Del Monte Corporation 2026 Q3 Earnings Call

Good day, everyone, and thank you for joining our third quarter 2026 conference call. Joining me for today's discussion are Mr. Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer, and Ms. Monica Vicente, Senior Vice President and Chief Financial Officer. I hope that you've had a chance to review the press release that was issued earlier via Business Wire. You may also visit the company's IR website at investorrelations.freshdelmonte.com to access today's earnings materials and to register for future distributions. This conference call is being webcast live on our website and will be available for replay after this call. Please note that 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 investor supplemental slide deck, which is available on our website.

I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward-looking statements within the safe harbor provisions of the federal securities laws. In today's press release and in our SEC filings, we detail risks that may cause our future results to differ materially from these forward-looking statements. Our statements are as of today, October 28, 2026, and we have no obligation to update any forward-looking statement we may make. During the call, we will provide a business update along with an overview of our financial results, followed by a question and answer session. With that, I will turn today's call over to Mr. Mohammad Abu-Ghazaleh. Please go ahead, sir. Thank you, Christine.

Good morning, everyone, and thank you for joining us. When we acquired Del Monte Foods earlier this year, we saw an opportunity to do much more than expand our portfolio. We saw the potential to bring together the strengths of two iconic businesses that had operated separately for decades, creating a stronger foundation for long-term growth. Today, with our second full quarter of the expanded portfolio behind us, that opportunity is beginning to take shape. Our third quarter performance reflects the contribution of our Foods business and the progress that we are making toward building a stronger, more diversified company. While our fresh operations continue to navigate a challenging global environment, Foods is broadening our earnings base and adding greater balance to our business. But what is most important to me is not simply what the acquisition is contributing today.

It is what these businesses can accomplish together. For the first time, we can fully connect our agricultural expertise, global infrastructure, manufacturing capabilities, and the strength of the Del Monte brand under one strategy. We believe that this creates opportunities for growth that neither businesses could have pursued as effectively on its own. An important part of realizing that potential is strengthening the foundation of our Foods business, where our teams have made significant progress in a relatively short period of time. Customer fill rates have improved from 87% in the prior year period to approximately 98% ahead of the upcoming holiday season, representing our best improved service levels and helping restore confidence among retail partners in our Del Monte Foods division. These improvements reinforce our confidence in the underlying strength of the business and the Del Monte brand.

We hold strong positions in our core categories, including approximately 25% market share in canned vegetables and in refrigerated fruit. Importantly, we have plans in place to leverage the capabilities of our integrated company to build on those positions through innovation and growth. Beyond the progress we are making in our Foods division, what truly distinguishes Del Monte Corporation is the combination of five complementary strengths that we believe position us well competitively. These include our global pineapple franchise, fresh-cut capabilities, the unified Del Monte brand, our vertically integrated supply chain, and a global shelf-stable manufacturing platform. Individually, these are valuable assets. Our food business can fully leverage our global agricultural sourcing, fresh and frozen processing capabilities, and broader resources. At the same time, our fresh business has new opportunities to extend into additional product categories, formats, and consumer occasions.

Our long-term growth strategy is built around making the most of these complementary strengths, guided by our new North Star created by this union. More servings, more consumers, more occasions. Our ambition is to make fruits and vegetables a greater part of consumers' everyday lives. With consumption remaining below recommended levels worldwide, we see a tremendous opportunity to put our unique capabilities to work making nutritious foods more accessible, convenient, and relevant to consumers everywhere. Innovation will be central to realizing that opportunity. We are developing an ambitious pipeline of products with new formulations, modern packaging, and convenient formats designed to attract younger consumers while continuing to serve the households that have trusted Del Monte for generations. We currently anticipate initial launches of the first products beginning in the second half of 2027 and throughout 2028.

As we expand our prepared foods business and introduce higher value products, we see opportunities to improve our sales mix and support margin expansion while remaining disciplined in how we invest. We have a clear vision for the future, a remarkable team, and the capability to take Del Monte into its next chapter. There is still much work ahead, but I have tremendous confidence in the direction we are taking. Our history is what brought us here. What we build all together will define our future. Thank you for your continued interest in Del Monte Corporation. With that, I will turn it over to Monica Vicente, our Chief Financial Officer, to discuss our financial results.

Monica. Thank you, Mr. Abu-Ghazaleh, and good morning, everyone.

Before I review our third quarter results, I want to focus on three priorities that continue to shape our performance: advancing the integration and financial contribution of Del Monte Foods, improving returns across our global operating network, and maintaining disciplined capital allocation as we invest for growth and strengthen cash generation. Together, these priorities are improving operating efficiency, expanding our margin potential, and strengthening the Del Monte portfolio across fresh and prepared foods. Starting with Del Monte Foods, the third quarter marked six full months of ownership. Integration continues to progress well, and we remain on track to deliver approximately $9 million of annual margin expansion through the pricing portfolio and trade spend initiatives discussed last quarter.

We are increasing our outlook for net sales to approximately $650 million and adjusted EBITDA to approximately $45 million, up from our previous expectations of $625 million and $35 million respectively. This increase reflects stronger than expected performance to date. Our integration work remains focused on procurement, logistics, commercial execution, and trade spend efficiency. These actions are designed to expand margins and strengthen cash generation. Across our global fresh platform, we continue to take decisive actions to build a more agile and cost-effective production network. In Costa Rica, we advanced the previously announced closure of banana farms and continue repurposing a significant portion of the land to expand production of our premium pineapple varieties. Therefore, shifting resources toward higher return opportunities and strengthening returns over time. Turning to our third quarter financial performance. Net sales were $1.1 billion, an increase of 7% year-over-year. Adjusted net sales increased by 14%.

Gross profit increased 27% to $103 million, significantly outpacing sales growth. Gross margin was 9.4%, an expansion of 150 basis points. Adjusted operating income was $35 million, adjusted net income attributed to Del Monte Corporation was $24 million, and adjusted diluted EPS was $0.50. Adjusted EBITDA increased 5% to $61 million, representing a margin of 5.6%. The prepared food segment delivered a 17.5% gross margin, the highest among our reportable segments, and contributed meaningful scale and profitability during the quarter. In our global fresh platform, favorable pricing across portions of the portfolio partially offset lower volume in certain categories and higher production, procurement, freight, distribution, and fuel costs. Results also reflected adverse currency movements, primarily from the stronger Costa Rican colón. Against that backdrop, we are focused on three areas.

First, we are optimizing supply and logistics by realigning our production and distribution network to improve asset utilization, lower costs, and expand margins. Second, we are focused on improving returns on our product, directing capital and operating resources toward premium products and opportunities with the strongest potential to generate earnings and cash. Third, we are advancing pricing, sourcing, and productivity by maintaining pricing discipline, expanding sourcing flexibility, and protecting service levels for our customers. Turning now to capital allocation and our full year outlook. Net cash provided by operating activities for the first nine months was $53 million, which supported integration, strategic inventory buildup, and working capital requirements while preserving financial flexibility. We continue to expect full year capital expenditures of $85 million-$95 million, focused on integration, productivity, premium fresh capacity, fresh-cut growth in Europe, and technology-enabled efficiency.

On shareholder returns, our board declared a quarterly cash dividend of $0.30 per share, or $1.20 annualized, payable on December 4, 2026, to shareholders of record as of November 11, 2026. Looking at our full year 2026 outlook, we are reiterating our outlook for adjusted net sales growth of 13%-15%, and adjusted EBITDA of approximately $230 million-$240 million. We continue to expect gross margins of 11%-12% for fresh and value-added products, 14%-15% for prepared foods, and 10%-11% for other products and services, consistent with our prior outlook. For bananas, we now expect full year gross margins of 2%-3%, compared with our prior expectation of 3%-4%. The revision reflects weather-related volume impacts, production costs, distribution, and currency pressures.