Operator
Welcome to Dole PLC's first quarter 2026 results webcast. Today's webcast is being broadcast live over the internet and it's also being recorded for playback purposes. Currently, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. For opening remarks and introductions, I would like to turn the call over to the head of investor relations with Dole PLC, James O'Regan.
Thank you, Derek. Welcome everybody and thank you for joining our results webcast. Joining me today is our Chief Executive Officer, Rory Byrne, our Chief Operating Officer, Johan Linden, and our Chief Financial Officer, Jacinta Devine. During this webcast, we'll be referring to presentation slides to supplemental remarks, and these, along with our earnings release and other related materials, are available on the Investor Relations section of the WPLC website. Please note, our remarks today will include certain forward-looking statements within the provisions of the Federal Security Safe Harbour Law. These reflect circumstances at the time they are made, and the company expressly disclaims any obligation to update or revise any forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings and press releases. Information regarding the use of non-GAAP financial measures may be found in our press release, which also includes a reconciliation to the most comparable gap measures. With that, I'm pleased to hand over to Rory.
Thanks, James. Welcome, everybody, and thank you for joining us today as we discuss our results for the first quarter and give an update on the latest developments within the group. So firstly, turning to slide four for a review of quarter one in 2026. Well, we're very pleased to report a solid start of the year with positive momentum across the group been reflected in strong revenue growth of 12 percent year over year we are seeing positive consumer demand for our products across all our key markets supported by evolving dietary preferences influenced by glp1 adoption and the broader health and wellness trends adjusted ebitda of 100 million dollars was in line with our expectations this result was driven by a strong performance in diversified americas as well as growth in diversified emea partially offsetting a lower result in fresh fruit due to higher fruit sourcing costs this result once again demonstrates the resilience of our business model particularly in light of the additional complexity being seen in the operating environment due to the ongoing conflict in the middle east while our direct exposure to the region is limited we are experiencing indirect effects including elevated fuel costs as well as higher prices for other inputs such as fertilizer and paper as announced in december we agreed to sell our port operations in guayaquil ecuador terminal investments limited we are very pleased to update that regulatory approval has been received and we expect to complete this important transaction during the current quarter we continue to expect net proceeds after tax of approximately 75 million dollars so turning to slide five and focusing more on the team of capital allocation Obviously, our priority is to seek the best long-term returns for our shareholders. We've identified several development opportunities throughout our operations, which we believe can deliver good returns, particularly when benchmarked against the alternative expected return from share repurchases. These opportunities are spread across our value chain and are a combination of development investments and bolt-on acquisitions. ensuring access to high quality produce and diversifying our sourcing are essential elements of our strategy to support this we have made recent investments to increase the portion of our own production in fresh fruit through an investment by one of our joint ventures we have increased our own production and sourcing from guatemala for both organic and both conventional and organic bananas as well as plantains and diversified americas we continue to invest in cherry category with a focus on securing high quality and stable product volumes we've also invested in our packing operations for cherries citrus and other products with the investments being made both our whole through our wholly owned operations as well as via our joint venture companies in diversified amea our investment focuses on end markets and our distribution channels over the last number of years we've made investments in our logistics and automation capabilities in Sweden, particularly in our third-party logistics company, No Waste Logistics. No Waste is delivering good returns and we continue to see further opportunities for similar future investments in this business. In addition to our third-party logistics operation in Sweden, we are exploring a strategic opportunity to further invest in automation, AI and innovative warehouse solutions to better serve our core customer base. We are working towards the finalization of a significant development investment in the order of approximately 100 million dollars which will provide us with a strategic platform for sustainable long-term growth. In Ireland and Spain we are also investing to upgrade and expand our warehouse operations and infrastructure. Finally given the fragmented nature of our sector we are focused on identifying bolt-on acquisition opportunities that are complementary and synergistic to our existing businesses in this regard we are progressing a number of opportunities in ireland italy spain and sweden and we'll update further as these progress slide six outlines our capital allocation priorities we invested 18 million dollars in the quarter and routine capital additions and continue to expect full-year investment of approximately 100 million dollars this covers routine profit maintenance investments across our farming shipping and distribution assets as well as in it as i've just discussed advancing the development of the group is a key strategic priority for us which we will pursue through development capital expenditure and targeted both on acquisitions and of course generating and delivering good returns for our shareholders is a major component component of our capital allocation strategy we offer an attractive and consistent quarterly dividend which we assess annually in november our board granted authorization for sharing purchases And we are using this authorisation opportunistically, benchmarking the returns relative to those available from our portfolio of development projects. So turning now to the operational review and starting firstly with the fresh fruit division on slide eight. As expected, the elevated fruit sourcing costs experienced in 2025 continue to have an impact on fresh fruit profitability in the first quarter of this financial year. Positively, we continue to see strong category demand, driving higher overall portfolio volumes. This was particularly evident in our sales of bananas in Europe this quarter. In North America, revenue growth was driven by higher year-on-year pricing across our categories. In Europe, along with higher banana volumes, we benefit from a favourable movement in the euro versus dollar exchange rate. lower overall industry volumes have contributed to higher sourcing costs across the segment and the continued appreciation of the costa rican colon is also impacting pineapple profitability on the production side we have rehabilitated our farms in honduras and as mentioned earlier we've invested in production and sourcing capacity from guatemala we expect these investments to deliver benefits as the year progresses we are closely monitoring developments related to the conflict in the middle east input costs including fertilizers paper and fuel have increased for fuel specifically we have variable search engine places in place for with our north american customers serving as a mitigate against rising uh fuel expenses all albeit with the time like overall while the unfavorable supply dynamic and recent developments in the middle east are impacting our cost base we remain confident positive demand trends combined with strategic investments and cost-saving initiatives will lead to improved profitability on a full-year basis moving on to the diversified emea segment this segment has had a solid start to the year with adjusted ebitda up by eight percent we've seen continued revenue growth supported by favorable exchange rates from stronger european currencies against the us dollar and robust underlying organic growth of four percent the nordic nordics have been a strong contributor in the first quarter and we are seeing the benefits of breached investments in our third-party logistics business in particular other notable contributions of the quarter were from our operations in germany driven by higher rate volumes these positive factors helped balance out reduced profitability in the uk caused by lower product availability from southern europe and north africa during the quarter as well as lower margins in the netherlands and south africa this once again demonstrates the advantage of our diversified business model and strategy looking ahead we are focused on executing on a number of internal and external investment projects across ireland the nordics and italy by proactively identifying additional volume avenues for growth in summary we anticipate that the current positive momentum will continue throughout the remainder of the year and lastly turning to our diversified america segment this segment delivered another strong performance in the quarter with adjusted EBITDA up by 29 percent the result was driven by a positive end to the Chilean cherry season the season was categorized by higher volumes to meet growing consumer demand and we continue to invest in this category to take advantage of these positive demand dynamics in addition to cherries our southern hemisphere export business has experienced positive volume trends and several other categories we also experienced increased activity in our North American imports and marketing operations which compensated for lower avocado pricing furthermore this part of the business is also seeing the operational benefits of the integration of Dole Direct North America with OPI finally our joint ventures in the segments have started the year well and we expect to see the benefits of recent investments as the year progresses so with that I'll hand you over to Jacinta they give the financial review for the first quarter thank you Rory and good morning everyone turning firstly to the group results on slide 12. group revenue of 2.3 billion was 11.6 percent
higher on a reported basis reflecting continued positive demand for our products as well as favorable foreign exchange movements excluding foreign exchange impacts on a like-for-like basis revenue was up seven percent cost of sales increased at a proportionally higher rate than revenue and was driven by higher food sourcing costs in the fresh fruit segment however gross profit increased by 2.8 million smgna increased by 5.4 million or 4.5 percent mainly due to the impact of foreign currency translation partially offset by the synergies achieved on the integration of ddna and opi this increase along with a higher gain from asset sales in q1 2025 following the sale of land in Hawaii contributed to the six million decrease in operating income other income increased by 4.8 million predominantly due to an unrealized gain on foreign currency denominated borrowings interest expense decreased by 4.6 million due to lower average borrowings lower base interest rates and the benefits of the refinancing completed in May 2025 equity method earnings decreased by 6.7 million, primarily due to a non-cash gain of 6.9 million on an M&A transaction booked in Q1 2025. Overall net income was 37.7 million, 6.4 million lower than the prior year. Looking now at the non-GAAP performance measures, adjusted EBITDA was 100 million, a decrease of 4.5 million, and mainly driven by higher food sourcing costs in fresh fruit, partially offset by strong growth in diversified Americas and a solid performance in diversified EMEA. Adjusted net income decreased 1.9 million, predominantly due to the decrease in adjusted EBITDA, as well as higher depreciation expense and higher interest and tax in equity method investments, following recent investments made in our Chilean cherry and citrus JV and our guatemalan tropical produce jv these decreases were partially offset by lower interest expense adjusted diluted eps was 33 cents compared to 35 cents in q1 2025 turning now to the divisional updates starting with fresh fruit on slide 14. revenue increased 7 percent primarily due to higher worldwide pricing of bananas pineapples and plantains and higher volumes of bananas sold in europe adjusted ebitda in decreased by 10.7 million mainly due to higher food sourcing costs and the impact of the appreciation of the costa rica colon reported revenue in diversified fresh produce amia increased 15 primarily due to a favorable impact from fx as well as underlying growth in france and germany on a like for like basis revenue increased by four percent or 36 million dollars adjusted eva da increased eight percent driven by a favorable impact from fx translation and good contributions from scandinavia and germany partially offset by lower underlying earnings in the uk the netherlands and south africa on a like for life basis adjusted ebitda decreased 1.4 million dollars finally diversified americas delivered another strong result in this quarter revenue increased 16 driven by higher volumes and pricing in our southern hemisphere export business as well as by higher volumes in our north american businesses offsetting lower pricing primarily in avocados adjusted ebitda increased by 4 million to just under 18 million dollars driven by higher revenue the benefits of the opie and ddna integration and a good performance in our joint venture operations turning to slide 17 for a view of key cash items and leverage as rory mentioned routine capex was 18 million dollars and there was no material development expenditure in q1 for full year 2026 we are maintaining our guidance for routine capex for approximately 100 million cash flow from operations was influenced by a routine working capital outflow consistent with our standard cycle in which outflows typically occur during the first half of the year and inflows follow in the latter six months the outflow of 22 million was 56 million lower than q1 2025 as the prior year was negatively impact by accentuated working capital outflows. Free cash flow was an outflow of $40 million compared to an outflow of $132 million in Q1 2025 due to the lower cash flow used in operations and lower capex as the prior year included the purchase of two vessels which had previously been on finance lease. Asset sales and other business disposals generated proceeds of $6 million in the quarter. We ended the quarter with net debt of £657 million and net leverage of 1.7 times. Now, I'll hand you back to Rory, who will provide an update on our outlook for 2026.
Thanks, Jacinta. So overall, we're pleased with the solid start of the year and the positive momentum we're seeing across our operations. Looking forward, conditions in the Middle East remain fluid, making the operating environment more complex and having a direct impact on our cost base. We anticipate increased shipping and fuel costs in the second quarter, particularly in our fresh fruit segment. However, as the year progresses, we expect to see the benefit of contract price adjustments, as well as the benefit of our dynamic pricing strategy within our diversified divisions coming through. Our resilient and diversified business model provide positions as well to handle today's complex environment. Demand for our products remain strong, supported by major health and wellness trends. We also anticipate positive returns from our recent investments and remain committed to advancing our development pipeline. Taking all these factors together, we are continuing to target full-year adjusted EBITDA of at least $400 million for 2026. I want to finish by once again thanking all our outstanding people across the group for their ongoing commitment and dedication to advancing our business, particularly in the light of the challenges over the last few months due to the current dynamic operating environment. As always, we really appreciate our essential partners, suppliers, customers, shareholders and all other stakeholders for the continued support. With that in mind, I'll hand you back to the operator to open the line for questions.
Operator
We will now begin the question and answer session. If you would like to ask a question, please press Start 1 on your telephone keypad to raise your hand. To withdraw your question, press Start 1 again. Please stand by while we compile the Q&A roster. Your first question comes from the line of Gary Martin with Davey. Your line is now open. Please go ahead.
Hey, Rory, Justin, and Johan. Congrats on a strong set of results. I just have a few questions on my side. I'll start with the guidance just to begin with just the at least 400 million adjusted EBTA guidance. I guess if I can read through the components of that, it seems that part of it is going to be centered around some dynamic pricing on the diversified side of things and then there's also a bit of an ask when it comes to actual direct negotiation on the fresh fruit side so i'd just be curious what gives you the kind of confidence on the direct negotiation fresh fruit side pricing that's one part of the question and then you'd also mention in your program arc story that you expected to offset some of it from internal savings i'd just be curious as to what the quantum of those internal savings will be okay thanks gary so yeah i mean guidance
as you well know is you know very difficult to predict in this uncertain world but it does certainly refocus everybody's minds to look at all aspects of the business so it was a good opportunity even within within all of our divisions to um you know re-look at our cost base on a division by division basis even our central costs and um you know we expect to make reasonable savings we tend to run a pretty tight ship anyway so you're not going to get quantum leap savings so um we will get some incremental benefit from that um i think at the outset we expected to have a second half of the year to be stronger than the first half which is a little bit unusual and um you know perhaps um you know it gives us a little bit of leeway our diversified particularly america's businesses q1 and q4 very weighted but it gives us a little bit of time to adapt to the cost-based changes in the system and our history and experience would tell us that we have been able to get that through in pricing across all the segments um so i i you're right i mean and you're you know in some ways you've answered the question yourself gary that you know our diversified dynamic pricing model has worked very well for us i mean you've only got to look back at say the disruption that was caused by the introduction of tariffs and we believe we managed to navigate that challenge pretty well so we're reasonably confident that putting all of those factors into the mix that we will we are able to hold the guidance on a full year basis
that's pretty helpful and then just maybe a second question just around capital allocation and i appreciate there's a lot of good color there on slide five just around the moving parts but just be good to kind of get your thought process and even prioritization between we'll say the buyback, forward M&A, some of that organic investment, and just the debt repayment piece with maybe particular emphasis on the last component, just kind of given the kind of rate trajectory at the middle.
Yeah, I mean, the capital allocation, as you know, Gary, it's a very dynamic process. So, you know, we're continually internally examining all aspects and all opportunities for capital allocation. It's probably a while since we've made any significant investment within the business. we think you know if we look at our scandinavian business in particular it's been at the forefront of advanced technology for picking packing preparation probably got the highest labor costs as well in europe so it's it's the easier target to apply you know even some of the new emerging technologies and artificial intelligence and picking so there is an opportunity you know we have a few pieces of the jigsaw to put together to do that but that would be a huge focus for us trying um you know take the next iteration of technology in terms of picking and packing and order preparation you know if it works could be certainly a very strong blueprint for other aspects of the business as well so our debt levels as well i think in terms of debt payback well you know we're comfortable um with our current um level you know keeping our eyes on on the world generally and hopefully interest rates don't move in any kind of a negative way but our idea today was really to set out more clear terms you know that we we do have some very attractive internal development opportunities and you know that is going to be our short-term focus we have all the other tools in the in in the kit as well so that can be dividend it can be buybacks it can be um debt repayment and you know it is a very dynamic process that we continually internally challenge ourselves on what the best capital allocation uh process is that's helpful and then just maybe one
final one just around just fresh fruit costs. I mean, they're quite elevated in Q1. It seems like that's maybe some of the kind of after issues of Storm Sara and other kind of growing issues still working its way through the system.
I'd be curious as to what you're forecasting for the remaining nine months when it comes to just general, we'll say, banana supply and demand uh just through the system so maybe johan do you want to make a few comments on that please yeah uh gary i think you touched on it but if if you remember again just to set the stage a little bit last year we had a shock when it comes to the supply we had our problems in honduras with the tropical storm sara at the same time you had weather issues in costa rica and then you had panama totally falling out uh which didn't impact us directly but it impacted one of the competitors and therefore impacted the supply. The consequence of this was a very tight supply. Cost went up. And as we negotiate through the year, we don't negotiate everything in the fall. We negotiate through the year. It would take some time for us to catch up. So this is working itself through the system. And we expect as we leave Q2 behind us, when also the few surcharges has caught up with realities, we believe the picture is going to be much better, Gary.
Operator
Off it on. Thank you, guys. Your next question comes from the line of Christopher Vars with Deutsche Bank. Your line is now open. Please go ahead.
Good afternoon. I guess first I'd just like to follow up on Gary's question around guidance in the cost environment. So you mentioned that the Middle East conflict is already impacting fertilizer and packaging, and you're expecting higher shipping and fuel costs in the second quarter. But I'm just hoping you can put a little more quantification against some of these buckets and how we should think about the cadence of EBITDA from here, just as it relates to these escalating cost pressures balanced against what sounds like a lag on pricing and some of the surcharges that you're using to offset these dynamics. And then just relatedly, the operating environment is clearly very volatile, but to the extent you do get some relief, like how locked in are some of these pricing and surcharge benefits if oil prices and other cost pressures subside over the past of the year?
Thanks, Chris. Yes. Yeah, I mean, we do expect that Q2 is going to suffer quite a few of the costs, particularly in relation to fuel. And there is just a technical time lag when you get the price adjustment under the bunker surcharge formula. So it comes in a quarter in arrears effectively. So a chunk of that, it's effectively mathematically hit Q2, but we will get the benefit in Q3. So the consequence of that is that we are expecting, as you asked, with the cadence of the flow by quarter, we don't want to give specific quarterly guidance we will clearly suffer some pressure and particularly in our fresh fruit division and in q2 but that will be made up in q3 and q4 and we expect a stronger weighting compared to and certainly last year on the second half of the year versus the first half of the year and our diversified divisions the the reaction you know there's so many variables goes into making up the pricing it's much more variable it can go from you know production levels in different products it can go from shipping costs to historically tariffs competing seasons switch from southern hemisphere to northern hemisphere and they're consistent variables that we're dealing with and it creates a consistent variation in the price to our customer base so we expect to be able to pass through the ups and downs in that cost chain to our customers much quicker than we can do within our fresh fruit division and I think as Johan explained you know some of the pricing increases are phased in over the course of the year and you know they're locked in in a positive way as well and we're hopeful that the supply dynamic changes a little bit so again you know it's not an exact science guidance here and we put it all into the mix and we've done a pretty comprehensive piece of work across all of the divisions. And, you know, our judgment is that we can still get at least $400 million for the full year.
Okay, great. That's a helpful perspective, Rory. And then just separately around the Diversified Americas business, like that business continues to execute at a very high level, both on the top line and EBITDA. So can you just elaborate on what's driving the strength and how we should expect it to continue from here. What was the source of the strength in the first quarter? Was it more just seasonal timing, strong execution, or how should we think about the structural improvements from OPI and Dole diversified North American integration?
Yeah, I think certainly the Dole diversified North American integration with OPI is has worked very positively you know we've been able to take a chunk of cost out of the system consolidate our efforts of marketing in the north american market so i think that's been really really positive i think it's probably fair to say that there's an element of seasonality within q1 particularly around the cherry season and you know over the course of the year we expected you know to have an improvement year and year but not as dramatic as perhaps highlighted in the first quarter um but at the overall the division and the other categories within chile peru and other aspects of that business have have worked positively over the quarter um you know we've we've um you know very strong focused management team in that division and they've been performing well over the last while and you know we're positive that with you know small step-by-step investments within this division we're building up our volumes through consolidating consolidating marketing of other third-party volumes as well so we're reasonably optimistic that we're well position within that division on an overall basis great thank you very much i'll pass it on thanks chris your next question comes from the line of puran sharma with stephen your line is now open please go ahead great thank you thank you for the question um just wanted to understand just the middle east region a little bit i think your guidance incorporates cost pressures looking ahead due to fuel but just wanted to get a better sense of the demand picture do you are you concerned with any sort of any sort of demand degradation just given the the conflict has persisted maybe longer than we had originally thought it would yeah i mean we do we don't have a huge amount of direct business into the middle middle east area we do have some um you know we do some banana business into that region and our south african operations also sell into that regions and the trade has largely continued albeit with a lot of complications around the freight and transport getting into that region and you know we hope that settles down that can have some further impact on you know isolated parts of the business and in particular our south african units and you know coming into the south african citrus season we do sell a reasonable percentage of our south african citrus into that business we would like to see that uh trade opening back up but um other than that we don't see any other um significant impact on demand on our main core markets in europe and north america thank you for that color and on my follow-up um i i just wanted to understand your
your uh opportunity for investments here i think on the deck you highlighted the uh 100 million dollar uh potential automation uh investment and um i was just wondering if if you could maybe update us or just remind us what what kind of payback uh period is associated with this type of investment yeah i mean we're targeting returns um in the order of 12 15 at least on an investment like that and uh you know i think as i said one of the key benchmarks for us now is being looking at what the return would be by using the capital to buy back our own stock obviously you
know that it's complex because you know we look at that division in scandinavia we've been at the cutting edge of technology we want to grow our business for the long term we want to continue to be very relevant to our customers we need to invest in the business to stay ahead of the game and to you know keep even our people focused and motivated on developing that business but we do expect attractive returns on that investment as well or we wouldn't be doing it clearly appreciate that color and i guess just for my last one and i'm you may have touched on this a little bit but how do you weigh that um decision versus kind of like your your progress uh that you've identified in ireland italy spain and sweden and um i guess what i'm asking is how do you determine uh whether to do an organic investment here or whether to do kind of like a bolt-on or an m a a little bit of this opportunistic um you know as i said at the outset in capital allocation it's a very very dynamic process it's not just absolutely cast in stone and we have to be dynamic and react to opportunities that as and when they arise we have our own internal corporate finance team that's constantly looking at um you know significant opportunities or what's happening in the market generally speaking and then our local teams also look at um you know local opportunities so then local markets certainly in terms of the value we found that some of the smaller bolt-on acquisitions are more attractive um you know the initial price expectation is more reasonable and indeed we can generally get more synergies out of integrating them with our operations on the ground so it's a dynamic process and you know constantly trying to ensure that we are moving our business forward we're staying relevant and attractive for all of our key customers our key suppliers and you know that we have all of our people focused on trying to do that so you know at the moment you know we have a couple of those couple of opportunities that call that that we are exploring you continue to explore in a detailed way and you know hopefully as time progresses over the course of the year we can give you some more um update on how they they evolve very helpful thank you for the color thank you there are no further questions at this time i will now turn a call back to rory burn ceo for closing remarks well i think we can be very pleased with a solid quarter one and there's no doubt that we're living in complex times in a complex world and i really would like to just make a particular call out to our experienced team at all levels across the organization that yes yet again once again i've shown the capacity to react to very dynamic circumstances and i think that gives us the confidence to be well positioned and hopefully um as the year evolves have a have a good uh full year outcome so thank you very much for joining us today this concludes today's call thank you for attending you may now disconnect.
