Dole plc (DOLE) Q2 2026 Earnings Call Transcript

Welcome to Dole PLC's second quarter 2026 results webcast. Today, 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 joanne linden and our chief financial officer jacinta devine during this webcast we will be referring to presentation slides to supplementary remarks and these along with our earnings release and other related materials are available on the investor relations section of the dole plc website please note our remarks today will include certain forward-looking statements within the provisions of the Federal Security's 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 GAAP measures. With that, I'm pleased to hand over to Rory.

Thank you, James, and welcome, everybody. Thank you all for joining us today as we discuss our results for the second quarter and provide an update on the latest developments across the group. So turning firstly to slide four. Well, across the group, we continue to see healthy consumer demand for our products, Fresh produce consumption remains resilient, supported by the long-term health and wellness trends, and we believe this augurs well for the future of our sector. Our second quarter results was in line with our expectations, reflecting the impact of higher fuel and shipping costs on fresh food profitability arising from the conflict in the Middle East. Despite these pressures, the quarter once again demonstrated the resilience of our diversified business model with the strength of our diversified Americas, in particular, helping to offset the pressures experienced in Fresh Fruit. Since our last update, we've been active in advancing our development pipeline while maintaining our disciplined approach to capital allocation. Turning now to slide five and focusing in more detail on this topic. As we said last quarter, our priority remains clear. to allocate capital where we can achieve the best long-term returns for our shareholders. As part of this approach, we were delighted to complete the Ecuador port sale on July 1st. This transaction represents an important milestone, unlocking approximately $95 million of net proceeds, further strengthening our balance sheet and increasing our financial flexibility. Importantly, the sale is expected to have a negligible impact on our ongoing earnings and cash flow profile making it a very attractive value-enhancing transaction for shareholders. We continue to explore an important strategic opportunity to invest in automation, AI and innovative warehouse solutions to better serve our core customer base in Scandinavia. As part of this strategy, we were very pleased to complete the acquisition of Green Foods Fresh Produce Division in Scandinavia at the beginning of July. This acquisition strengthens our position in an attractive market where we already have meaningful and successful operational capabilities. And it also adds a state-of-the-art distribution facility in Helsingborg that gives us a strong platform for the next phase of this automation and artificial intelligence investment. Alongside these larger projects, we continue to look at smaller bolt-on acquisitions that complement and strengthen our existing operations. During the quarter, we completed a bolt-on acquisition within our Irish growing operations, further strengthening our sourcing capabilities and supply base. The fresh produce market remains fragmented, and we continue to see opportunities for disciplined acquisitions that add value across our core markets. Finally, returning capital to shareholders remains an important component of our capital allocation framework. During the quarter we repurchased just over 700,000 shares for 10 million dollars at an average price of 1388 dollars per share. As always we weigh share repurchases against the returns available from our development projects and acquisitions. We remain focused on balancing investment for growth with returns to shareholders. Turning now to the operational review and beginning with the fresh fruit slide on slide eight. As we flagged on our first quarter call we anticipated higher fuel and shipping costs to arise from the conflict in the Middle East and that is how the quarter played out. Looking at our main product categories bananas we saw strong volumes in Europe with pricing broadly in line with the prior year. In North America volumes were lower reflecting market conditions and our focus on discipline profitability although underlying pricing was slightly higher than the prior year for pineapples weather affected availability during the quarter while the continued strength of the costa rica cullen pressured profitability these challenges are not unique to dole and continue to affect producers across the industry positively overall demand for our product products remained resilient let's move through the second half we expect to benefit from contractual pricing mechanisms including variable fuel surcharges, together with increasing benefits from our recent investments in production and sourcing and the cost-saving actions we continue to advance across the segment. Taking together, these initiatives are expected to help offset a portion of the cost pressures experienced during the second quarter and support improved fresh fruit performance in the second half of the year relative to the prior year. Turning now to Diversa Vida Mea, the segment delivered a solid quarter overall with the revenue broadly stable, although profitability was slightly below the strong prior year comparative. Sweden was again a strong contributor and we continue to see the benefits of our investments in logistics, infrastructure and automation. The lower year-in-year result was driven largely by South Africa, which had our greatest exposure to the disruption in the Middle East during the quarter. turning to diversified americas diversified americas live in another strong quarter and was again an important contributor to group performance the segment benefit from strong category performance disciplined execution and the continued benefits of investments made over recent years its dynamic pricing model continues to support profitability and gives us flexibility to managing to manage changing market conditions its strong performance through the first half again highlights the value of our diversified business model and helped offset the pressures of fresh fruit with that i'll hand you over to Jacinta to give the financial review for the second quarter thank you Rory and good day everyone turning firstly to the group results on slide 11.

Group revenue of 2.5 billion was 2.9 percent higher on a reported basis reflecting positive operation performance across the group together with favorable foreign exchange movements Excluding foreign exchange impacts, on a like-for-like basis, revenue was 1.7% ahead. While revenue remained resilient, profitability was impacted by higher costs within fresh fruit, as discussed by Rory. Cost of sales increased at a proportionally higher rate than revenue, primarily reflecting the higher costs in fresh fruit. And as a result, gross profit decreased by $23 million. dollars smgna expenses were higher year over year primarily due to a non-recurring charge recorded a connection with the settlement of a historical legal matter in q 2020 in q2 2025 we booked gains from asset sales in hawaii which also contributed to the overall decrease in operating income offsetting this other income increased by 22.6 million primarily reflecting favorable unrealized foreign exchange movements on foreign currency denomination borrowings compared with an unrealized loss in the prior year interest expense decreased by 2.7 million due to lower average borrowings and lower base interest rates overall net income from continuing operations was 35.1 million compared to 52.9 million in the prior year however total net income increased year on year as the prior year included a loss from discontinued operations associated with the fresh vegetable business which was divested in august 2025. looking now at the non-gap performance measures adjusted ebda was 117 million a decrease of 20.4 million mainly driven by the higher cost within fresh fruit and partially offset by another strong performance from diversified americas adjusted net income decreased 9.4 million predominantly due to the decrease in adjusted ebitda partly offset by lower interest expense and a lower tax charge adjusted diluted eps was 46 cents compared to 55 cents in q2 2025. turning now to the divisional updates starting with fresh fruit on slide 13. revenue of 972.8 million was broadly in line with the prior year as higher banana volumes in europe and higher underlying pricing in north america was partially offset by lower banana volumes in north america and lower pineapple volumes across all markets adjusted the da decreased by 22.5 million to 50.3 million primarily reflecting elevated fuel and shipping costs higher fruit sourcing costs, higher pineapple growing costs, and the continued depreciation of the Costa Rica Coulon. In diversified fresh produce EMEA, reported revenue increased 1%, primarily due to favourable foreign exchange and underlying growth in Scandinavia, partially offset by lower revenue in Spain relative to a strong comparator quarter. On a like-for-like basis, revenue decreased by 1.7%, or $19 million. Adjusted EBITDA decreased 6%, compared with a very good performance in Q225, as continued strength in Scandinavia and a favourable foreign exchange impact was offset by weaker performance in South Africa, the Netherlands and Spain. On a like-for-like basis, adjusted EBITDA decreased $4 million. dollars finally diversified america's delivered another strong result this year revenue increased 14 driven primarily by higher volumes in north american business particularly kiwi avocados and north american cherries together with more positive season end pricing for our southern hemisphere export business adjusted eva da increased by 5.2 million to 20.6 million dollars driven by a strong performance in our north american business together with the continued benefits of the partial restructuring of our very operations in the fourth quarter of 2025. turning to slide 16 for a view of key cash items and net leverage capital expenditure was circa 25 million dollars including investments designed to support future growth expand capacity and improve operating efficiency for full year 2026 we are maintaining our guidance for routine capex of approximately 100 million dollars as expected working capital remained an outflow during the first half of the year reflecting the normal seasonal profile of the business however as discussed in our q1 call first half free cash flow significantly improved compared to the prior year net debt in the quarter was impacted by the first step of the ecuador port sale transaction as part of that transaction we completed a pre-closing ownership restructuring in may acquiring the remaining minority interest in the port business the second and final step closed on july 1st and the associated proceeds would be recognized in the third quarter overall net proceeds are now expected to be approximately 95 million dollars we ended the quarter with net depth of 746 million and that leverage of two times reflecting the completion of the ecuador port sale on july 1st and the expected net proceeds of approximately 95 million dollars pro forma net leverage would have been approximately 1.6 times and quarter end this remains a conservative level of leverage and provides us with significant flexibility as we continue to execute our capital allocation strategy now i will hand you back to rory who will provide an update on our outlook for 2026. thank you jacinta so looking beyond the quarter we are very encouraged by the strength and diversity of our portfolio the quality of our market position positioning and the strategic progress progress achieved during the first half of the year.

As we move into the second half, fuel and shipping costs remain elevated and geopolitical developments continue to create uncertainty. While some of the sharp cost increases experienced during the second quarter appear to be moderating, the operating environment is still complex. Consumer demand across our key markets has remained resilient, supported by long-term health and wellness trends. We also expect to benefit from contractual pricing mechanisms and cost-saving initiatives and fresh fruit, the effectiveness of our demand dynamic pricing model across the diversified businesses, and positive returns from recent investments and development activity. Taking all these factors together, we are targeting full-year adjusted EBITDA of approximately $400 million for 2026.

And with that, I'll hand you back to the operator to open the line for questions. we will now begin the question and answer session if you would like to ask a question please press start 1 to raise your hand to withdraw your question press start 1 again we ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally please remember to unmute your device please stand by while we compile the q a roster your first question comes from the line of christopher barnes with deutsche Bank. Your line is now open. Please go ahead.

Hi, good morning, good afternoon. Thanks for the question. First, I guess, could we just start on the EBITDA guidance? I know now it's approximately 400 million down from at least 400 million before, but I just want to get more perspective on what you're expecting for the second half. Last quarter, you mentioned that the second half would always be the stronger half for the year, given the pricing, fuel search recharge recoveries and other opportunities to take out costs division by division. But I guess, are you able to size in the second quarter, how much of a headwind was the fuel cost versus recovery mismatch this quarter? And as we sit here today, how should we think about those benefits in 3Q relative to higher fuel logistics costs and other inflationary pressures you might be incurring currently. Thanks.

Okay, thank you, Christopher. Yeah, I mean, I think the main problem we've got here is that it's just such a difficult backdrop in which to predict anything. You know, certainly, if you look at the world, you look at the general impact on fuel prices and fertilizer prices, knock-on effects to inflation, consumer impacts. I think there's an overwhelming incentive around the world to try and solve this issue, but it's dragging on longer than we would have liked and that obviously has some impact on um our ability to get clear visibility over the back half of the year we've put all the factors into the mix uh we do have fuel surcharges that come in a quarter in arrears and they will we will see the benefit that flow through in q3 and then with the the way pricing has been a fuel likely to be the same similar benefit in q4 some negative impact in europe where you know fuel's been a little bit higher versus where we would have liked it to have been, but there's some offsets and ups and downs. So I think really just, Christopher, just the backdrop for being very precise about forecasting just remains so complex that if we can achieve a $400 million EBITDA outcome with all of the challenges that are being thrown at us at the moment, I think it'll be a pretty satisfactory outcome for the full year. And we expect that to be split across Q3 and Q4.

Understood. Thank you. And just switching gears, how are you scenario planning around potential disruption related to a super El Nino on your banana and pineapple businesses? I know in the past you've mentioned improved irrigation for some of the drought-prone areas and better drainage where flooding might occur. But any perspective on contingency plans in place at your own farms or those where you're sourcing from would be helpful. And if you're willing to offer any insight into how protected or exposed the broader industry might be, that'd also be helpful. Thanks so much.

Johan, we'll deal with that, Christopher.

Yeah, Christopher, firstly, you mostly actually answered the question yourself, which is good. We appreciate that. But remember, weather is not new to us. We farm in the tropics. Managing weather is what we do every day. And also, this event is building. We don't know any potential or how potentially strong it will be. is just starting to build as we are speaking. However, also the pattern is well understood. Ecuador will get more rain, Ecuador and northern Peru. Central America and Colombia will be drier. And we have been building resilience for this for a long period of time, not only us, but also the industry as a whole. But we've been building resilience by expanding irrigation in areas that are likely to be more dry. We've been building dikes and drainages in areas that are likely to be more impacted by rain. We elevate up pump stations so they're not at flood levels. And also, if you take some of the other products, not talking about bananas and pine nuts, but if you take grapes or if you take berries, which we are not as exposed to as bananas and pines, the farmers that we're working with are experimenting with new varieties that are more tolerant to drought and to weather overall, to drought and rain. On top of that we are building our portfolio when it comes to being diversified so we have a lot of the volume south of the equator as well as north of the equator. So when you put all this together we are keeping an eye on it But we are not losing sleep on it right now, Christophe.

Great. That's very helpful. Thanks so much.

Your next question comes in the line of Gary Martin with Davey. Your line is now open. Please go ahead.

Hey, Rory, Jocelyn and Johan. Just a few questions on my side. I'll start with the capital allocation just to begin with. And I'm cognizant that you bought back shares during the quarter. How do you think about just general capital allocation into the future and just kind of weigh in the different return differentials between choices of capital usage, you know, be it more organic investment in the Scandinavian area versus buybacks versus other potential M&A? How do you kind of think about that whole picture? That's my first question.

Yeah, thanks, Gary. I mean, I think, as always, in the question of capital allocation, you know, we do take a very dynamic approach to it. So I think the dividend is well established and we know we've held our dividend at a decent level. It gives an acceptable yield. Most of our shareholders are happy with that. There clearly are some small bolt-on acquisitions that very obviously give the right level of return compared to buybacks. We've some development capex and I suppose you look at Scandinavia, it's a combination of a small acquisition. It gave us a strong platform. It's a small-ish business, some $250 million revenue business, but has a very attractive facility that we believe we can utilise much better for the future development of our business. over the over the last while we've enhanced our investment at the production side and strengthened our position in production jvs um you know across our european business we've been upgrading our ripening facilities in ireland in france and spain um normal growth small add-on developments all part and parcel of the ongoing and continuing and successful development of the group so i think you know we look at everything we look at the investment return opportunities We obviously look at the interest rate environment that's out there at the moment. We look at our free cash flow development from our business. And, you know, we make some variable judgments around all of those factors. We've carried out, you know, an element on the buyback program, I think, since we announced it last November, something like a $15 million buyback so far with a consistent dividend. So the return to shareholding, we think, is sensible and reasonable. But it's a dynamic process. I think, you know, we had flagged, obviously, the Scandinavian investment, which is probably one of the longer term, more significant uses of the Ecuador, you know, a very strong and 95 million net proceed outcome as well. So I hope that covers it, Gary.

I do have a part two, Rory, just on your answer there, just around the general returns profile of, we'll say, some of that organic investment in Scandinavia. And I know that you called out AI and automation stand in particular. I mean, how does that sit premium to the overall average of Dole right now? Like, is it materially higher in terms of the opportunity style?

Yeah, I mean, our business is, you know, is not one where we've quantum leap growth by making investments. You know, we have a target level of return. and I guess the easiest way to look at it is we measure what our return would be against buybacks and we try to ensure that our investments get a return that's a reasonable premium to that return and we would like to grow the business, we'd like to develop the business so we think there are interesting elements across, particularly in Scandinavia where we will go to a further level of automation in conjunction with some of our key customers in that area where we will utilize the latest robot picking technology. We will utilize the latest AI developments that are there and improve the efficiencies and strengthen both the profitability and our long-term positioning with our key customers in that marketplace and hopefully get the right return to enhance shareholder value over the long term as well.

That makes sense. And maybe just to ask a different kind of line of questioning just around the revenue performance in the quarter. and just expectations since the back half in particular, which is one for diversified North America in particular. It's been several very strong quarters now in a row. Are we expecting moderation at any point here? Was some of the performance, was it timing-based in Q2? Should we expect that to moderate into the back half?

We're not expecting any radical moderation in the back half of the year. I mean, we have had a pretty strong run in that division, and fair wind in terms of the way seasons have fallen. So, you know, no radical shifts, but there can be a few, as you know, Gary, a few ups and downs, but overall we're very satisfied with that division.

And then just on diversified, I mean, on the rest of the world, it was a reasonably kind of collapse to slightly negative revenue growth quarter. I'd just be curious, just on a kind of pricing pass-through perspective, was a lot of the headwinds just a weakness in South Africa or was some of the price passed through and knock-on elasticity? What's the best way to think about it?

I think there's a couple of factors. I think if you go back to last year, we had a very strong increase in EMEA and we called it out as exceptionally strong. So to try and repeat that was always going to be a bit challenging. But I think the single biggest factor is our South African business And it is the business that has the single biggest exposure to the marketplace in the Middle East. So it has quite a strong customer base in that region. And the magnitude of disruption that took place, particularly during the early part of the war issues, was radical, where shipping in its entirety stopped reorganizing shipping. in the main across the remainder of that division you know it takes a little bit as a little bit of a time lag to try and reflect the price changes but in the main we've been able to adjust the dynamic pricing as we have always been able to do within that division and south africa really was our standout issue that makes sense and then just uh just to top it off i'll cover fresh through here just on revenue growth perspective as well there's just one piece in particular that i'd

be interested in and that's the the negative volume print in north america on the banana side Is there anything that you'd call it in particular there? I know you kind of gave a bit of color in the red remarks, but are you seeing any demand attrition here in the US?

I don't think so. And maybe Johan could give a little more flavor around that.

Yeah, no. We see demand holding stable in North America. Because of weather, pine volumes were down over low in the industry. That impacts it. And we've been careful when it comes to just the protecting price in negotiations. That's it. Volume overall in the market's good, demand good, consumers still loving the products.

Very good. One final one from me then. Maybe it's one for Descenta in particular, just around the first half's operating cash flow performance back a bit. i'd just be curious just uh kind of the way to think about uh net there at year end or just the kind of general moving parts around um the puts and takes of h2 operating cash flow performance will be will be really useful yeah uh hi gary yeah so um as as you recall we are uh we always have a operating uh outflowing in in q1 and q2 and then typically experience a significant inflow in in

the second half and we expect a very similar cadence um to to for this year so so far i mean last year we had we had uh lower operating cash flows but this year we expect it to be more normalized and so far that's the way it's it's played out i mean in terms of our net debt at the end of the year obviously we've got the benefit of the uh port proceeds now so um yeah we would expect leverage um and and net debt uh to to be down at the end of the year you know hard to predict but i'm guessing uh south of one and a half times in terms of leverage perfect

makes sense i'll pass it on your next question comes in the line of poor run sharma with stephens your line is now open. Please go ahead.

Good morning and good afternoon. Thanks for the question here. Rory, I wanted to kind of get at something you had said earlier in relation to guidance. I think you said, you know, 3Q and 4Q split for fresh fruit and wanted to just confirm that because I know in the past, um, seasonally margins seem to wane, uh, from 3Q to 4Q. But I think last year, you know, the, the business was facing pressure starting in the back half of the year.

And so are we expecting the, the margins to be kind of similar through 3Q and 4Q and and and not exhibit that seasonality like it's like we've seen in the past yeah i mean we've gone thanks for the question i mean we we've over the last year certainly the the world circumstances have been a little bit different and uh there's a few factors i guess last year um in the back half of the year in particular is a whole range of unusual dynamics around short short production in Honduras, short production in Panama, a huge increase in the cost of fruit coming out of Ecuador, which tends to be the safety valve, and the impact of that certainly had a strong impact on our back half of the year last year. We're not expecting that dynamic to repeat in Q3 and Q4, and on top of that then we see the delayed benefit coming in from our specific contractual adjustments around bunker fuel surcharge. So yes, we do expect the margin dynamic in Q3 and Q4 and fresh fruit to be different to Q3 and Q4 of last year.

Okay, great. I appreciate the clarification there. And then just on the follow-up, I just want to zoom out and think about the fresh fruit business. I think in the past, this has been described as a 5% to 6%, even a margin business over time. And just want to think about the changes in sourcing freight, just some of your own production footprint over the last couple of years, wanted to ask you if you feel like this is an appropriate normalized margin rate and what you think it would take to get back to this level.

Yeah, we'd like it to be a little bit higher and our aspiration internally is to try and push it up a little bit higher. you know over the last few years I suppose Honduras was the biggest single impact that affected us at the end of 24 and 25 that production is coming back in stream and that generally speaking because of the way it links in with our logistics and shipping structure and the cost of production Honduras tends to give us a particular advantage that goes to margin so you know and we've invested as I highlighted earlier in a couple of production JVs particularly in guatemala um we've invested a little bit in in plantains um i think pineapple margin as well within that has been has been under a bit of pressure just with some short-term climatic issues that affected the the production and quality sizing yields and pineapples in the short term but that happens periodically and tends to balance out so um we certainly could do with the world being a bit more calmer and the volatility around fuel prices shipping prices etc a little bit unhelpful but you know with a bit of a fair wind that you know the world will settle down and some of those production issues and we'll see the benefit coming through and try and push back up the margin a little bit to what our normal aspiration should be i appreciate the color i'll get back in the queue thank you there are no further questions at this time i will now turn the call back to rory burn ceo for closing remarks thank you yeah well i think we're very pleased with the progress the businesses major in the first half of the year no doubt that the operating environment remains complex um our teams are continuing to execute well against the backdrop of a difficult environment our strategic priorities remain very clear and we're focused on delivering sustainable long-term value for our shareholders really would like to thank all of our employees right across the group for their continued dedication and hard work to the group as well as to our shareholders customers and suppliers for their ongoing support so thank you all for joining us today and for your continued interest and

support of dual plc thank you very much this concludes today's call thank you for attending you may now disconnect