Good day, everyone and welcome to Fresh Del Monte Produce's Fourth Quarter and Full Year 2020 Conference Call. Today's conference call is being broadcast live over the Internet and is also being recorded for playback purposes. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. 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, Christine. Good morning everyone. As everyone on the call knows 2020 came with unprecedented challenges. I'm extremely proud of how our global team has responded and adapted to the ever-changing conditions to continue to get our products to market, serve our communities with donations while taking the necessary precautions to keep our production environments safe for our team members. We made progress on many fronts in 2020, building a solid foundation for a strong future, which I will highlight in a minute. However, I want to first mention the events that affected our quarter's performance. The COVID-19 pandemic continued to impact Fresh Del Monte especially in our largest market North America, primarily as a result of ongoing disruption in the food service business. In November hurricanes Eta and Iota took their toll on Guatemala, Honduras and Nicaragua. Despite the devastation sustained on our farms and communities, we quickly engaged a global team to lend support and assistance to our team members and the surrounding hard hit communities. Thankfully, no lives were lost.

Thank you, Mohammad and good morning. Despite the COVID-19 disruptions during the full year and the impact of hurricanes Eta and Iota in our Central American operations in the fourth quarter of 2020, we achieved a net income per diluted share of $1.03 versus net income per diluted share of $1.37 in the full year of 2019.

Your first question today comes from the line of Jonathan Feeney with Consumer Edge. Please proceed with your question.

Good morning and thank you. You itemized a number of headwinds. You had some uninsured losses from hurricane. You told us $21 million in adjusted gross profit for COVID and yeah, maybe not a headwind, but a calming tailwind maybe. You made some significant investments in streamlining your cost structure, particularly with the West Coast Mann Packing operations, consolidation. So I'm trying to understand how much all of that affects 2021? Maybe we could take those three line items in whatever detail you can be comfortable giving us. I know you gave us very helpful detail about what the impacts were for '20. I'm trying to understand how much comes back in '21, just so I can understand if you - annual run rate at a normal basis where we're thinking about for modeling. Thank you.

Okay. Thank you, Jonathan. So let me give you some color about that right. So we're talking about the impact on the that we do not expect that to happen in 2021. Although we may see it impacting our costs because we're going to need to source from different sources mainly Ecuador, that has not only a higher cost, but also from a logistics standpoint, on ocean freight that's going to be higher. And from a capital standpoint, we're going to need to rebuild a lot of the infrastructure that was damaged in those areas. So that's the first one. The second one - so we did the, as you mentioned and we are very proud of all the different actions we took in 2020 to streamline our cost structure. So we took a lot of measures to improve our asset utilization and so we do expect that to bring improvements. We anticipate and we share the $10 million just by consolidating the operations of four different units at our new Gonzales unit, they are in Mann Packing. But also, we do expect to recover the sales that were impacted in 2020 not only because of food service, but also because of the product recall. Of course, that will happen throughout the year, right, because some of this volume has been shifted to other suppliers. And it takes some time for you to recover that. But we do expect that as a significant contribution. And the third one, I would say that as we look into our operations in different geographies, we do expect by simplifying our cost structure to see an improvement as part of these overall optimization in Middle East, in Asia, as well as in our operations in CECAB and South America. So those are the three main areas that I would like to highlight there Jonathan.

So it sounds like you mentioned capital expense, just so I'm super clear on that. That's not an earnings factor, right for '20. You just need some capital expense for repairs basically and that's not so much earnings. Then you talked about -

Yeah, that was mainly on - in the hurricanes that we had in Guatemala. That's not - let's keep in mind that we still have two vessels that we will receive in 2021. So there'll be some capital associated with that as well. But anticipate lower capital investments in 2021 as compared to 2020. But in terms of earnings improvement, as I mentioned, the actions that we took in Mann Packing as well as optimizing or around the world, we do expect a reduction in our run rate of cost of doing business.

So just so I understood clearly Eduardo, so $10 million or so and that kind of savings. And if magically, retroactive to January 1, there was no COVID and out we went back to normal levels of behavior, let's just say we're back to the kind of demand we had in say January, February 2020 across the world all of a sudden just hypothetically, well, that would be a 20 in your estimation, because you gave us a $21 million number, that would also be a $21 million, tailwind for your business, all things equal, is that correct?

Yeah, that is correct. And that's tied to a $300 million on net sales that we had the impact. The challenge is always how long it's going to take to really see.

I would like to add to this, Jonathan, is that the recall of Mann was at the end of 2019, which was about November, sometime in November 2019. And that was a big drawback for us going into 2020. And right after we came into 2020, we were hit with the COVID. So imagine, like a double whammy you have very cold in the first place. And then you got the COVID to make it even worse, so all the food service business almost gone overnight. And then only we were left with retail mainly and the retail of course as because of the recall, we had so much business that was unfortunately stopped by the retailers. So we gained some of this business during 2020 in terms of retail business. We have - we are seeing now some back some life and activity in the food service, it's coming back, not as much as we hope, but at least we see life coming back into the food service business. So we are very optimistic and really encouraged that hopefully, by April, May that the normality comes back to the market in terms of food service, and opening up restaurants and hotels and the whole sector. So we are very confident about really going into the future. I have no doubt. And don't forget that moving four facilities into one during the COVID period with so many suppliers and so many new machines and so many technicians that they have to come. It was like Mission Impossible. But thanks to God and thanks to our people. Really, we have made an unbelievable achievement by putting up everything and as we speak today it was completely achieved. And now it's fully operational with one unit other than four different units. So you can see what would be the operational efficiencies and by consolidating all this together and it will be significant.

Thank you. That's really, really helpful. Just one more question for me, you're 40% of the way through your asset sale program. Are you happy with the prices you're getting? And we see the gains. So the accountants are happy, but you're relative to what you understood to be the values here. Are you happy with these values? Are they going up with the - seems like the asset prices of everything else in the world right now? And how long do you think it will take you to be finished with that?

I'll give you an example. Just to give you an example for instance, we had a piece of land that I bought in the late 80s in Chile, about 22 Hector's that cost us about probably at the time when we bought that property was like $300,000, $400,000 I remember. And we sold it last year at the end of last year at a $12 million price tag. So just to give you an idea of what kinds of assets that we had and what kind of valuations we have, I don't need to go with the rest. But that is valuable. And that's nice piece of land, by the way was sitting idle, we didn't cultivate it with anything. It was just sitting there and unutilized.

Thank you. Sounds like you're happy with it. I appreciate it. Thanks so much and great work. And we'll talk soon

Thank you, Jonathan.

Your next question comes from the line of Mitch Pinheiro with - I'm sorry, there is no company name. Please proceed with your question.

Hi, there can you hear me?

Hi, Mitch. Yes.

Hi, so just following up on John's last question, in terms of the asset sales is it going to be mostly - I guess its land correct? Is that what you're selling?

No, that's - some of it is land, some of it are facilities that we really are under - either not utilized or underutilized to the point that that doesn't make sense to keep it and what we do is consolidate that business into another facility where we optimize and maximize efficiencies. So it is a mix of land and facilities that are underutilized are not utilized at all.

Okay. I just want to look at the banana business. So as we're looking here really short-term, you still have force majeure in place I guess, in the United States. So are we going to see - are you able to fulfill volume at this point? I mean, we're getting close to that, we're almost two thirds of the way done the first quarter, are we going to expect like a volume decline, perhaps in the banana business in the United States or North America? And then how does that balance against the pricing you can get? And are we going to see normal gross margins in North America or anything you can talk about would be helpful.

As far as bananas, I don't believe that the prices are going to move from where we are today. We are under so much pressure as banana producer in terms of course and procurement. And as well, as much as the damages we have been facing in our producing areas as well as just as close - I mean, as near last week I mean, we had so much disruptions in our operations in Texas and other areas in the Northeast because of the storms and the ice and so that also added - that all adds to the additional costs and disruptions that we have be it bananas or other products. So I don't see any movement on the banana pricing going forward at least in the near future or even in the midterm as best as far as bananas. As far as the other business, I believe that as we move - as we go forward with the vaccinations that's taking place with the decline in the rate of infections and so I am very optimistic. And I'm very hopeful that by - hopefully by June, we can see a much more relaxed and much more kind of back to normal life in North America and then other parts of the world. I mean, just to give you an idea, just we have been hit hard in MENA, in the Middle East and Asia with bananas because the Iran market was closed for almost now two years. And that market used to import and consume huge amounts of bananas when I'm saying probably a couple of million boxes a month or more and just recently as of last week, they decided to open the market again for banana imports, and that has already given a big push in prices. And that would relieve the pressure on Asia as well as MENA with volumes, which will be going to Iran. And already we saw the spot market in the Philippines shooting by at least $3, $4 additional in terms of pricing. So I'm very confident and hopeful going forward, I see the markets changing. Yes, we had two years of very difficult environment in several fronts, but as we go into '21, I'm really full of confidence about the future.

And in Europe you sell better in Europe than I would have thought just watching the pricing, spot pricing, banana pricing in Europe is down - it seemed down a lot and you look at your business in the quarter and it held up very well. Are you doing something differently in the European market as it relates to bananas?

Yes, we are, as a matter of fact, the way that we sell our bananas, we have a structural change in terms of having long-term contracts, rather than just dependent on the spot market. So we are kind of mitigating the risks, which helped us in achieving better results. And as well as sourcing from different companies that can support the European market. So it's several factors, but I believe that going forward, as I said, for the other markets, Europe as well will be normalized and will be a lot more kind of consistent than in the past. Aside from that, Europe is also diversifying their product lines, and they have done extremely well in introducing new fruit lines and they are really achieving very good results there as well, so all in all Europe is doing quite well as well.

And then I'm not sure really - when we look at this reading about all the - in Europe and wanting to provide - sort of requesting banana producers to have - to sort of have Fairtrade certified bananas. How does that - and then obviously not wanting to pay for that is sort of the issue, but how do you guys think about Fairtrade pricing as it relates to your business and as it relates to the broader market?

Well, everybody is affected in the same way all the banana players, all the banana operators have the same issues and same challenges. Fairtrade is a big kind of were very, very elastic in terms of how the - what do you mean, by fair trade? I mean the Fairtrade retailers ask you for fair trade of all this. And then at the same time, when you come to negotiate with them, they want to strip you down and then take it even below your corpse that doesn't work. And that's something that we refusing even to - our biggest challenge in Europe right now is the MRL which is a chemical that the Europeans are going to prohibit by the end of this year. This is one of the - and this chemical that we use, which is safe because we use it in other parts of the world is something that will affect the quality of the bananas if we ship it into trips like to Europe. So what is happening right now is the Banana Association here - I mean, is taking steps hopefully to be addressing this through the proper channels, government channel. And this is really our challenge other than that. In our business, we always face challenges, not daily, weekly, monthly, and it's a continuing process, so we need to be ready to meet these challenges and find solutions.

Okay, just one last - I don't know if you mentioned it, but what are your CapEx plans for 2021 and approximately what do you intend to spend?

As Eduardo mentioned, the CapEx we have is very clear. We have two ships that we still have to pay the balance for the value, these two ships. We have other projects that needs to continue. These were projects that started a couple of years ago. And we had the maintenance and repairs, which is normal every single year. So what we are going to do is really rationalize our capital expenditures to the best of our abilities and not invest in any new projects that would entail heavy investments with long-term payback. That's the kind of policy that we are undertaking.

Okay and so approximately what level of spending is it? Is it going to be - you did 150 million this year, 122 million in the year prior, where do you expect it to fall this year relatively speaking?

We do not - as far as we are concerned here we - that's the trigger that they have already. The units delivered to you at the beginning of the year. As we go forward in the year. We always fine tune this and prioritize as well and try to only approve the - really what is really needed and what is really essential. So as we go forward, I mean, by the second quarter, I would be able to give you a better picture of how the year would shape and how it would look, but we are on top of that and it's not like open checkbook.

Okay, thank you.

Thank you.

And there are no further questions at this time. Now, I turn the call back to Mr. Abu-Ghazaleh for closing remarks.

I would like to thank everybody for joining us today and hopefully - and I'm half confident for next quarter to be a very bright for everybody. Better days and happier days, God willing in the next few months. Thank you very much and have a good day.

And this concludes today's conference. Thank you for participating. You may now disconnect.