases (Black Sigatoka, TR4) and weather; consumption broadly stable but margins pressured by higher farm and protection costs.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): Will the new banana industry group (VANA) lead to more rational pricing?
  Response: CEO: The group aims to better understand and address industry challenges (agricultural/logistics), not to coordinate pricing; supply shocks could eventually cause sharp price increases.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): How much did tariffs add to the top line across the portfolio?
  Response: CFO/CEO: Did not disclose a number; tariffs were passed on in North America and overall impact is minimal.

• Question from Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division): Is Black Sigatoka driving the Costa Rica production decline and can canopy changes mitigate it?
  Response: CEO: Yes—Sigatoka is the primary cause of the ~22% YoY production decline (≈18M boxes) in Costa Rica; mitigation is difficult and the disease continues to spread.

Contradiction Point 1

Pineapple Supply and Demand Dynamics

It directly impacts expectations regarding supply and demand dynamics in the pineapple segment, which is a key product for the company, potentially influencing revenue and investor expectations.

Are pineapple margins still the strongest in fresh and value-added segments despite cost pressures? - Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q3: Pineapple costs are not increasing significantly like banana costs... Pineapple prices are stable due to limited supply, and demand continues to outstrip supply. - Mohammad Abu-Ghazaleh(CEO)

好的，我需要处理用户提供的这个金融文章作者的任务。用户希望将电话会议中的问题简化，保持原意，符合美式英语习惯，并且只输出问题，结尾要有问号。首先，我需要仔细阅读原问题：“Can you provide more color on your core focus areas, pineapples, fresh-cut fruit, and avocados? How are you addressing supply constraints, weather impacts, and tariff risks?” 这里有两个部分，第一部分是询问核心关注领域，第二部分是应对供应限制、天气影响和关税风险。接下来，我要简化每个部分。第一部分中的“provide more color on your core focus areas”可以简化为“core focus areas”，因为“provide more color”在这里是冗长的，直接说核心领域更简洁。然后列举的三个产品：pineapples, fresh-cut fruit, and avocados，需要保持原样，但可能需要检查是否有更常见的表达方式，不过用户要求不改变原意，所以保留原词。第二部分的问题是如何应对供应限制、天气影响和关税风险。原句是“How are you addressing...”，可以简化为“How are you addressing...”，但可能需要更直接的动词，比如“mitigating”或者“managing”，但用户要求不改变原意，所以保持“addressing”更合适。然后三个因素：supply constraints, weather impacts, tariff risks，这些已经是简洁的术语，不需要改动。然后检查是否符合美式英语习惯，比如用词是否正确，比如“pineapples”是复数，正确。另外，问题是否连贯，是否需要合并两个部分。原问题有两个问号，但用户可能希望合并成一个问题，还是分开？原问题有两个独立的问题，所以应该保留两个问号，但用户示例可能希望合并。需要看用户给的例子。用户提供的例子中，原问题有两个部分，但简化后可能合并成一个问题，但用户可能希望保持两个问题分开。不过原问题中的两个问题是否应该合并？比如“Can you provide more details on your core focus areas (pineapples, fresh-cut fruit, and avocados) and how you're addressing supply constraints, weather impacts, and tariff risks?” 但用户可能希望分开，所以可能需要保持两个问题。不过原用户给的例子中，输出是两个问题吗？看用户给的示例，用户提供的输入是两个问题，但输出可能是一个问题，因为原问题中的两个问句是分开的。例如，用户提供的输入有两个问句，但输出可能是一个合并的问题。需要确认用户的需求。根据用户的要求，输出是简化后的问题，可能需要保持两个独立的问题，每个以问号结尾。但用户可能希望将两个问题合并成一个，用逗号分隔。例如：“Can you provide more details on your core focus areas (pineapples, fresh-cut fruit, and avocados) and how you're addressing supply constraints, weather impacts, and tariff risks?” 但用户给出的例子中，原问题有两个问句，而输出是否合并？需要看用户给的示例。用户给的例子中，输入是两个问题，但输出是否合并？例如，用户可能希望将两个问题合并为一个，因为它们都是关于同一主题的。但用户没有明确说明，所以需要根据常规做法来判断。通常，如果两个问题相关，可以合并成一个复合问题。所以可能合并成一个，用逗号分隔。但需要确保符合用户的要求。用户要求不改变原意，所以如果原问题有两个独立的问题，应该保持两个独立的问题。但原问题中的两个问题是否独立？第一个是询问核心领域，第二个是询问应对措施，可能属于同一主题，所以合并是合理的。但用户可能希望保持原结构。需要仔细分析。例如，原问题中的两个问句是分开的，但用户可能希望简化为一个问题，涵盖两个方面。例如：“Can you provide more details on your core focus areas (pineapples, fresh-cut fruit, and avocados) and how you're addressing supply constraints, weather impacts, and tariff risks?” 这样更简洁，并且保持原意。但用户是否允许合并？用户没有明确说明，但根据常规做法，合并是合理的，因为它们都是关于同一主题的。所以最终简化后的问题可能是一个合并的问题，用逗号分隔，保持两个部分。然后检查是否符合美式英语习惯，比如用“details”代替“color”，因为“provide more color”在金融场合中常用，但用户要求精简，所以用“details”更合适。另外，“pineapples, fresh-cut fruit, and avocados”是否需要用括号括起来，或者作为例子列出？可能用括号更清晰。最后，确保结尾有问号。因此，最终简化的问题应该是：“Can you provide more details on your core focus - Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division)

andQ4: Pineapple pricing is expected to be as strong or stronger than last year due to supply constraints and weather impacts. - Monica Vicente(CFO)

Contradiction Point 2

Avocado Pricing and Market Dynamics

It involves differing perspectives on avocado pricing and market dynamics, which are critical factors for the company's revenue and investor expectations.

Will avocado prices stabilize in the next 6 months? - Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q3: There could be a pickup in prices due to Mexico's supply dominance, but it's unlikely to be a long-term increase. Prices will likely stabilize around $30 to $50 per box. - Mohammad Abu-Ghazaleh(CEO)

How will tariffs on Mexican avocado imports affect demand and the avocado business? - Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division)

andQ4: If tariffs on Mexican avocado imports take effect, Del Monte expects to pass the costs to buyers. The impact on demand is uncertain, and it's premature to speculate. - Mohammad Abu-Ghazaleh(CEO)

Contradiction Point 3

Avocado Pricing Outlook

It involves differing expectations about avocado pricing stability, which impacts the company's ability to maintain profitability in the fresh and value-added segment.

Will avocado prices stabilize in the next 6 months? - Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q3: There could be a pickup in prices due to Mexico's supply dominance, but it's unlikely to be a long-term increase. Prices will likely stabilize around $30 to $50 per box. - Mohammad Abu-Ghazaleh(CEO)

What is your outlook for avocado demand and pricing for the rest of this year and next year? - Mitchell Brad Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q2: We are seeing a stabilization in avocado pricing with current prices in the mid-$40-per-box range. - Mohammad Abu-Ghazaleh(CEO)

Contradiction Point 4

Pineapple Supply and Demand Dynamics

It reflects differing perspectives on the expected duration and impact of pineapple supply constraints, which are crucial for understanding the company's product strategy and profitability.

When do you expect demand and supply to balance in the pineapple segment? - Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q3: We expect continued strong demand for pineapples, especially with new production from Brazil starting in a few years. Demand will likely remain strong. - Mohammad Abu-Ghazaleh(CEO)

Can you update us on current pineapple supply challenges and the supply outlook for 2026? - Mitchell Brad Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q2: We expect a continued shortage of pineapple supply through 2026, driven by strong demand for our premium varieties. Expansion is planned in Costa Rica, Africa, and Brazil, with new production capacity expected in the next 2 to 3 years. - Mohammad Abu-Ghazaleh(CEO)

Contradiction Point 5

Banana Supply and Disease Impact

It highlights differing perspectives on the impact of diseases on banana supply, which has significant implications for the company's operations and financial performance.

Why has banana consumption decreased in North America? - Mitchell Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q3: Consumption drops may be seasonal. However, the primary issue is cost pressures due to diseases and price stability. The industry is at risk of facing severe drops in banana production. - Mohammad Abu-Ghazaleh(CEO)

What impact has Black Sigatoka had on banana supply in Central America? - Mitchell Brad Pinheiro (Sturdivant & Co., Inc., Research Division)

2025Q2: Black Sigatoka has significantly impacted banana production in Costa Rica, reducing export volume by over 20%. The disease is transforming against chemicals, and no cure is evident. Costa Rica is down 20% in banana exports this year, and the impact is worsening. - Mohammad Abu-Ghazaleh(CEO)