Good day everyone and welcome to Fresh Del Monte Produce's Fourth Quarter and Full Fiscal Year 2022 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, Corporate Communications with Fresh Del Monte Produce, Claudia Pou. Please go ahead, Ms. Pou.

Thank you, Regina. Good morning everyone and thank you for joining our fourth quarter and full fiscal year 2022 conference call. As Regina mentioned, I'm Claudia Pou, Vice President of Corporate Communications with Fresh Del Monte Produce. Joining me in today's discussion are Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer; and Monica Vicente, 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 IR website at investorrelations.freshdelmonte.com to access today's earnings materials and 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 and the other required disclosures are set forth in the press release and earnings presentation, which is available on our website. I would like to remind you that much of the information we'll 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 laws Safe Harbor. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from these forward-looking statements. Our statements are as of today, February 22 and we have no obligation to update any forward-looking statements we may make. During the call, we will provide a business update, along with an overview of our fourth quarter and full year 2022 financial results, followed by a question-and-answer session. With that, I'm pleased to turn today's call over to Mohammad.

Thank you, Claudia. Good morning, everyone. Fourth quarter of '22 has been our best performing fourth quarter in recent history, led by strong net sales and strong margins. Our net sales for the fourth quarter were the strongest since quarter four of 2018. In quarter four 2022, we had our best margins and the best 10th fourth quarters now at 8% versus 4% in 2021. And our gross profit for the quarter was the best since fourth quarter of 2016. Overall for the year, we closed out 2022 in a much stronger position than '21. We believe this reflects our commitment to remaining flexible and agile, controlling our costs, leveraging our assets and optimizing new and existing partnerships. It was a challenging macroeconomic environment for our business as costs for packaging materials, fertilizers, transportation and labor remained elevated throughout the year. Yet, we focused our efforts on being flexible and mitigating the risks associated where we can. During the year, we sought to control costs and implemented inflation justified price increase to offset some of the increased costs. And why Fresh Del Monte is most notably known for being a global produce marketer and distributor, it's important to note that we are also a logistics provider. In 2022, we made a conscious effort to leverage our assets wherever we can within our vertically integrated network. Net sales in our other products and services segment, which includes third party ocean freight services increased 24% for the quarter and 45% for the year, compared with '21. We are extremely proud of the expanded partnership between Network Shipping and sister companies, like Tricont Trucking and Tricont Logistics and the work we are doing at various ports. We are helping to further extend the ocean service that Network Shipping has perfected into the inland…

Thank you, Mohammad, and thank you for joining us on today's call. Let's first turn to our fourth quarter 2022 financial results. Net sales for the fourth quarter of 2022 increased by approximately $23 million or 2% compared with the prior year period. The increase in net sales was driven by inflation justified per unit price increases, partially offset by lower sales volume and the negative impact of fluctuations in exchange rates, primarily in Europe and Asia. The negative impact of exchange rates was partially mitigated by our foreign currency hedges. Gross profit for the fourth quarter of 2022 was $82 million compared with $40 million in the prior year period. The increase was a result of higher per unit selling prices across all segments. The increase in selling prices helped offset some of the continuing inflationary cost pressures, which resulted in higher per unit production and distribution costs including packaging materials, fertilizers, inland and ocean freight, labor and fuel. Adjusted operating income for the fourth quarter of 2022 was $34 million compared with a loss of $7 million in the prior year period. The increase in adjusted operating income was primarily due to higher gross profit, partially offset by higher SG&A. Adjusted FDP net income for the fourth quarter of 2022 was $22 million compared with a loss of $9 million in the prior year. Our diluted earnings per share for the fourth quarter of 2022 was $0.38 compared with a loss of $0.24 in the prior year. Adjusted diluted earnings per share was $0.45 compared with a loss of $0.18 in the prior year. The difference between GAAP and adjusted diluted earnings per share during the fourth quarter of 2022 was at $3.3 million or $0.07 per share asset impairment charge primarily related to flooding in our Philippines…

[Operator Instructions] Our first question will come from the line of Mitch Pinheiro with Sturdivant. Please go ahead.

Good morning. So, Mohammad that was a surprisingly strong gross margin performance in your banana segment and I was wondering if you could take us through the puts and takes those that are sort of going to be sustainable, and those that - the benefits are sustainable on the - and some of the benefits that go away for 2023?

No, I think our business has turned around, and Mitch I don't want you to keep focusing on bananas, because banana is a true part of our business. But bananas is not going to be the turning point for our business and I keep focusing on certain. And you could see that in our results that, when we are optimizing our assets in logistics, distribution, warehousing and we have many new projects in the pipeline that will add a lot of value to our business aside from banana. And so, I'm very confident in general about bananas because we are managing our banana volumes in a much better and more rational way than it used to be in the past. We are using more technology and more predictability in our operations going forward. And these in my opinion, will make a big change going forward in our business.

Yes, I mean I appreciate that Mohammad, but the bananas segments like the big swing in profitability from quarter-to-quarter and I was wondering if - I know it's not where your focus is and - but it's still a meaningful part of the business that it would be helpful to have a little visibility into the first quarter and maybe what you're seeing for the year just banana business hold on to these margins or to some of the price increases start to get whittled away? And do you see any headwinds with regard to sort of some of - whether it's fruit costs or ocean freight costs, what could be some headwinds in the banana segment?

Well, the headwinds in the bananas would be the oversupply. As we have seen during the last seven, eight months, especially after the pandemic, I think Ecuador have gone down drastically in terms of supplies. And this has helped the market to be more balanced, let's say. And from our side, we are just matching supply and demand more rationally, let's put it that way. And as a Company, we are not planning to sell under cost or to sell with low margins. That is a policy that we have taken. And so I believe that margins will be more or less consistent with fluctuations from quarter-to-quarter depending on the time of the year. But I think margins will somehow be maintained more or less around the same lines that we are taking right now. So - and I am going to repeat myself, again Mitchell that, other businesses will really make up a lot for the banana business itself.

Okay. And then on the ocean freight services, it's been doing quite well. And you talked about, you've taken from the ocean freight, you're going to take that same sort of model and move it inland. So for 2023, is this - you had a nice growth in 2022, do you see the growth in that segment sustainable and margins in that segment sustainable?

I believe so, yes. I believe that would be. I don't know, I think it would be the same percentage of growth, but definitely there would be growth on this segment in '23.

Okay. Yes, it's a nice - it's a nice high margin business therefore. And then on the fresh and value added, margins were down versus a year ago in the quarter, which explained why - what do you expect for 2023 in this business? Is it going to be dependent upon product mix or do you see some fixed cost leverage and some things that you're doing that you can sort of outrun some of those headwinds?

The headwinds were the packaging materials and transportation and we are seeing this to be now easing kind of to mitigate some of this additional costs that we faced during '22, and also the product mix, Mitch. I mean sometimes you'll have shortage on certain items which increases your cost, but I believe all-in-all, we should be able to maintain our historical kind of margins on the value-added like products, which is fresh-cut in particular.

And you were talking - another question, you were talking about within that segment, the avocado business. With avocado prices down, do you expect margins to stabilize in the early part of 2023, that's really get back to again more normalized margin level?

Yes, well, you know what has happened during the last, I would say, four, five months, is that the avocado pricing was more - very consistent and very stable unlike '21 and '22 first half was crazy. The kind of cost increases, price increases in Mexico. And what we have seen from - in the last few months is that, the prices were more stable, no volatility, which helped the industry in general, to be able to predict better. And as I mentioned, we are using now Artificial Intelligence, which we have been working on for several years now and we have come to almost 95% predictability and we're going to roll that as well for supply and demand as well. So we're going to be using technology as well in terms of predictability for avocados, which is the most difficult, and that's actually why we chose avocado to be the best commodity to apply AI, is because it's the most difficult. And then once we do that and once we did that actually we are going to roll it out to all other SKUs or commodities that we handle and this will help us going forward in the future.

[Operator Instructions] And there are no further questions at this time, I will turn the conference back over to management for any closing remarks.

I would like to thank everyone for joining us on this call today and hope to talk to you on our next call in May I hope. Thank you and have a good day.

Ladies and gentlemen, that will conclude today's meeting. We thank you all for joining. You may now disconnect.