Dole plc (DOLE) Q3 2021 Earnings Call Transcript | The Motley Fool

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Dole plc ( DOLE -2.58% )
Q3 2021 Earnings Call
Dec 03, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the Dole plc third quarter 2021 earnings conference call and webcast. Today’s conference is being broadcast live over the Internet and is also being recorded for playback purposes. [Operator instructions] For opening remarks and introductions, I would like to turn the call over to the head of investor relations with Dole plc, James O’Regan.

James O’Regan — Head of Investor Relations

Welcome, everybody, and thank you for joining our third quarter 2021 conference call. Joining me on the call today are Rory Byrne, chief executive officer; Johan Linden, chief operating officer; and Frank Davis, chief financial officer. This conference call is being webcast live on our website and will be available for replay after this call. During this call, we will be referring to presentation slides and supplemental remarks, and these 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 law. 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 news releases. Our earnings release, financial report and related materials for the third quarter can be found on our website at doleplc.com/investors.

Information regarding the use of non-GAAP financial measures may also be found in the Notes section of the release, which also includes the reconciliation to the most comparable GAAP measures of adjusted EBITDA, adjusted net income, net debt, and adjusted earnings per share. The details of our statutory forward-looking statements disclaimer can be found in our SEC filings and the presentation slides we will be discussing today. With that, I’m pleased to turn today’s call over to Rory.

Rory Byrne — Chief Executive Officer

Thank you, James, and thank you all for joining us on our first earnings call at Dole plc following our IPO in July. As well as discussing our third quarter 2021 results and performance year to date, I’ll also provide you with a high-level overview of the Dole plc business. And later in the presentation, I’ll give you some further insight into our long-term strategy. Johan will give an update on trading, progress being made on synergies, and comment on some of the strategic initiatives being undertaken across the group.

And finally, Frank will take you through the financial review. So with that, turning to Slide 5, while 2021 has been a transformative year for the group, Dole plc was formed by bringing together Total Projects plc and Dole Food Company, followed by the IPO of this new company at the end of July. We received net proceeds of $398.9 million from the IPO, and all of the proceeds were used to strengthen our balance sheet by repaying higher cost stash. Concurrently with the IPO, we also successfully completed a $1.44 billion refinancing package, providing us with well-structured liquidity to support our continued growth.

For the purpose of this presentation and as set out in our press release issued today, the financial information has been prepared on a pro forma basis, illustrating Dole plc’s results as if the merger, IPO, and refinancing had all occurred on 1 January 2020. This is consistent with the pro forma financial information presented in the Form F-1 filed with the SEC in connection with the IPO. So since the IPO at the end of July, we’ve been focused on the integration and reorganization of management across the enlarged entity, implementing our synergy strategy, and further strengthening our public company reporting and compliance functions. Looking at our financial performance, we’ve delivered strong results for the first nine months of the year against the backdrop of a unique economic environment.

Pro forma revenue and pro forma adjusted EBITDA are both up versus the comparable prior year period, with pro forma revenue up 4.5% and pro forma adjusted EBITDA up 12.6%. We’re very pleased with this growth and set against the context of a strong prior year and also given the complexities currently being experienced in supply chains across the globe. Talent and dedication of our people, along with the diversity of our operations, both from a geographic and a product and service offering perspective, as well as our sophisticated asset base has helped us to manage the industrywide supply chain pressures. We’ve witnessed firsthand the continued benefits of our integrated business model and having control over assets within our supply chain, such as our fleet of 11 ships that we operate and approximately 17,000 containers in our tropical fleet business.

This has enabled us to continue to deliver in a challenging environment. Despite the benefits of our integrated supply chain, we’ve not been immune from industrywide cost inflation, which we managed earlier this year. As increasing inflationary pressures emerged, we initially focused our efforts on optimizing our supply chain to limit cost impacts. However, now that it’s clear that inflation is pervasive and persistent, we have reacted by increasing prices in the segment of our business that have longer-term contracts, such as our tropical fruit division and value-added solids.

And we’re pleased that our customer base has largely been supportive and understanding. Within the diversified segment of our business, pricing tends to be more dynamic. And to date, we’ve been able to largely pass through cost increases but working closely with our suppliers and our customers. We’re also very pleased with our financial position following the IPO.

At the end of Q3, our net leverage stood at 2.6 times, which is below our targeted level of three times. Our well-capitalized balance sheet creates the basis for long-term sustainable growth for the group, and I’ll provide a recap of our long-term strategy later in the presentation. Today, we’ve also announced a cash dividend for the third quarter of 2021. We pay a dividend of $0.08 per share on January 7, 2022 to shareholders on record on the 17th of December 2021.

We’re providing a full year 2021 pro forma revenue target in the range of $9.2 billion to $9.4 billion and the full year 2021 pro forma adjusted EBITDA target in the range of $390 million to $400 million. This corresponds to year-on-year pro forma growth of 2.6% to 4.8% and pro forma adjusted EBITDA growth of 4.9% to 7.6%. I’ll provide further details on our outlook later in the presentation. So turning to Slide 7.

I’ll now give you a brief overview of the Dole plc business. We are the global leader of fresh produce of nearly two times larger in terms of revenue than the next largest company in this category. We produce remarket, distribute an extensive variety of fresh fruits and vegetables across the globe. Our produce are sourced both locally and from around the world from a broad sourcing network and from our own farms.

We’ve over — we have sales in over 80 countries, the North America and Europe being our largest markets, but also the presence in parts of Asia, Latin America, the Middle East, and Africa. Four operating divisions of Dole plc are Fresh Fruits, Fresh Vegetables, Diversified Fresh Produce America and Rest of World, and Diversified Fresh Produce EMEA. Fresh Fruit division is responsible for farming, sourcing, and distribution of bananas, pineapples and various other tropical fruits, as well as providing commercial cargo services. Principal markets, geographic regions served are North America and Europe.

Fresh Vegetables is responsible for the distribution sale of Fresh Packed Vegetables as well as value-added salads, which include pre packed salads and new year kits. The two diversified divisions are responsible for the production, marketing, and distribution of a wide variety of fresh produce to customers, primarily in North America and Europe across the retail, wholesale, and food service channels. Dole plc has leadership positions in categories such as bananas, pineapples, value-added salads, grapes, and Fresh Packed Vegetables. We also have a focus and expanding presence indeed and faster-growing product categories such as avocados, berries, and organic produce.

Fresh produce is a key and growing category within the overall food sector. We are seeing an acceleration of growth driven by health and wellness trends. Consumers are increasingly focused on their physical and mental well-being on sustainability, and they’re shifting toward plant-based vegetarian and vegan diets as a way to improve their health and reduce their own carbon footprint. As a result, the category itself is focused to experience annual growth of over 2.7% per annum over the next five years.

One final point to mention is that the market that we operate in is still highly fragmented with significant potential for further consolidation. As total produce, we used M&A as a successful lever for growth, and we expect Dole plc to do the same. On Slide 8, just to remind you, we’ve illustrated the wide geographical presence of Dole plc as well as giving some insight into the highly valuable and strategic asset base that we have. We operate in over 250 facilities across the globe, including over 160 distribution facilities and 75 pack houses.

We operate 12 cold storage facilities and five solid manufacturing plants. We own over 109,000 acres of land with this owned acreage combined with the multi-continental sourcing model enables operating flexibility and product availability throughout the year, enhance — and…