Fresh Del Monte's stock soars as customers buy less but spend more on fresh foods
Shares of Fresh Del Monte soared Tuesday, after the fresh fruit and vegetables seller swung to a third-quarter profit as sales rose, with higher selling prices in the fresh foods and banana businesses helping make up for lower sales volumes and higher costs.
The company also raised its "interim" cash dividend to 8 cents a share, payable Dec. 6 to shareholders of record on Nov. 13. That's up from the interim dividend of 6 cents a share paid in September, which was just seven months after the company said it suspended its dividend "in light of the terms of the company's credit facility."
Earlier this month, the company said it had amended a $1.1 billion credit facility to extend the maturity date to Oct. 1, 2024 from April 15, 2020, and to add a feature that would allow the company to buy up to an additional $300 million in credit.
The stock shot up 10.9% to close Tuesday at $31.67. The stock has now gained 12.0% year to date, while the S&P Small Cap 600 index has advanced 16.0% and the S&P 500 index has rallied 21.1%. S&P Dow Jones Indices added Fresh Del Monte's stock to the Small Cap 600 component on Sept. 30.
The company reported before the opening bell net income for the quarter to Sept. 27 of $18.1 million, or 38 cents a share, after a loss of $21.5 million, or 44 cents a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share came to 35 cents after a loss of 14 cents a share last year.
Sales edged up 0.1% to $1.07 billion, as fresh and value-added products sales rose 2.0% to $652.9 million while banana sales fell 2.9% to $385.8 million. Other products and services sales 2.2% to $31.5 million.
Here's how the company was able to take in more sales dollars in its fresh and value-added products that last year despite a decline in the volume of products sold:
For non-tropical fruit, which include the company's apple, grape, citrus, berry, pear, peach, plum, nectarine, cherry and kiwi product lines, sales fell 23% to $32.2 million, as volume decreased 22% while pricing was flat and unit costs declined 2%.
Prepared foods, which includes the company's prepared traditional products, and meals and snacks product lines, was the only business segment that saw prices decline, but net sales still rose as sales volumes enough to offset the lower prices.