Good day, everyone, and welcome to Fresh Del Monte Produce's Third Quarter 2020 Earnings Conference Call. Today's conference call 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 today's call over to the Vice President, Investor Relations with Fresh Del Monte Produce, Christine Cannella. Please go ahead, Ms. Cannella.

Thank you, Lindsey. Good morning, everyone, and thank you for joining our third quarter 2020 conference call. As Lindsay mentioned, I'm Christine Cannella, Vice President, Investor Relations with Fresh Del Monte Produce. Joining me in today's discussion, Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer; and Eduardo Bezerra, Senior Vice President and Chief Financial Officer. I hope that you had a chance to review the press release that was issued earlier this morning via Business Wire. You may also visit the company's website at freshdelmonte.com for a copy of today's release as well as to register for future distribution. 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 includes reconciliations of any non-GAAP financial measures we mention today to their corresponding GAAP measures. 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 provisions of the Federal Securities Safe Harbor laws. We ask that you review the forward-looking statements information included in the press release we issued this morning and in the company's most recent filings with the SEC. With that, I am pleased to turn today's call over to Mohammad.

Thank you, Christine. Good morning, everyone. 2020 is shaping up to be one of the most challenging periods ever for our industry and Fresh Del Monte Produce. The difficulties we experienced in the third quarter of 2020 were driven by the continuing impact of the COVID-19 pandemic, which continued to hinder our performance with decreased demand as a result of mandatory government shutdowns, including schools, restaurants, food service and business closures being our biggest headwind. These challenges continued to hamper our ability to achieve our financial targets for the third quarter. Net sales for the quarter were $990 million compared with $1.1 billion in the third quarter of 2019. We reported adjusted gross profit of $69 million compared with $76 million in the third quarter of 2019, with gross profit margin improvements in our fresh and value-added products segments. Due to the early actions we took by adjusting our business in response to these challenges, we reported adjusted EPS of $0.35 compared with adjusted EPS of $0.38 in the third quarter of 2019. I'm pleased to report that during the quarter, we completed our move to our new Gonzales, California facility. Today, our 3 Mann Packing facilities and Fresno fresh-cut facility are now operating under one roof, which we anticipate will enable us to improve gross profit in our fresh and value-added products segment by approximately $10 million on an annual basis; a benefit which we expect to achieve over the next 12 months. We also made progress with the optimization plan we announced in the second quarter of 2020, reducing underutilized facilities and land assets. We believe this will allow us to shift assets that better serve the long-term growth of the company. We identified assets across all of our regions that we plan to sell over the next…

Thank you, Mohammad, and good morning. Despite the COVID-19 disruptions during the third quarter 2020, we achieved net income per diluted share of $0.37 versus net income per diluted share of $0.38 in the third quarter of 2019. Excluding, among other things, the effect of other product-related charges, which resulted in a $2.3 million gross profit impact related to inventory write-offs, we delivered adjusted net income per diluted share of $0.35 compared with adjusted net income per diluted share of $0.38 in the third quarter of 2019. However, I would like to point out that if you apply the adjusted gross profit margin of 7% to the $73 million of net sales impacted by COVID-19, we estimate that we would have delivered an additional $5.8 million in adjusted gross profit. Additionally, despite the headwinds of the COVID-19 pandemic, we generated $63 million in cash flow from operating activities during the third quarter. We reduced our long-term debt by $76 million since the end of 2019, and we reduced our long-term debt by $24 million compared with the end of the second quarter of 2020. As Mohammad mentioned, we announced a $100 million asset sale program to be completed over the next 12 to 18 months to strengthen our cash flow position, reduce our debt and continue to reinvest in key areas of growth in our business. Our focus on our value-added business is also progressing well. Measures we have taken over the past year demonstrates the significance of our goals to increase sales revenue, enhance margins and maintain our track record of improved cash flow generation. We believe we are on-track to realize most of our cost savings actions planned for 2021. With that, I will now get into the results for the third quarter of 2020. Net sales were…

[Operator Instructions] Our first question comes from the line of Jonathan Feeney with Consumer Edge.

I guess my first question is a pretty detailed one, I guess, but. Of the announced nonstrategic divestitures -- I'm sorry if you already mentioned this, but is there any general gross profit or operating profit or cash cost to the losses of those assets that are presumably associated with business? I guess that would be my first question. And my second question would be, just an update on how much of the struggles in the banana business is where you do business? It looks like a lot of the problem was concentrated in North America. It is due to competitive activity? And how much of this is due to just dynamics of demand in the category, food away-from-home and different purchasing patterns?

Regarding the assets issue, these assets actually that we want to dispose of or sell are actually assets that are sitting underutilized or lands that we have had for so many years that we never used in terms of agriculture. Just to give you an example, for instance, we have a piece of land -- we have a piece of land in Chile, which we acquired in the -- sometime in the late '80s, early '90s for about $250,000. Today, we are selling this land for over $11 million. That piece of same land, which is in the northern part of Chile. This actually, I bought many, many years ago as -- for an agricultural project that we never used for, and then sat there for a long time. The same thing applies for many other lands that we have in different parts of the world and particularly in Chile and Uruguay. Some of these assets are really underutilized or not utilized at all. Some facilities that we have vacated because we consolidated the operation in -- rather in 2 or 3 facilities under one roof, like we are doing, for instance, right now in California by putting like 3, 4 different facilities under one roof in Gonzales, California, which means that we have so much assets that we can sell. And if you look across the world, over the years, we have had so many assets that we have accumulated, as I believe that they are very valuable assets that we really don't need and that doesn't affect our business in any way, whatsoever. On the contrary, it might leverage our business in a better way. As far as the banana is concerned, the banana, it's really -- it's a very big mess, let me put it that way.…

And Jonathan, just to complement what the Chairman mentioned, it's very important to highlight that although the prices are very unstable in the market, all the investments that we have done in the recent years and the important one being the new vessels, it's really to drive our longer cost position that we can really now deviate strongly through these, let's say, oversupply in the marketplace, so that we can really have, let's say, a better cost position in all of the geographies to be able to face that. And once these move on, we expect that to be accretive to our margin going forward.

[Operator Instructions] Our next question comes from Mitch Pinheiro with Sturdivant.

Just to follow-up on Jon's question regarding the banana business. I mean, Mohammad, you said it's a difficult business. I mean, it's always been a difficult business and there always seems to be supply -- oversupply, and demand has been relatively stable. So you always had these doubts with the ups and downs in this business. What -- is there anything different today just in terms of your comments saying it's difficult? Anything different than the usually difficult business historically?

No, nothing difficult, except that as we see now in the last, I would say, 12 months or 10 months, there is a lot more supply than what it used to be, coupled with the present market conditions because of the pandemic, less consumption, food services, almost dead schools, all these convenience stores, everything is disrupted. So on top of the additional volume that Ecuador has produced and the optimum conditions for production in the other countries as well, we didn't have any kind of climatic, let's say, disorders or disasters during the year, thanks God. But that means that there is more supply and the trees are giving at optimum level. But it hasn't -- the business hasn't changed, except that there is more supply, and we have the dynamic issues that's around this business. I believe, going forward, in the year ahead, hopefully, once that pandemic, we are over with what we are facing today, banana will become better. But like Eduardo just mentioned, we are taking so many actions to really bring the business into a kind of a different path by -- we're having new vessels, which will be the best -- I mean, it is the state-of-the-art of any vessel on that route and this will be only for North America. This will be not only cost-effective but, also logistically, will be the best that you can find. At the same time, we are optimizing and rationalizing our supply and demand in terms of not taking additional risks that we shouldn't take. And that's why I'm very hopeful and very confident that we will be able to achieve even better results than what we are seeing today, even though we have so much challenges and so much headwind with the banana oversupply worldwide. And that's a fact. And one of the unfortunate, which I discussed before, is that our business has been contaminated with other businesses that using bananas as a means to transport. And unfortunately, this has also added to our -- to the challenges in this business.

And so when I watch the European banana prices, they've been awfully weak. I imagine that's where a lot of the excess supply is also heading into. But when I look at the USDA, the prices for bananas in North America, they were -- the retail price is actually up 10% in the third quarter. Is -- are you -- you're not seeing any of that benefit because you've contracted prices earlier in the year, is that correct?

No. North America is a contract -- 90% of our volumes in North America -- and that applies to us, applies to competition as well. 90% of our volumes are contracted to the buyers to retailers and others. So we have -- we don't have that kind of volatility on the prices during the year, except for the spot market. What really helps us is that when the markets are soft, like we have been seeing for the last 3, 4 months during the summer months and even as we speak today, that the retailers are not being able to absorb the contractual volumes that they have contracted for. So what happens is that they come back to you and say -- please reduce my volumes by, let's say, instead of 100 loads, give me only 90 or 85 or 80 loads. So you ends up with additional fruit that there is no home for it, except the spot market. And that's really what helps, you see. This is something that nobody -- I mean, we cannot stuff it down the throat of the retailer on one side. At the same time, we have to live with it and go to the -- either the spot market or go into other markets, which really underpays and suffer a lot more than selling it in North America. That's actually what is happening right now.

And then -- I'm sorry, go ahead.

And just to complement a little bit. So if you look to the export prices from Ecuador, they are at historical low level currently. And so that's a very important element on the equation that shows exactly what Mohammad mentioned about the oversupply and the -- let's say, the concentration of the demand in the retailer, it caused all of the companies trying to get a stake there, and that also puts pressure on the volumes that get into the retailer.

Just one more banana question. Do you have any update on the Panama disease? Is there any further spread? Do you feel like it's a little bit under control? Anything -- any actions that you've been taking in your own facilities?

No. The Panama disease is status quo. We haven't seen anything abnormal in any of our plantations or other plantations. So as far as we speak, it's under control. It doesn't happen overnight. This takes years if there is anything to flare up. It doesn't happen overnight. It takes years for it to expand or to go to other areas. As we speak, there is nothing really to mention, Mitch.

Okay. And my final question and I'll get back in the queue. But you've done a nice job on deleveraging here and with the asset sales and other things that's going to further delever. That kind of sets you up, at least the balance sheet with some dry powder. I mean, do you have an appetite for acquisitions at the moment? What's your feeling there?

No. I don't think we are looking at acquisitions. We did an acquisition a couple of years -- 2, 3 years back, which is the Mann acquisition, where we are now, and we are driving that acquisition to become very profitable and consolidating this business, as we spoke earlier. At this moment, our focus will be to reduce our debt and increase dividends.

[Operator Instructions] And there are no further questions in queue. At this time, I'll turn the call back over to Mr. Mohammad Abu-Ghazaleh for closing comments.

I would like to thank everyone today for attending this call. I know it is hard for everyone today with the pandemic and the way we are conducting our lives, but we will endure and overcome, I hope. Well, I'm assuring you that Fresh Del Monte is on the right track. We will be delivering as we go, good results and better results every time we speak up with you. Thank you very much, and have a good day. Bye.

This concludes today's conference call. You may now disconnect.