Dole plc 2026 Q2 Earnings Call

Thank you, Derek. Welcome everybody, thank you for joining our results webcast. Joining me today is our Chief Executive Officer, Rory Byrne, our Chief Operating Officer, Johan Linden, and our Chief Financial Officer, Jacinta Devine. During this webcast, we'll be referring to presentation slides to supplement our 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 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 press releases.

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

Thank you, James, welcome everybody. Thank you all for joining us today as we discuss our results for the second quarter and provide an update on the latest developments across the group. Turning firstly to slide four. Well, across the group, we continue to see healthy consumer demand for our products. Fresh produce consumption remains resilient, supported by the long-term health and wellness trends. We believe this augurs well for the future of our sector. Our second quarter results was in line with our expectations, reflecting the impact of higher fuel and shipping costs on fresh fruit profitability arising from the conflict in the Middle East. Despite these pressures, the quarter once again demonstrated the resilience of our diversified business model with the strength of our Diversified Americas in particular, helping to offset the pressures experienced in fresh fruit.

Since our last update, we've been active in advancing our development pipeline while maintaining our disciplined approach to capital allocation. Turning now to slide five and focusing in more detail on this topic. As we said last quarter, our priority remains clear: to allocate capital where we can achieve the best long-term returns for our shareholders. As part of this approach, we were delighted to complete the Ecuador port sale on July 1st. This transaction represents an important milestone, unlocking approximately $95 million of net proceeds, further strengthening our balance sheet and increasing our financial flexibility. Importantly, the sale is expected to have a negligible impact on our ongoing earnings and cash flow profile, making it a very attractive value-enhancing transaction for shareholders. We continue to explore an important strategic opportunity to invest in automation, AI, and innovative warehouse solutions to better serve our core customer base in Scandinavia.

As part of this strategy, we were very pleased to complete the acquisition of Greenfood Fresh Produce division in Scandinavia at the beginning of July. This acquisition strengthens our position in an attractive market where we already have meaningful and successful operational capabilities, and it also adds a state-of-the-art distribution facility in Helsingborg that gives us a strong platform for the next phase of this automation and artificial intelligence investment. Alongside these larger projects, we continue to look at smaller bolt-on acquisitions that complement and strengthen our existing operations. During the quarter, we completed a bolt-on acquisition within our Irish growing operations, further strengthening our sourcing capabilities and supply base. The fresh produce market remains fragmented, and we continue to see opportunities for disciplined acquisitions that add value across our core markets. Returning capital to shareholders remains an important component of our capital allocation framework.

During the quarter, we repurchased just over 700,000 shares for $10 million at an average price of $1,388 per share. As always, we weigh share repurchases against the returns available from our development projects and acquisitions. We remain focused on balancing investment for growth with returns to shareholders. Turning now to the operational review and beginning with the fresh fruit slide on slide eight. As we flagged on our first quarter call, we anticipated higher fuel and shipping costs to arise from the conflict in the Middle East, and that is how the quarter played out. Looking at our main product categories, bananas, we saw strong volumes in Europe with pricing broadly in line with the prior year. In North America, volumes were lower, reflecting market conditions and our focus on disciplined profitability, although underlying pricing was slightly higher than the prior year.

For pineapples, weather affected availability during the quarter, while the continued strength of the Costa Rica colon pressured profitability. These challenges are not unique to Dole and continue to affect producers across the industry. Positively, overall demand for our products remained resilient. As we move through the second half, we expect to benefit from contractual pricing mechanisms, including variable fuel surcharges, together with increasing benefits from our recent investments in production and sourcing and the cost-saving actions we continue to advance across the segment. Taken together, these initiatives are expected to help offset a portion of the cost pressures experienced during the second quarter and support improved fresh fruit performance in the second half of the year relative to the prior year. Turning now to Diversified EMEA. The segment delivered a solid quarter overall, with the revenue broadly stable, although profitability was slightly below the strong prior year comparative.

Sweden was again a strong contributor, we continue to see the benefits of our investments in logistics, infrastructure, and automation. The lower year-on-year result was driven largely by South Africa, which had our greatest exposure to the disruption in the Middle East during the quarter. Turning to Diversified Americas. Diversified Americas delivered another strong quarter and was again an important contributor to group performance. The segment benefited from strong category performance, disciplined execution, and the continued benefits of investments made over recent years. Its dynamic pricing model continues to support profitability and gives us flexibility to manage changing market conditions. Its strong performance through the first half again highlights the value of our diversified business model and helped offset the pressures in fresh fruit. With that, I'll hand you over to Jacinta to give the financial review for the second quarter.

Thank you, Rory, and good day everyone. Turning firstly to the group results on slide 11. Group revenue of $2.5 billion was 2.9% higher on a reported basis, reflecting positive operational performance across the group, together with favorable foreign exchange movements. Excluding foreign exchange impacts on a like-for-like basis, revenue was 1.7% ahead. While revenue remained resilient, profitability was impacted by higher costs within fresh fruit, as discussed by Rory. Cost of sales increased at a proportionally higher rate than revenue, primarily reflecting the higher costs in fresh fruit. As a result, gross profit decreased by $23 million. SG&A expenses were higher year-over-year, primarily due to a non-recurring charge recorded in connection with the settlement of a historical legal matter. In Q2 2025, we booked gains from asset sales in Hawaii, which also contributed to the overall decrease in operating income.

Offsetting this, other income increased by $22.6 million, primarily reflecting favorable unrealized foreign exchange movements on foreign currency denominated borrowings compared with an unrealized loss in the prior year. Interest expense decreased by $2.7 million due to lower average borrowings and lower base interest rates. Overall, net income from continuing operations was $35.1 million compared to $52.9 million in the prior year. However, total net income increased year-on-year as the prior year included a loss from discontinued operations associated with the fresh vegetable business, which was divested in August 2025. Looking now at the non-GAAP performance measures. Adjusted EBITDA was $117 million, a decrease of $20.4 million, mainly driven by the higher costs within fresh fruit and partially offset by another strong performance from Diversified Americas.

Adjusted net income decreased to $9.4 million, predominantly due to the decrease in adjusted EBITDA, partially offset by lower interest expense and a lower tax charge. Adjusted diluted EPS was $0.46 compared to $0.55 in Q2 2025. Turning now to the divisional update, starting with fresh fruit on slide 13. Revenue of $972.8 million was broadly in line with the prior year, as higher banana volumes in Europe and higher underlying pricing in North America was partially offset by lower banana volumes in North America and lower pineapple volumes across all markets. Adjusted EBITDA decreased by $22.5 million to $50.3 million, primarily reflecting elevated fuel and shipping costs, higher fruit sourcing costs, higher pineapple growing costs, and the continued depreciation of the Costa Rica colon.

In Diversified Fresh Produce EMEA, reported revenue increased 1%, primarily due to favorable foreign exchange and underlying growth in Scandinavia, partially offset by lower revenue in Spain relative to a strong comparator quarter. On a like-for-like basis, revenue decreased by 1.7%, or $19 million. Adjusted EBITDA decreased 6% compared with a very good performance in Q2 2025 as continued strength in Scandinavia and a favorable foreign exchange impact was offset by weaker performance in South Africa, the Netherlands, and Spain. On a like-for-like basis, Adjusted EBITDA decreased $4 million. Finally, Diversified Americas delivered another strong result this year. Revenue increased 14%, driven primarily by higher volumes in North American business, particularly kiwi, avocados, and North American cherries, together with more positive season end pricing for our southern hemisphere export business.

Adjusted EBITDA increased by $5.2 million to $20.6 million, driven by a strong performance in our North American business, together with the continued benefit of the partial restructuring of our berry operations in the fourth quarter of 2025. Turning to slide 16 for a view of key cash items and net leverage. Capital expenditure was circa $25 million, including investments designed to support future growth, expand capacity, and improve operating efficiency. For full year 2026, we are maintaining our guidance for routine CapEx of approximately $100 million. As expected, working capital remained an outflow during the first half of the year, reflecting the normal seasonal profile of the business. However, as discussed in our Q1 call, first half free cash flow significantly improved compared to the prior year. Net debt in the quarter was impacted by the first step of the Ecuador port sale transaction.